A. Securities Exchange Act of 1934
Sections 15(b)( 4)88 and 15(b)( 6)89 of the Securities Exchange Act can
impart liability to the Chief Compliance Officers of broker-dealers.90 A
broker performs transactions in securities for other peoples’ accounts.91 A
dealer buys and sells securities for his or her own account through the use of
a broker.92 Compliance or legal personnel inherit liability to supervise on a
case-by-case basis, considered by a “facts and circumstances
determination.”93 Section 15(b)( 6) gives the SEC authority to bring an action
against a natural person who is part of a broker-dealer if an employee under
that person’s supervision commits a violation against the federal securities
laws, the Commodity Exchange Act,94 or Municipal Securities Rulemaking
Board95 rules.96 If the manager did not reasonably supervise the subordinate,
allowing the violation to occur, then the manager will be charged with the
failure to supervise.97 The SEC focuses on the responsibilities of the parties
involved to determine whether supervisory duties exist for compliance
personnel.98 In the end, the responsibility of the broker-dealer rests with the
CEO and senior management.99
B. Investment Advisers Act of 1940
The Advisers Act is a federal law that the SEC enforces which regulates,
as the title implies, investment advisers.100 Below are some relevant sections
of the Advisers Act and a rule implementing the Advisers Act.
Section 203(e) of the Advisers Act gives the SEC the ability to place
88. Securities Exchange Act of 1934, 15 § U.S.C. 78o(b)( 4).
89. Id. § 78o(b)( 6).
90. Frequently Asked Questions About Liability of Compliance and Legal Personnel at
Broker-Dealers Under Sections 15(b)( 4) and 15(b)( 6) of the Exchange Act, U.S. SEC. &
EXCHANGE COMMISSION (Sept. 30, 2013), https://www.sec.gov/divisions/marketreg/faq-cco-
supervision-093013.htm [hereinafter Frequently Asked Questions].
91. Guide to Broker-Dealer Registration, U.S. SEC. & EXCHANGE COMMISSION (Apr.
93. Frequently Asked Questions, supra note 90.
94. Commodity Exchange Act, 7 U.S.C. §§ 1–27f.
95. Our Mission, MSRB, http://www.msrb.org/About-MSRB.aspx (last visited Sept. 17,
96. Securities Exchange Act of 1934, 15 § U.S.C. 78o(b)( 4).
100. Investment Advisers Act of 1940, INVESTOPEDIA,
http://www.investopedia.com/terms/i/investadvact.asp (last visited Sept. 17, 2017).