The after‐effect of Rule 203(b)(3)‐2: what it means to take on the role of CCO to comply with the controversial measure

Abstract

Purpose

To describe the role and requirements for the chief compliance officer (CCO), appointed by hedge fund managers within an investment advisory firm.

Design/methodology/approach

Summarizes Rule 203(b)(3)‐2 under the 1940 Investment Advisers Act, provides a recent case study in which a CCO failed to fulfill his responsibilities, suggests guidelines on how to become an effective CCO, emphasizes the need to be proactive, recommends safeguards to take, and discusses the CCO's need for self‐protection.

Findings

Recent statements and actions indicate that the SEC will be relentless in holding CCOs to their duties.

Originality/value

Provides a useful case study of how a CCO failed to fulfill his responsibilities and suggests helpful guidelines on how the CCO can work within the culture of the firm.

Citation

Panebianco, C. (2005), "The after‐effect of Rule 203(b)(3)‐2: what it means to take on the role of CCO to comply with the controversial measure", Journal of Investment Compliance, Vol. 6 No. 1, pp. 59-62. https://doi.org/10.1108/15285810510634704