On November 17, the SEC announced that it filed administrative proceedings against an investment adviser and its parent broker-dealer, as well as their former chief compliance officer, for an alleged failure to have adequate policies and procedures to prevent misuse of nonpublic information. The SEC claims that Buckingham Capital Management and its parent company Buckingham Research Group Inc. failed to take steps "reasonably designed to prevent misuse of material, nonpublic information, including forthcoming BRG research reports."

BRG provides equity research to institutional customers. BRG's policies required that upon any material research event, its research analysts must complete a certification form attesting that they had maintained confidentiality of the material information. The SEC alleged that in fact, BRG required analysts to complete a certification form only where a BCM portfolio had actually traded in the same direction as the research.

In addition, the SEC claims that while BCM's written policy required that people with access to material, nonpublic information report "all business, financial or personal relationships that may result in access to material, non-public information," BCM required employees to report only relationships that actually did result in access to material, nonpublic information.

The SEC also charged Lloyd Karp, the chief compliance officer of both BRG and BCM during the relevant period. The agency claimed that Karp was responsible for establishing and administering all compliance policies, and "willfully aided and abetted and caused the firms’ violations." As part of a settlement, BRG agreed to pay a $50,000 penalty, BCM agreed to pay a $75,000 penalty, and Karp agreed to pay a $35,000 penalty.

The WSJ reports that in the wake of the Buckingham case, some compliance professionals are growing more concerned that the SEC may seek to blame them for for any misconduct that occurs on their watch. For example, Katherine Hanks, a compliance consultant, told the WSJ that she believes a "sea change is probably coming," with regulators holding chief compliance officers more broadly responsible. DLA Piper's Deborah Meshulam added that the Buckingham case emphasizes that "paper policies" are inadequate. "You have to have the right policy and enforce that policy," she told the WSJ.