The SEC has long held the position that CCOs play a vital role in preventing violations of the securities laws. To fulfill that role, however, CCOs and compliance departments in general need adequate support and resources from senior management – and unfortunately, they do not always get what they need when fund managers are setting their annual budgets. See “Developing a 2018 Compliance Budget: How Investment Advisers Can Make the Most of Limited Resources” (Dec. 21, 2017). As a result, in November 2020, the SEC’s Division of Examinations (Division) issued a risk alert on notable compliance issues its staff identified during examinations of private fund managers (Risk Alert). Among other issues, the Risk Alert details a lack of compliance resources and a dearth of autonomy and empowerment of CCOs. Division Director Peter Driscoll emphasized the severity of those issues in remarks given the same day (Speech). For more on the Risk Alert and Speech, see our two-part series: “Limited Staffing, Marginalized CCOs and an Overall Lack of Resources at Fund Managers” (Feb. 18, 2021); and “Inadequate Annual Reviews, Poorly Implemented Policies and Other Key Takeaways” (Feb. 25, 2021). In addition, related SEC enforcement actions illustrate what can happen when a CCO’s repeated calls for more resources and support go unheeded. In November 2018, Pennant Management, Inc. (Pennant), formerly a registered investment adviser, settled charges that it negligently failed to perform adequate due diligence and monitoring of certain investments contrary to its representations to clients, which ultimately contributed to substantial client losses. Separately, Pennant’s former CEO, Mark A. Elste, also settled charges that he contributed to Pennant’s violations by failing to address known resource deficiencies in its compliance program. This two‑part series explains why it is important for fund managers to provide adequate resources to support their CCOs and compliance programs. The first article details the compliance failures in the Pennant and Elste enforcement actions. The second article provides the key takeaways for fund managers and their CCOs from these actions.