The ethics requirement is the final step on your path to CCO® certification. It indicates you've agreed to adhere to high ethical and professional standards for the practice of cannabis compliance auditing, and to act as a licensed professional when providing compliance advice to your client, always putting their best interests first.
The Certified Compliance Officer code of ethics reflects the commitment that all CCO professionals make to high standards of competency, ethics, and ability. The code of ethics is not a written in stone document - it is modified to reflect the reality of the state of the industry. However, it's premise remains its driving force and that is to provide a reasoned, well documented compliance position, and an opinion provided to the responsible party for the conclusions reached. Compliance with the code of ethics is a requirement of the CCOtm certification that is critical to the integrity of the both the mark and the profession. Violations of the Code of Ethics may subject a CCO professional to discipline.
1. The CCO must act with honesty, integrity, competence, diligence and without bias.
2. Act in the client’s best interests, but they may not circumvent the law in the client's favor.
3. Exercise due care.
4. Avoid or disclose and manage conflicts of interest, and provide resolution to all parties concerned.
5. Maintain the confidentiality and protect the privacy of client information, including HIPAA and financial information as well.
6. Act in a manner that reflects positively on the Certified Compliance Officer profession and the certification process.
At all times when providing compliance advice to a client, a CCO® professional must act as a fiduciary, and therefore, act in the best interests of the Client. The following duties must be fulfilled:
a. Duty of Loyalty. A CCO® professional must:
i. Place the interests of the Client above the interests of the CCO® professional and the CCO® Professional’s Firm;
ii. Avoid Conflicts of Interest, or fully disclose Material Conflicts of Interest to the Client, obtain the Client’s informed consent, and properly manage the conflict; and
iii. Act without regard to the financial or other interests of the CCO® professional, the CCO® Professional’s Firm, or any individual or entity other than the Client, which means that a CCO® professional acting under a Conflict of Interest continues to have a duty to act in the best interests of the Client and place the Client’s interests above the CCO® professional’s.
b. Duty of Care. A CCO® professional must act with the care, skill, prudence, and diligence that a prudent professional would exercise in light of the Client’s compliance goals, risk tolerance, objectives, and financial and personal circumstances.
c. Duty to Follow Client Instructions. A CCO® professional must comply with all objectives, policies, restrictions, and other terms of the Engagement and all reasonable and lawful directions of the Client. At all times, the CCO must inform the client of any instances of material non-compliance with federal, state and local regulations.
A CCO® professional must provide compliance services with competence, which means with relevant knowledge and skill to apply that knowledge. When the CCO® professional is not sufficiently competent in a particular area to provide the compliance services required under the Engagement, the CCO® professional must gain competence, obtain the assistance of a competent professional, limit or terminate the Engagement, and/or refer the Client to a competent professional. The CCO® professional shall describe to the Client any requested Compliance services that the CCO® professional will not be providing.
A CCO® professional must provide compliance services, including responding to reasonable Client inquiries, in a timely and thorough manner.
A. DISCLOSE AND MANAGE CONFLICTS OF INTEREST
1. Disclose Conflicts. When providing cannabis compliance advice for a bona fide state licensee, a CCO® professional must make full disclosure of all material conflicts of interest with the CCO® professional’s Client that could affect the professional relationship. This obligation requires the CCO® professional to provide the Client with sufficiently specific facts so that a reasonable Client would be able to understand the CCO® professional’s Material Conflicts of Interest and the business practices that give rise to the conflicts, and give informed consent to such conflicts or reject them. A sincere belief by a CCO® professional with a Material Conflict of Interest that he or she is acting in the best interests of the Client is insufficient to excuse failure to make full disclosure.
i. A CCO® professional must make full disclosure and obtain the consent of the Client before providing any compliance advice regarding which the CCO® professional has a Material Conflict of Interest.
ii. In determining whether the disclosure about a Material Conflict of Interest provided to the Client was sufficient to infer that a Client has consented to a Material Conflict of Interest, the CCO Director in their sole discretion evaluate whether a reasonable Client receiving the disclosure would have understood the conflict and how it could affect the advice the Client will receive from the CCO® professional. The greater the potential harm the conflict presents to the Client, and the more significantly a business practice that gives rise to the conflict departs from commonly accepted practices among CCO® professionals, the less likely it is that CCO Director will infer informed consent absent clear evidence of informed consent. Ambiguity in the disclosure provided to the Client will be interpreted in favor of the Client.
iii. Evidence of oral disclosure of a conflict will be given such weight as the CCO Director in its judgment deems appropriate. Written consent to a conflict is not required.
2. Manage Conflicts. A CCO® professional must adopt and follow business practices reasonably designed to prevent Material Conflicts of Interest from compromising the CCO® professional’s ability to act in the Client’s best interests.
A CCO® professional must exercise professional judgment on behalf of the Client that is not subordinated to the interest of the CCO® professional or others. A CCO® professional may not solicit or accept any gift, gratuity, entertainment, non-cash compensation, or other consideration that reasonably could be expected to compromise the CCO® professional’s objectivity.
A CCO® professional must treat Clients, prospective Clients, fellow professionals, and others with dignity, courtesy, and respect.
i. A CCO® professional may not intentionally or recklessly participate or assist in another person’s violation of these Standards or the laws, rules, or regulations governing Compliance services.
A CCO® professional must keep confidential and may not disclose any non-public personal information about any prospective, current, or former Client (“client”), except that the CCO® professional may disclose information:
1. For ordinary business purposes with the client’s consent, so long as the client has not withdrawn the consent;
2. As necessary to defend against allegations of wrongdoing made by a governmental authority;
3. As necessary to present a civil claim against, or defend against a civil claim raised by a client;
4. As required to comply with a request from the CCO Board concerning an investigation or adjudication; and
5. As necessary to provide information to professional organizations that are assessing the CCO® professional’s compliance with professional standards.
a. A CCO® professional may not use any non-public personal information about a client for his or her direct or indirect personal benefit, whether or not it causes detriment to the client, unless the client consents.
b. A CCO® professional, either directly or through the CCO® Professional’s Firm, must take reasonable steps to protect the security of non-public personal information about any client, including the security of information stored physically or electronically, from unauthorized access that could result in harm or inconvenience to the client.
c. A CCO® professional, either directly or through the CCO® Professional’s Firm, must adopt and implement policies regarding the protection, handling, and sharing of a client’s non-public personal information and must provide a client with written notice of those policies at the time of the Engagement and thereafter not less than annually (at least once in any 12-month period) unless (i) the CCO® professional’s policies have not changed since the last notice sent to a client; and (ii) the CCO® professional does not disclose non-public personal information other than as permitted without a client’s consent.
d. A CCO® professional shall be deemed to comply with this Section if the CCO® Professional’s Firm is subject to, and the CCO® professional complies with, Regulation S-P under the federal securities laws or substantially equivalent federal or state laws or rules.
A CCO® professional must provide a Client with accurate information, in accordance with the Engagement, and in response to reasonable Client requests, in a manner and format that a Client reasonably may be expected to understand.
A. A CCO® professional may not make false or misleading representations regarding the CCO® professional’s or the CCO® Professional’s Firm’s method(s) of compensation.
1. Specific Representations
a. Fee-Only. A CCO® professional may represent his or her or the CCO® Professional’s Firm’s compensation method as “fee-only” only if:
1. The CCO® professional and the CCO® Professional’s Firm receive no Sales-Related Compensation; and
2. Related Parties receive no Sales-Related Compensation in connection with any Compliance services the CCO® professional or the CCO® Professional’s Firm provides to Clients.
b. Fee-Based. CCO Board uses the term “fee and commission” to describe the compensation method of those who receive both fees and Sales-Related Compensation. A CCO® professional who represents that his or her or the CCO® Professional’s Firm’s compensation method is “fee- based” or any other similar term that is not fee-only:
1. May not use the term in a manner that suggests the CCO® professional or the CCO® Professional’s Firm is fee-only; and
2. Must clearly state that either the CCO® professional or the CCO® Professional’s Firm earns fees and commissions, or that the CCO® professional or the CCO® Professional’s Firm are not fee- only.
c. Sales-Related Compensation. Sales-Related Compensation is more than a de minimis economic benefit, including any bonus or portion of compensation, resulting from a Client purchasing or selling Financial Assets, from a Client holding Financial Assets for purposes other than receiving compliance advice, or from the referral of a Client to any person or entity other than the CCO® Professional’s Firm. Sales-Related Compensation includes, for example, commissions, trailing commissions, transaction fees, revenue sharing, referral or solicitor fees, or similar consideration. Sales-Related Compensation does not include:
1. Soft dollars (any research or other benefits received in connection with cannabis compliance or cannabis medical development.)
2. Reasonable and customary fees for custodial or similar administrative services if the fee or amount of the fee is not determined based on the amount or value of Client transactions;
3. Non-monetary benefits provided by another service provider, including a remediation firm, that benefit the CCO® professional’s Clients by improving the CCO® professional’s delivery of Compliance services, and that are not determined based on the amount or value of Client transactions;
4. Reasonable and customary fees for Compliance services, other than for solicitations and referrals, the CCO® professional or CCO® Professional’s Firm provides to a Client that are collected and distributed by another service provider, including under a turnkey operating agreement for a licensee or any part of their operation.
5. A fee the Related Party solicitor receives for soliciting clients for the CCO® professional or the CCO® Professional’s Firm.
d. Related Party. A person or business entity (including a trust) whose receipt of Sales-Related Compensation a reasonable CCO® professional would view as directly or indirectly benefiting the CCO® professional or the CCO® Professional’s Firm, including, for example, as a result of the CCO® professional’s ownership stake in the business entity. There is a rebuttable presumption that a Related Party includes:
1. Family Members. A member of the CCO® professional’s Family and any business entity that their Family or members of the family control; and
2. Business Entities. A business entity that the CCO® professional or the CCO® Professional’s Firm Controls, or that is Controlled by or is under common Control with, the CCO® Professional’s Firm.
e. In Connection with any Compliance services. Sales-Related Compensation received by a Related Party is “in connection with any Compliance services” if it results, directly or indirectly, from Client transactions referred or facilitated by the CCO® professional or the CCO® Professional’s Firm.
f. Misrepresentations by a CCO® Professional’s Firm. A CCO® professional who Controls the CCO® Professional’s Firm may not allow the CCO® Professional’s Firm to make a representation of compensation method that would be false or misleading if made by the CCO® professional. A CCO® professional who does not Control the CCO® Professional’s Firm must correct a CCO® Professional’s Firm’s misrepresentations of compensation method by accurately representing the CCO® professional’s compensation method to the CCO® professional’s Clients.
1. When engaging or recommending the selection or retention of additional persons to provide compliance or professional advice for a Client, a CCO® professional must:
a. Have a reasonable basis for the recommendation or Engagement based on the person’s reputation, experience, and qualifications;
b. Disclose to the Client, at the time of the recommendation or prior to the Engagement, any arrangement by which someone who is not the Client will compensate or provide some other material economic benefit to the CCO® professional, the CCO® Professional’s Firm, or a Related Party for the recommendation or Engagement; and
c. When engaging a person to provide services for a Client, exercise reasonable care to protect the Client’s interests.
2. When working with another consultant or Compliance services provider on behalf of a Client, a CCO® professional must:
a. Communicate with the other provider about the scope of their respective services and the allocation of responsibility between them; and
b. Inform the Client in a timely manner if the CCO® professional has a reasonable belief that the other consultant’s services were not performed in accordance with the scope of services to be provided and the allocation of responsibilities.
1. A CCO® professional must exercise reasonable care and judgment when selecting, using, or recommending any software, digital advice tool, or other technology while providing compliance services to a Client.
2. A CCO® professional must have a reasonable level of understanding of the assumptions and outcomes of the technology employed, including the relevant seed to sale software or other inventory software.
3. A CCO® professional must have a reasonable basis for believing that the technology produces reliable, objective, and appropriate outcomes.
1. A CCO® professional may not, directly or indirectly, borrow money from or lend money to a Client unless:
a. The Client is a member of the CCO® professional’s Family; or
b. The lender is a business organization or legal entity in the business of lending money.
2. A CCO® professional may not commingle a Client’s Financial Assets with the Financial Assets of the CCO® professional or the CCO® Professional’s Firm.
3. Analyzing Current Course of Action. A CCO® professional must analyze the Client’s current course of action, including the material advantages and disadvantages of the current course and whether the current course maximizes the potential for meeting the Client’s goals.
4. Analyzing Potential Alternative Courses of Action. Where appropriate a CCO® professional must consider and analyze one or more potential alternative courses of action, including the material advantages and disadvantages of each alternative, whether each alternative helps maximize the potential for meeting the Client’s goals, and how each alternative integrates the relevant elements of the Client’s circumstances.
5. Addressing Implementation Responsibilities. A CCO® professional must establish with the Client whether the CCO® professional has implementation responsibilities. When the CCO® professional has implementation responsibilities, the CCO® professional must communicate to the Client the recommendation(s) being implemented and the responsibilities of the CCO® professional, the Client, and any third party with respect to implementation.
6. Identifying, Analyzing, and Selecting Actions, Products, and Services. A CCO® professional who has implementation responsibilities must identify and analyze actions, products, and services designed to implement the recommendations. The CCO® professional must consider the basis for each selection, which must include:
a. How the action, product, or service is designed to implement the CCO® professional’s recommendation; and
b. The advantages and disadvantages of the action, product, or service relative to reasonably available alternatives.
7. Recommending Actions, Products, and Services for Implementation. A CCO® professional who has implementation responsibilities must recommend one or more actions, products and services to the Client. The CCO® professional must discuss with the Client the basis for selecting an action, product, or service, the timing and priority of implementing the action, product, or service, and disclose and manage any Material Conflicts of Interest concerning the action, product, or service.
8. Selecting and Implementing Actions, Products, or Services. A CCO® professional who has implementation responsibilities must help the Client select and implement the actions, products, or services. The CCO® professional must discuss with the Client any Client selection that deviates from the actions, products, and services the CCO® professional recommended.
1. Monitoring and Updating Responsibilities. A CCO® professional must establish with the Client whether the CCO® professional has monitoring and updating responsibilities. When the CCO® professional has responsibilities for monitoring and updating, the CCO® professional must communicate to the Client:
a. Which actions, products, and services are and are not subject to the CCO® professional’s monitoring responsibility;
b. How and when the CCO® professional will monitor the actions, products, and services;
c. The Client’s responsibility to inform the CCO® professional of any material changes to the Client’s qualitative and quantitative information;
d. The CCO® professional’s responsibility to update the Financial Planningrecommendations; and
e. How and when the CCO® professional will update the Financial Planning recommendations.
2. Monitoring the Client’s Progress. A CCO® professional who has monitoring responsibilities must analyze, at appropriate intervals, the progress toward achieving the Client’s goals. The CCO® professional must review with the Client the results of the CCO® professional’s analysis.
3. Obtaining Current Qualitative and Quantitative Information. A CCO®professional who has monitoring responsibility must collaborate with the Client in an attempt to obtain current qualitative and quantitative information concerning the Client’s personal and financial circumstances.
4. Updating Goals, Recommendations, or Implementation Decisions. Where a CCO® professional has updating responsibility, and circumstances warrant changes to the Client’s goals, recommendations, or selections of actions, products or services, the CCO® professional must update as appropriate in accordance with these Practice Standards.
C. USE REASONABLE CARE WHEN SUPERVISING
A CCO® professional must exercise reasonable care when supervising persons acting under the CCO® professional’s direction, including employees and other persons over whom the CCO® professional has responsibility, with a view toward preventing violations of applicable laws, rules, regulations, and these Standards.
D. COMPLY WITH LAWFUL OBJECTIVES OF CCO® PROFESSIONAL’S FIRM
A CCO® professional:
1. Will be subject to discipline by CCO Board for violating policies and procedures of the CCO® Professional’s Firm that do not conflict with these Standards.
2. Will not be subject to discipline by CCO Board for violating policies and procedures of the CCO® Professional’s Firm that conflict with these Standards.
E. PROVIDE NOTICE OF PUBLIC DISCIPLINE
A CCO® professional must promptly advise the CCO® Professional’s Firm, in writing, of any public discipline imposed by CCO Board.
C. DEFINITIONS
The following definitions apply:
1. Felony. A felony offense, or for jurisdictions that do not differentiate between a felony and a misdemeanor, an offense punishable by a sentence of at least one-year imprisonment or a fine of at least $1,000.
2. Relevant Misdemeanor. A criminal offense, that is not a Felony, for conduct involving fraud,theft, misrepresentation, other dishonest conduct, crimes of moral turpitude, violence, or a second (or more) alcohol and/or drug-related offense.
3. Regulatory Investigation. An investigation initiated by a federal, state, local, or foreign governmental agency, self-regulatory organization, or other regulatory authority. A Regulatory Investigation does not include preliminary or routine regulatory inquiries or requests for information, deficiency letters, “blue sheet” requests or other trading questionnaires, or examinations.
4. Regulatory Action. An action initiated by a federal, state, local, or foreign governmental agency, self- regulatory organization, or other regulatory authority.
5. Civil Action. A lawsuit or arbitration.
6. Finding. A finding includes an adverse final action and a consent decree in which the finding is neither admitted nor denied, but does not include a deficiency letter, examination report, memorandum of understanding, or similar informal resolution of a matter.
7. Minor Rule Violation. A violation of a self-regulatory organization rule designated as a minor rule violation under a plan approved by the U.S. Securities and Exchange Commission. A rule violation may be designated as “minor” under a plan if the sanction imposed consists of a fine of $2,500 or less, and if the sanctioned person does not contest the fine.
A CCO® professional may not engage in conduct that reflects adversely on his or her integrity or fitness as a CCO® professional, upon the CCO® marks, or upon the profession. Such conduct includes, but is not limited to, conduct that results in:
1. A Felony or Relevant Misdemeanor conviction, or admission into a program that defers or with holds the entry of a judgment of conviction for a Felony or Relevant Misdemeanor;
2. A Finding in a Regulatory Action or a Civil Action that the CCO® professional engaged in fraud, theft, misrepresentation, or other dishonest conduct;
3. A personal bankruptcy or business bankruptcy filing or adjudication where the CCO® professional was a Control Person of the business, unless the CCO®professional can rebut the presumption that the bankruptcy demonstrates an inability to manage responsibly the CCO® professional’s or the business’s financial affairs;
4. A federal tax lien on property owned by the CCO® professional, unless the CCO®professional can rebut the presumption that the federal tax lien demonstrates an inability to manage responsibly the CCO® professional’s financial affairs; or
5. A non-federal tax lien, judgment lien, or civil judgment that has not been satisfied within a reasonable amount of time unless the CCO® professional can rebut the presumption that the non- federal tax lien, judgment lien, or civil judgment demonstrates an inability to manage responsibly the CCO®professional’s financial affairs.
A CCO® professional must provide written notice to CCO Board within thirty (30) calendar days after the CCO® professional, or an entity over which the CCO®professional was a Control Person, has:
1. Been charged with, convicted of, or admitted into a program that defers or withholds the entry of a judgment or conviction for, a Felony or Relevant Misdemeanor;
2. Been named as a subject of, or whose conduct is mentioned adversely in, a Regulatory Investigation or Regulatory Action alleging failure to comply with the laws, rules, or regulations governing Compliance services;
3. Had conduct mentioned adversely in a Finding in a Regulatory Action involving failure to comply with the laws, rules, or regulations governing Compliance services (except a Regulatory Action involving a Minor Rule Violation in a Regulatory Action brought by a self-regulatory organization);
4. Had conduct mentioned adversely in a Civil Action alleging failure to comply with the laws, rules, or regulations governing Compliance services;
5. Become aware of an adverse arbitration award or civil judgment, or a settlement agreement, in a Civil Action alleging failure to comply with the laws, rules, or regulations governing Compliance services, where the conduct of the CCO® professional, or an entity over which the CCO® professional was a Control Person, was mentioned adversely, other than a settlement for an amount less than $15,000;
6. Had conduct mentioned adversely in a Civil Action alleging fraud, theft, misrepresentation, or other dishonest conduct;
7. Been the subject of a Finding of fraud, theft, misrepresentation, or other dishonest conduct in a Regulatory Action or Civil Action;
8. Become aware of an adverse arbitration award or civil judgment, or a settlement agreement in a Civil Action alleging fraud, theft, misrepresentation, or other dishonest conduct, where the conduct of the CCO® professional, or an entity over which the CCO® professional was a Control Person, was mentioned adversely;
9. Had a professional license, certification, or membership suspended, revoked, or materially restricted because of a violation of rules or standards of conduct;
10. Been terminated for cause from employment or permitted to resign in lieu of termination when the cause of the termination or resignation involved allegations of dishonesty, unethical conduct, or compliance failures;
11. Been named as the subject of, or been identified as the broker/adviser of record in, any written, customer-initiated complaint that alleged the CCO®professional was involved in:
a. Forgery, theft, misappropriation, or conversion of Financial Assets;
b. Sales practice violations and contained a claim for compensation of $5,000 or more; or
c. Sales practice violations and settled for an amount of $15,000 or more.
12. Filed for or been the subject of a personal bankruptcy or business bankruptcy where the CCO® professional was a Control Person;
13. Received notice of a federal tax lien on property owned by the CCO®professional; or
14. Failed to satisfy a non-federal tax lien, judgment lien, or civil judgment within one year of its date of entry, unless payment arrangements have been agreed upon by all parties.
F. PROVIDE NARRATIVE STATEMENT
The written notice must include a narrative statement that accurately and completely describes the Material facts and the outcome or status of the reportable matter.
G. COOPERATION
A CCO® professional may not make false or misleading representations to CCO Board or obstruct CCO Board in the performance of its duties. A CCO®professional must satisfy the cooperation requirements set forth in CCO Board’s Procedural Rules, including by cooperating fully with CCO Board’s requests, investigations, disciplinary proceedings, and disciplinary decisions.
H. COMPLIANCE WITH TERMS AND CONDITIONS OF CERTIFICATION AND TRADEMARK LICENSE
A CCO® professional must comply with the Terms and Conditions of Certification and Trademark License.
5. PROHIBITION ON CIRCUMVENTION
A CCO® professional may not do indirectly, or through or by another person or entity, any act or thing that the Code and Standards prohibit the CCO® professional from doing directly.
GLOSSARY
CCO® Professional’s Firm(s)
Any entity on behalf of which a CCO® professional provides Compliance services to a Client, and that has the authority to exercise control over the CCO® professional’s activities, including the CCO® professional’s employer, broker-dealer, registered investment adviser, insurance company, and insurance agency.
Client
Any person, including a natural person, business organization, or legal entity, to whom the CCO® professional provides or agrees to provide Compliance services pursuant to an Engagement.
Conflict of Interest
Control
The power, directly or indirectly, to direct the management or policies of the entity at the relevant time, through ownership, by contract, or otherwise.
Control Person
A person who has Control.
Engagement
An oral or written agreement, arrangement, or understanding.
Family
Grandparent, parent, stepparent, father-in-law/mother-in-law, uncle/aunt, spouse, former spouse, spousal equivalent, domestic partner, brother/sister, stepsibling, brother-in-law/sister-in-law, cousin, son/ daughter, stepchild, son-in-law/daughter-in law, nephew/niece, grandchild, and any other person the CCO® professional, directly or indirectly, supports financially to a material extent.
Financial Advice
The determination of whether Financial Advice has been provided is an objective rather than subjective inquiry. The more individually tailored the communication is to the Client, the more likely the communication will be viewed as Financial Advice. The provision of services or the furnishing or making available of marketing materials, general financial education materials, or general financial communications that a reasonable CCO® professional would not view as Financial Advice, does not constitute Financial Advice.
Financial Assets
Securities, insurance products, real estate, bank instruments, commodities contracts, derivative contracts, collectibles, or other financial products.
Financial Planning
A collaborative process that helps maximize a Client’s potential for meeting life goals through Financial Advice that integrates relevant elements of the Client’s personal and financial circumstances.
Material
Information is material when a reasonable Client or prospective Client would consider the information important in making a decision.
Compliance services
Financial Advice and related activities and services that are offered or provided, including, but not limited to, Financial Planning, legal, accounting, or business planning services.
Related Party
A person or business entity (including a trust) whose receipt of Sales-Related Compensation a reasonable CCO® professional would view as benefiting the CCO®professional or the CCO® Professional’s Firm, including, for example, as a result of the CCO® professional’s ownership stake in the business entity. There is a rebuttable presumption that a Related Party includes:
Scope of Engagement
The Compliance services to be provided pursuant to an Engagement.
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