As recent reports of the firing by JPMorgan Chase of the head of its government debt trading desk and another trader for compliance violations make clear, it is vital for hedge fund managers and other financial services firms to take compliance seriously. As part of its effort to ensure that regulated firms devote sufficient attention and resources to compliance, the SEC Office of Compliance Inspections and Examinations (OCIE) issued a Risk Alert in November describing its recent “Outsourced CCO Initiative.” In a two-part guest series, Andrew W. Reich, counsel at BakerHostetler, analyzes the Risk Alert and offers guidance on the issues addressed therein applicable to all investment advisers and investment companies as well as their CCOs (not just those employed at third parties), along with the application of those issues to their compliance programs. This first article explores the background that gave rise to the Risk Alert; allocation of resources to compliance; and CCO independence and empowerment. The second article will clarify written policies and procedures as well as outline steps to enhance firms’ culture of compliance. See “The Role of Outsourced Compliance Consultants in the Hedge Fund Compliance Ecosystem” (Jun. 27, 2014). For more on CCO responsibilities, see “SEC Chief of Staff Offers Nine Key Considerations for Investment Adviser and Broker-Dealer Compliance Officers” (Oct. 22, 2015); and “SEC Enforcement Action Shows Hedge Fund Managers May Be Liable for Failing to Adequately Support Their CCOs” (Jul. 23, 2015).