How Chief Compliance Officers Can Achieve Empowerment and Authority at Investment Advisory Firms
How Chief Compliance Officers Can Achieve Empowerment and Authority at Investment Advisory Firms

If you ask the U.S. Securities and Exchange Commission (SEC) which two things Chief Compliance Officers (CCOs) could benefit from most in the coming year, you might be surprised that time and money aren’t at the top of the list.

The SEC’s Office of Compliance Inspections and Examinations (OCIE) has kept a watchful eye on compliance programs during the ongoing COVID-19 pandemic and found that what helped firms the most during this time was to have a strong culture of compliance supported by senior management and a CCO with empowerment and authority to oversee and administer the compliance program.

Click here to read a November 19, 2020, speech by OCIE Director Peter Driscoll on The Role of the CCO – Empowered, Senior and With Authority.

A Fine Line

CCOs are responsible for helping an organization to develop and implement a compliance program that detects, prevents and corrects any potential or actual violations of securities laws. In doing so, the CCO  must constantly balance and reconcile the needs of the business with his/her duty to oversee the compliance program and ensure the firm is in compliance with industry rules and regulations. Far too often, compliance officers are viewed as “the internal police” of an organization whose sole job seems to be finding a way to frustrate department heads by saying, "we can't do that." The culture of compliance at your firm has room for improvement when view the CCO as a "cop on the beat" rather than as an integral strategic partner for the business.

Let’s consider a real-life example that perhaps occurred in your firm during the pandemic. Because of COVID, your sales and marketing outreach pivoted, and the team wants to post a lot on social media, deciding that Twitter is the medium they want to use. It is the responsibility of compliance to meet with the marketing staff and learn precisely how the Twitter account will be used for messaging in order to draft disclosures and perform risk mitigation steps. Such steps may Include archiving all messages, reviewing materials prior to posting, formulating oral disclosures for the posts (as needed) and maintenance of performance backup documentation.

Often the implementation of new internal controls causes frustration. The marketing team may  counter that Twitter has a limit of 280 characters and thus, disclosures cannot be added (not to mention, it will take away from the intended messaging). However, dependent upon content, failure to add that disclosure could be in violation of the anti-fraud provisions of the Advisers Act.

It’s All About Relationship Building

Instead of letting compliance being perceived as the bad guy in the Twitter example, a strong CCO should seize the opportunity. Using the above scenario, the CCO could be a "true partner" of the business by suggesting a means for disclosure that could achieve both marketing's and compliance's objective, such as using an audio disclosure that is accessible by a link. This solution allows the firm to comply with the law and achieve the business' objective. In return, providing practical solutions builds trust and confidence from others, which enhances the CCO’s empowerment and authority.

In many ways a CCO is really about being the conscience of the organization. In order to get that seat at the table, your team and managers in other departments have to respect you. That comes with time. And you’re going to spend a lot of time on relationship building to earn that respect.

Important Steps CCOs Can Take Today

For those who are new to the role of CCO at an investment advisory firm, meet with senior management and ask them about the biggest compliance challenges they face. Then address them.  Ask senior managers to let you help them address their concerns, so they’re no longer frustrated. This effort shows true engagement and outreach to the business which will not go unnoticed.

When senior management sees you can provide solutions, you will get that seat at the table. This is turn bolsters the CCO's empowerment and authority within the organization.

Reciprocate by letting senior management know their importance to the organization's compliance culture.  Ask heads of senior management to make opening remarks at your next compliance department meeting. When information comes directly from the CEO or key members or senior management, people take notice and listen.

Creating a Culture of Awareness

The people who are the most successful in the CCO role are analytical, inquisitive, and understand the business and the regulations that govern it. A best practice for CCOs is taking the time to train employees and associated persons every opportunity they can.  This will help others to understand what is expected of them and how to escalate concerns to Compliance.

How successful a CCO is largely depends on the internal relationships built within his or her firm. In order to get that empowerment, authority, and that seat at the table, one must build a relationship with every department.

In pre-COVID days, a simple "walk around" the office would be effective.  Today, it is a lot more challenging to communicate. Strive to over-communicate by inviting video teleconferences with senior managers.  Make yourself available to colleagues, and truly be a partner with the business. If you can do that, you’ll get that seat at the table, and they’ll be coming to you for guidance on compliance….and that’s the name of the game.

Putting it All Together 

The experts at Jacko Law Group, PC have the knowledge and experience to help your firm create and maintain a culture of compliance and increase employee awareness of the helpful role compliance plays in serving your business and your clients. Contact us today at 619.298.2880 or email us at Info@jackolg.com to schedule a strategy session.

Tags: SEC

Add a comment

Type the following characters: sierra, romeo, niner, whisky

* Indicates a required field.

Recent Posts

Topics

Archives

Contributors

Jump to Page

This website uses cookies to enhance your browsing experience and improve functionality. By continuing to browse this website, you are accepting our use of cookies in accordance with our privacy policy.