Whether you’re a small broker-dealer or an enterprise-level private equity firm, your regulatory compliance program isn’t a one man show – even if the department is only made up of your chief compliance officer (CCO).
How can that be? For a regulatory compliance program to function appropriately, the entire advisory firm must play a role.
In this blog, we’ll break down the critical roles which comprise your compliance program and how your advisory firm – whether registered investment adviser, hedge fund, broker-dealer private equity – can gain from a firm-wide culture of compliance.
Who should play a role in your regulatory compliance program and why
You wouldn’t be out of bounds to think your CCO is the end-all-be-all for your compliance program, however, that line of thinking can be critically detrimental to firms. As the Securities and Exchange Commission (SEC) prepares for its ongoing 2023 examinations, firms which lack a culture of compliance might find themselves one step behind the rest.
To sufficiently meet regulatory requirements, your entire firm should play an active role in the regulatory compliance program which governs certifications and attestations, employee trade monitoring and more.
1. The CCO and compliance team
Let’s start with the obvious. Your CCO and compliance team are the backbone of your compliance program, establishing and maintaining your policies and procedures, educating your firm on compliance requirements and interfacing with regulatory bodies should they audit your firm.
2. The executive leadership
Compliance starts from the top. For firms which struggle to maintain a culture of compliance, it would be wise to start with your executive leadership and ask yourself whether or not they set the right example for the firm. How can they help communicate the critical nature of your compliance requirements and the active role each employee must take?
3. The employees
Your employees are your best line of defense when it comes to regulatory compliance risk. While your compliance department may set the standards, in order to actually achieve compliance, your employees must be willing to follow the policies and procedures laid out for them, continually acting in the best interest of the firm and its clients.
This should include:
- Completing all regulatory compliance certifications and attestations.
- Preclearing all trades.
- Disclosing any conflicts of interest.
- Supporting the compliance team in all activities and requests.
4. The outside experts
Outside compliance experts complement the activities within your firm, providing nuanced advice on any critical risk points or potential red flags within your program. Tagging in an expert, especially during critical times like your annual compliance review, can alleviate the pressure placed on your internal team and ensure you don’t miss any potential points of noncompliance.
Your regulatory compliance program is comprised of so much more than just your CCO. By bringing together the entire firm, and continually striving to encourage a culture of compliance, your advisory firm can benefit from an active approach to regulatory compliance, which addresses risk before it becomes a violation.