Advisory firms are required to have a Chief Compliance Officer (CCO), according to SEC Rule 206(4)-7. However, there are few actual requirements regarding who can serve as your firm’s CCO. In smaller firms, for example, it’s likely that another member of the leadership team, say the CEO or President, takes on the role of CCO.
As firms grow, however, the responsibilities of a CCO tend to become too much for another executive to juggle with their other duties. In that case, hiring a dedicated CCO is likely the next step.
CCOs can come with varying levels of experience and previous compliance knowledge, making it challenging to find the right person to bring onto your leadership team. To help you in the hiring process, here are 9 qualities to look for when hiring your firm’s next CCO.
1. Attention to Detail
CCOs are responsible for adopting and implementing written Policies and Procedures designed to prevent violations of the Advisers Act. Achieving compliance across the board begins with a CCO’s ability to effectively and accurately interpret the most recent rulings and uphold compliant practices.
Simply put, maintaining firm-wide compliance is all about the details.
If your CCO is unable to keep important details straight like dates, document types, record-keeping procedures, or other critical compliance-related things, your entire compliance program is put in jeopardy.
2. Lifelong Learner
The financial services industry has benefited greatly over the past few years from the widespread adoption of advanced technology and AI-driven solutions. If your CCO doesn’t keep pace with the latest tech trends, they may be missing critical opportunities to make their compliance efforts more streamlined, accurate, and cost-effective.
More than ever before, for example, compliance software is rapidly evolving to help CCOs become more efficient through automation while also helping to ensure that no new regulatory rule changes slip through the cracks.
By embracing evolving technology, CCOs can better help their firms avoid costly mistakes, fines, and penalties—all while identifying and correcting potential problems much sooner.
3. High Emotional Intelligence
As with any other leadership hire, your CCO should be able to work well with others — including other members of the leadership team as well as other departments and employees.
Having someone who’s a good fit with your company’s culture is more important than you may realize, especially in a CCO role. CCOs have to maintain a high level of authority and command respect from both their peers and lower-level staff members. Otherwise, their fellow team members may not feel obliged to follow the policies and procedures established by them — which means compliance efforts across the board could fall short.
In addition, your CCO should be open to finding solutions to problems presented by advisors, as opposed to shutting down requests without any additional consideration.
4. Executive Presence and Authority
Part of the CCO job means getting the rest of the team to abide by compliance rules and procedures. Appointing a person of sufficient authority and seniority is crucial. Along with the proper authority to enforce rules, the CCO should have a deep knowledge of your firm’s culture and values, which can help them lead more effectively.
A quality that will be especially important should a compliance concern arise.
In those instances, your firm’s CCO must be able to proactively identify the potential problem and say something as soon as they do so. They should have the confidence to speak up and feel supported by fellow executives in the firm when they do so. Being able to raise alarm bells at the appropriate time requires someone to be observant, assured, and prepared.
5. Solution-Oriented
Even if you haven’t held a compliance role yourself, you know that compliance rules change fast to address concerns relating to technology, market conditions, and any number of other issues. Your CCO needs to stay on top of these compliance developments as they arise and be proactive in their policies and procedures.
To accomplish this, the CCO should (at minimum) review the ins and outs of your firm’s compliance program at least annually for adequacy and effectiveness of implementation.
If a new ruling has taken effect, or they find that a certain procedure may no longer be effective, the CCO should not hesitate to make changes fast and effectively—as opposed to waiting out the SEC’s implementation period (and risking the possibility of forgetting or falling behind).
6. Proactive and Diligent
When a CCO is given a high level of authority within the firm, they should be able to use their leadership skills and position to take immediate, appropriate action once a problem is brought to their attention. They should not feel like they need to seek out permission from others, nor should they hesitate to follow the procedures outlined in the firm’s compliance program.
7. Player/Coach
While they aren’t considered a “project manager,” a CCO will be much more effective in their role if they possess strong process management skills. The ongoing responsibilities of developing procedures, implementing them across the firm, monitoring their effectiveness, and regularly updating the compliance program require your CCO to stay ultra-organized.
8. Boundary Setter
An effective CCO should understand that protecting the greater good of the firm and, most importantly, its clients is their number one priority. As such, they need to be able to separate their personal feelings about colleagues from their professional responsibilities as a CCO. They should have no issue addressing concerns and/or potential violations in a compliant manner, even if the concern involves well-liked employees or high-level leaders.
9. Strong Industry Network
CCOs are tasked with an incredible amount of responsibility, and they should be able to recognize when they can’t do it all on their own. Just keeping up with evolving regulations can be a full-time job, let alone continuous employee monitoring, training, and reviewing. Third-party companies, like COMPLY, are well-equipped to assist your CCO by providing them with the resources, technology, and efficiencies to better execute their responsibilities.
When you’re ready to hire a CCO, set them up for success by connecting them with an independent compliance consultant who can help them navigate their most complex compliance challenges.
Have more CCO questions? Need help addressing new and upcoming rules and requirements? Schedule time to speak with one of our experts today.