As a compliance leader at a Hedge Fund, your focus includes, but is not limited to, developing, implementing, and monitoring all processes and procedures related to compliance, individuals at all every level (and every office/location) must take an active role in fostering a culture of compliance.
But for those Hedge Funds with numerous departments across multiple locations and possibly countries, it can be challenging to promote and maintain a compliance-focused culture.
Let’s look at why compliance needs to be a top priority for all employees and what specific focus areas your compliance team should prioritize to promote a healthy culture of compliance.
The SEC’s Perspective on Creating a “Culture of Compliance”
How advisers and employees view the idea of compliance will impact the success of your firm’s policies, processes, and procedures. Namely, it’ll either enhance your compliance efforts or, in the worst-case scenario, cause those policies to be ineffectual.
The SEC has emphasized the importance of compliance culture for decades, saying:
The culture of compliance is not a new concept…If you’ve been listening, you know it’s not enough to have policies. It’s not enough to have procedures. It’s not enough to have good intentions. All of these can help. But to be successful, compliance must be an embedded part of your firm’s culture.
When you neglect to make compliance a firmwide priority, you put your offices at risk of SEC scrutiny, which may result in fines or penalties. Not to mention, a lack of consistency in compliance across the firm can result in:
- Individual supervisory processes (as opposed to one, unified approach)
- Lack of initial or ongoing compliance training
- Leadership that’s unwilling to promote compliance procedures
- Firm employees only looking out for themselves
Core Focus Points for Creating a Culture of Compliance Across Your Hedge Fund
To achieve buy-in and cooperation at every level, focus your compliance team’s efforts on a few specific areas of concern. Nail down the basics, get key leaders on board, and your compliance practices will go much farther in helping your firm meet its regulatory requirements and standards of conduct.
Hiring process
When considering a candidate for any position at your firm, offer a brief overview of what your compliance procedures and expectations are. Give them the opportunity to ask questions or express potential concerns or hesitations. By emphasizing compliance during the initial hiring process, you’re setting expectations from the get-go with new hires and showing them your commitment to fostering a positive compliance culture.
Onboarding training
When initially bringing new staff members on board, dedicate a portion of their new hire training to your firm’s specific compliance Policies and Procedures. Even if they’re familiar with a previous firm’s practices, it’s important to show them what’s different about your firm’s specific policies.
In fact, you should never assume they know everything about current SEC, state, FCA, or other jurisdictional regulations. Introduce your new hire to all rules and regulations relevant to your firm’s operations, and ensure all necessary paperwork (tax forms, company policies, employment eligibility, etc.) is filled out correctly.
Keep in mind that the onboarding process can be overwhelming, and your new employee may be experiencing some information overload, so be sure to provide information or documents they can reference moving forward.
Regular reviews
Your firm’s annual compliance meeting is an opportunity to set expectations at all office locations and emphasize proper compliance culture in a more formal setting. Use it as an opportunity to retrain staff members on relevant procedures, communicate any recently updated policies, answer questions, and review recent SEC rulings or upcoming rulings with all employees.
Additionally, you may find it helpful to:
- Hold more frequent meetings throughout the year
- Create tailored content for individual departments
- Open a direct line of communication with your compliance team
- Share regular compliance updates
- Survey your employees to gauge the effectiveness of your program and training
Tracking employee activity
With many employees across multiple locations, it’s nearly impossible for your compliance team to track employee activity and identify potential problems proactively with manual processes. Compliance-focused tech tools can help your firm virtually monitor, verify, and mitigate employee trade risk, no matter the size of your firm.
Along the same lines, it’s important to equip your offices with the necessary tools to easily capture and archive client and internal communications in a compliant manner. Making it as easy as possible for employees to follow your team’s policies and procedures will help with maintaining a positive compliance culture.
Cultivate Firm-Wide Compliance with Comply
Empower your compliance team to regularly evaluate metrics and speak with employees directly to assess the firm’s attitude toward compliance. Doing so will provide additional insight into the effectiveness of its culture-building efforts.
Drive your compliance program’s efforts with the help of COMPLY’s dynamic tools and team of compliance experts. Schedule a demo today to learn more.