Constraints and Pressures Facing Compliance Today


What are the most significant pressures facing compliance programs in 2021? And where are the largest constraints? An audience of Chief Compliance Officers and General Counsel were asked those questions during the during the webinar Compliance Budgeting: Reducing Risk by Doing More With Less.

The  CCO’s and GC's identified new regulatory expectations and new business lines and products as the most significant pressures facing compliance programs in 2021. According to Treliant’s Securities and Investment Management Compliance practice leader Alan Halfenger “firms large and small are expanding into new areas of business. Whether it's on the front office side or on the back office side, the world is changing.”

The biggest constraints identified were resource constraints including staffing and budgets—the ongoing pressure to do more with less.

According to former GC and CCO Brent Taylor, “Regulators continue to churn out rules. With the change of administration enforcement will be even stronger than it already has been. At the same time businesses are trying to expand. There’s a tremendous amount of desire on the part of businesses to reduce cost wherever possible, while at the same time dealing with regulators who want to see with absolutely no questions that there are adequate resources around compliance.” 

Geography comes into play as well. Roles in the financial services industry aren’t just in major cities like New York, Chicago and Boston anymore. Jobs can be found everywhere, and COVID has only increased the pressure to do everything virtually. And of course there’s a compliance impact to that. Learn more about how technology helps firms with remote work compliance.

A November 2020 SEC Risk Alert provided insight into what regulators will be expecting from compliance programs, including:

  • Solid policies and procedures that are updated and tested on a regular basis
  • Rigorous testing of the compliance program
  • Adequate system resources, including technology as a key component of compliance
  • Adequate staff resources
  • A Chief Compliance Officer in place

In his Opening Remarks at the National Investment Adviser/Investment Company Compliance Outreach 2020, Director of the Office of Compliance Inspections and Examinations Peter Driscoll spoke about the role of the CCO and the need for Chief Compliance Officers to remain empowered, senior, and with authority. He also stated “we cannot overstate a firm’s continued need to assess whether its compliance program has adequate resources to support its compliance function.  Resources means a lot of different things, including training, automated systems and adequate staff to support firm growth, but perhaps most importantly, it means “empowerment.”  Compliance must be integral to an adviser’s business and part of its senior leadership.”

What does this mean for firms in the upcoming year?

According to Keith Pyke, Solution Sales Director at MyComplianceOffice, it’s important to remember that risks and challenges are different for each firm. Make sure your compliance program is fit for purpose by tailoring the technology to the specific needs of your firm and allocating resources accordingly.

Download the White Paper Why Less is More - Consolidate Compliance Technology to Reduce Cost and Risk

A hedge fund firm is going to have different needs than a real estate equity firm. Halfenger noted that “It all starts with risk assessment. Complexity drives compliance. Firms are dealing with factors including different business lines, point types, asset classes, etc. and these are all factors in figuring out your risk.” By not stepping back to understand the specifics inherent to your organization you risk both wasting time and missing where the real risk is at the core of your business.

On Jan. 18, the Biden administration announced the nomination of Gary Gensler as the next chairman of the SEC. With a history of a well-developed enforcement philosophy, firms can expect an uptick in enforcement. Halfenger expects that FINRA will follow suit.

Examiners expect you to have core compliance technology. Are you ready for a conversation about how MCO can help you use technology to manage Conduct Risk? Let us know and we’ll set up some time to talk.