If the first stage of a pragmatic Know Your Risk strategy is deconstructing and understanding compliance obligations to define where you need to keep your focus, the next step is mapping policies, procedures and controls to performance indicators to be able to accurately assure compliance.
Essentially, at this stage, we need to answer the question: What do we actually need to monitor?
Competing priorities for compliance departments today include tight budgets, challenges hiring and retaining skilled professionals, the continuing impact of COVID 19 and remote and hybrid work—all while maintaining a culture of compliance in the midst of everything else.
The U.S. Securities and Exchange Commission (SEC) recently released the staff bulletin Standards of Conduct for Broker-Dealers and Investment Adviser Conflicts of Interest to reiterate the required standards and obligations for broker-dealers under Regulation Best Interest (Reg BI) and for investment advisers the fiduciary duty standards under the Investment Advisers Act of 1940.
Regulations, frameworks, policies and controls define the day-to-day of the Chief Compliance Officer (CCO) and their teams. It’s fair to say that it is an important yet often troublesome undertaking to make sense of what can often be described as monitoring spaghetti. At the same time, the teams also need to ensure they are keeping senior execs and the Front Office engaged and compliant.
So how can the CCO set regulatory priorities, identify policy and procedure gaps and understand compliance obligations?
On 22 June 2015, retired Swiss banker Xavier Justo was arrested by armed Thai police at his brand new boutique hotel in Koh Samui, Thailand. Six months later, Justo provided a British journalist with thousands of documents that started a much larger chain reaction. The documents appeared to shed light on the alleged theft of hundreds of millions of dollars from a state-owned Malaysian investment fund known as 1MDB.
