Culture of Compliance

The idea of establishing a “culture of compliance” in financial services firms isn’t a new idea; firm CCOs have heard regulators touting the standard for decades. However, a seemingly endless parade of firms continues to be cited for compliance violations that seem to indicate their compliance infrastructure, or the firm’s culture of compliance, were lacking.

For CCOs, the challenge is to not only implement a culture of compliance, but to foster it and obtain “buy-in” from the highest levels of the firm so that compliance becomes part of the fabric of the organization.

Defining Firm Culture

While simply saying “create policies and hold people accountable” sounds simple and straightforward, most CCOs can attest to the challenge that comes with putting the ideals into practice. To create a culture of compliance, you need to first define and clarify what you’re trying to achieve.

FINRA defines “firm culture” as “…the set of explicit and implicit norms, practices and expected behaviors that influence how employees make and carry out decisions in the course of conducting the firm’s business.”

In a May 2016 keynote speech, SEC Chief of Staff Andrew Donohue reiterated a similar definition, adding that a firm’s culture of compliance should “… hold up the higher members of the firm to at least the same standard of conduct as those below them.”

Your firm may have its own definition of what constitutes a culture of compliance; the definition isn’t as important as the implementation.

Obtaining Senior Leadership Buy-In

Too often, companies tend to simply focus on the negatives and expenses that come with complying with regulations, rather than seeing how a culture of compliance can benefit and protect them from risk. It’s not a universal truth, but in many cases when an organization experienced systemic compliance failures, senior management viewed the compliance function as nothing more than a mandated cost center.

In firms where everyone wears multiple hats, and in firms whose growth in the sales and operations functions have outpaced growth in compliance, it can be tough for CCOs to make a case for the people and tools they need. This can be particularly true in companies where the compliance function is siloed and doesn’t have much interaction with other areas of the organization. However, obtaining buy-in from the CEO, COO and other chief executives can help keep the firm out of the regulators’ crosshairs.

Whether it’s getting regular one-on-one interaction with the CEO, creating and chairing an organizational compliance committee made up of the company’s senior leaders, building a compliance training program with engaging curriculum or simply making compliance matters more visible in the firm through regular and relevant communications, CCOs can drive real and meaningful change by getting others in the firm to embrace a compliance mindset.

Maintenance is Just as Important as Creating a Compliance Culture

Expending efforts to create a culture of compliance is important, but it’s equally important to foster and maintain that culture over time.

Ensuring that the right people are in place – those who share the same mindset about the need for a strong compliance function – is a foundational piece of your culture. When your team has the resources (both people and technology) to do its job well, the compliance function can operate as a valued partner with every other department in the organization – to keep the firm, its investors, its employees and of course its clients, safe.

When the tone from the top is that compliance with the rules isn’t optional and when compliance becomes just a regular part of the organization’s messaging and not an aside, compliance officers can breathe easier knowing they’re not alone in trying to navigate the regulatory waters.

Additional Resources on Creating a Culture of Compliance:

 

Fostering a Culture of Compliance Webinar

ComplySci invited Steven Felsenthal, CCO of the Millburn Ridgefield Corporation and Glen P. Barrentine, Partner at Winston & Strawn to discuss how to foster a culture of compliance. This webinar covered key cultural considerations including, what risks can a proper culture of compliance address, what are our compliance expectations, and the importance of culture, policy implementation and supervision. View the webinar and download the slides now by clicking here.

 

How CCOs Can Foster an Ethical Firm Culture

Charles Steerman, ComplySci’s Head of Customer Success was featured in Compliance Reporter in an article entitled, “How CCO’s Can Foster An Ethical Culture”. The full text can be read here.

 

Going Beyond a Compliance Manual: Cultural Considerations to Fostering an Ethical Firm Culture

ComplySci VP of Product, Dave Nash, covers three considerations for CCOs who understand the importance of fostering an ethical firm culture. Read the post here.