For financial services compliance professionals and other firm executives, it is sometimes difficult to gage how prepared their firms actually are to meet ever-changing regulatory requirements designed to protect investors. On September 9, 2019, leaders from financial services firms from across the country came together in New York to share success stories, and learn from peers and industry experts alike.
The ComplySci Summit 2019 featured a full agenda including both large-group presentations and smaller break-out sessions. With a roster of speakers made up of experienced CCOs and other industry experts, attendees gained actionable insights on a variety of key issues.
One of the day’s most highly-anticipated sessions was a fireside chat between former U.S. Attorney Preet Bharara and Jean-Marc Levy, CEO at ComplySci. During their conversation, Bharara shared some of his thoughts on a variety of compliance hot topics including ethics, corporate responsibility, and leadership. In this blog post, we’ve summarized that discussion which addressed questions and issues compliance professionals routinely face, regardless of their firms’ sizes or locations.
What is the role of compliance, and what is its function?
Regardless of a firm’s size, location, products, or services, the compliance function should be viewed as the office of “know,” as a part of the firm that understands how other areas of the firm operate. Compliance should add value to the organization without sacrificing integrity.
Compliance also needs to keep the larger objectives in mind. Sometimes, compliance professionals and firm leaders have the best of intentions but focus too much attention on individual rules and regulations at the expense of the bigger picture.
Effective CCOs are able to put themselves into the shoes of others in the firm, not unlike how effective psychologists treat their patients. By understanding employees and finding out what motivates them, CCOs are better able to manage behaviors and strengthen the firm’s culture of compliance.
Recognizing Firms with Strong (and not-so-Strong) Cultures of Compliance
One hallmark of firms where compliance culture is strong is that the message and tone from the top are in concert with those from the compliance department. When the firm’s chief executives maintain a zero-tolerance environment, one where violations are not tolerated – regardless of the wrongdoer’s role – the entire organization invariably benefits.
Another common theme in firms with solid compliance cultures is that employees feel comfortable asking questions and raising issues, knowing that management – both inside and outside the compliance function – will help. Having mechanisms in place for whistleblowers to come forward is also key.
When firms struggle with compliance culture, they often have a culture of silence. When violations and patterns of inappropriate activity ultimately come to light, it’s almost always the case that multiple other people in the organization knew there were problems but didn’t feel empowered or obligated to speak up.
Technology and the Role of the CCO
Today’s regulatory compliance technology has enormous power and potential. Too many firms find themselves with a myriad of legacy systems and platforms in place, each collecting large amounts of data. When those systems don’t “talk” to each other, it adds complexity and ultimately increases risk.
Firms should keep in mind that simply implementing a compliance platform will not, by itself, magically create a stronger compliance culture. There is a danger of becoming too reliant on technology. Firms’ compliance efforts can also be hampered when leaders become too attached to a system that doesn’t grow with the firm or adapt to changes in the industry.
Two Key Takeaways for Firms
For CCOs and other firm leaders, it’s critically important to understand and leverage the power of communication when it comes to compliance culture. Compliance messaging also needs to be repeated – frequently, so that compliance and integrity simply become part of the firm’s fabric. Compliance should be a key consideration in every interaction and decision.
Finally, a word of caution: No CCO or other executive should assume that their firm is above reproach just because the organization or its personnel have not previously been investigated or prosecuted. A lack of regulatory scrutiny or action is not synonymous with, or indicative of, a compliant firm. Consider that every organization charged with violations of federal or state securities laws “seemed” compliant up until the point where it became clear that it wasn’t.