As a Chief Compliance Officer, how can you achieve success? Tim Kelly, Head of Compliance at Bell Asset Management, has much to say about this important topic.
Tim shares his tips & tricks for building a culture of compliance. He urges CCOs to understand the regulatory landscape, develop effective communication skills, and leverage compliance monitoring software to automate and streamline workflows. Check out his insights below.
Tip #1: Understand the regulatory landscape
In order to build a culture of compliance, you need to be capable of navigating the regulatory landscape. Tim explains, “There has been a tidal wave of regulation over the last ten to fifteen years. I’ve found that it’s no longer just tripwires across a minefield. Now those wires are three dimensional.”
When you are familiar with the regulatory landscape, you will be able to understand the compliance culture your firm should have. Tim says, “We’re in an age where the cult of agency has taken hold in financial services. The role of the fiduciary has largely been overlooked and not applied appropriately by many organisations. I think there should be a strong effort to push and promote fiduciary obligations.”
“While there needs to be strong legislation in the market, much of this regulation isn’t delivering the right outcomes. There should be a lot more focus on creating environments conducive to appropriate behaviors that recognise, foster and encourage a proper fiduciary mindset (e.g. putting the client’s interests first). In some cases, the environments that people work in at some organisations have encouraged behaviours that do not have the client’s interests paramount and result in inappropriate or sub optimal outcomes for clients where the wrong decisions”
Understanding the regulatory landscape will enable firms to implement the right policies that encourage, support and reward behaviors, which in turn will:
- Deliver better outcomes
- Provide greater assurance that your business complies with the regulations; and
- Reduce the overreach by regulators to instigate regulatory requirements that won’t deliver positive outcomes for financial services clients
Tip #2: Set the right tone from the top
According to Tim, the most critical thing firms can do is focus on tone. “A culture of compliance must come from the top,” he says. “The board needs to stipulate and articulate their expectations and have a basis by which they follow up. The code of ethics must have a connection to the conduct and behavior of employees throughout the firm.”
Tim is aware that the ability to set a good culture of compliance is dependent on senior staff including top management like the CEO and other C-suite executives: “The most powerful compliance culture tool for the senior management is their level of compliant behavior – what the staff observe and notice what senior management do and what they don’t do. People will benchmark how to operate based on how the senior staff behave.”
“There needs to be proper recognition of ‘Carrot and Stick’ initiatives. That means penalties for doing the wrong thing, but also opportunities to publicly recognize people doing the right thing.”
To foster better communication, CCOs should create avenues for employees to bring forward/escalate delicate matters. Tim explains that “the other part of the ‘Carrot and Stick’ is having an effective and supportive whistleblowing policy. How many times have bad actors done the wrong thing but other people within firms haven’t felt confident or involved enough to speak up? There needs to be more focus on tone because it’s the quickest way to get those changes that you want. The pursuit of profit over fiduciary responsibilities cannot be allowed.”
Tip #3: Make the most of technology
Tim believes you can create a culture of compliance through the way you use technology. If you make the most of the technology at your disposal, you give yourself the best chance to succeed. “Technology like ComplySci is helpful because it gathers data easily and allows staff to complete compliance tasks efficiently,” he says.
“You need to have the ability to access, analyze and challenge data. Take ComplySci as an example. The information gathered through ComplySci can be actively used. This is vital.”
Ultimately for Tim, it’s about leadership. “You can have great systems, but if there is apathy or silent resistance from the top to doing the right things, compliance and the business won’t succeed.”