By Amy Kadomatsu, CEO at ComplySci
2020 was a challenging year. At a moment’s notice, long-term agendas were pushed aside for short-term recovery plans. For many companies, the goal was simply to stay afloat and survive a deadly global pandemic.
As we settle into 2021, no one knows how the year will play out. What we do know is that COVID-19 still exists, and most companies will operate remotely for the foreseeable future. As long as this remains the status quo, the concerns that kept compliance professionals up last year will continue to be top of mind in 2021.
Our team at ComplySci is here to help you navigate the latest compliance trends and come out of 2021 stronger and more successful than ever before.
Mitigating Risk in a Remote Work Environment
Due to COVID-19, many companies had to transition to a remote working environment in 2020. During this time, regulators expressed concerns about fraudulent activities, and reiterated to firms the importance of following the rules, even as companies faced downsizing and other financial difficulties.
The 2020 Annual Report from the Division of Enforcement is particularly revealing. Stephanie Avakian, Director of the Division of Enforcement at the SEC, states: “All told, from mid-March through the end of the fiscal year, the Division’s Office of Market Intelligence triaged approximately 16,000 tips, complaints, and referrals (a roughly 71% increase over the same time period last year), and the Division opened more than 150 COVID-related inquiries and investigations and recommended several COVID-related fraud actions to the Commission.”
“Despite the shift in working conditions – and the still-ongoing efforts to adapt to those conditions – we quickly dedicated substantial resources to address the emerging threats presented by COVID-19 and the ensuing dynamic market conditions. At the same time, we continued to focus on the multitude of existing and new non-COVID-related enforcement issues arising in the normal course. We confronted these challenges head on and, in so doing, remained steadfast in our mission to protect investors.” ~ Stephanie Akavian, Director of the Division of Enforcement, SEC
In addition to the SEC, FINRA also created a special COVID-19 page, reminding companies of the risks associated with the pandemic, as well as the responsibility of compliance.
It’s important to understand what the risks of remote working are, so companies can establish procedures that mitigate these risks as effectively as possible.
Some of the top concerns I hear about include cybersecurity, which explains why many CCOs are starting to implement strong vendor risk management programs. In addition, CCOs are thinking about how to scale up training programs for employees who now have to onboard virtually. These will continue to be top priorities in 2021.
Maintaining compliance in a remote work environment can be difficult, but there are solutions. One of our clients, Bluerock Capital Markets, was able to build an entire compliance program from home by using the ComplySci platform. In 2021, we’ll continue to make product enhancements that ensure you can carry out important compliance tasks from anywhere.
Employee Monitoring in a Changing Tech Landscape
In 2020, many CCOs struggled to balance the line between proactive employee oversight and overbearing surveillance, particularly when it comes to monitoring employee communications.
It can be difficult for CCOs to draw the line. Debates about monitoring social media communications, or instant messaging applications like WhatsApp, will continue to dominate the compliance landscape. As thought leadership content gains traction on social media, especially with the SEC’s recent modernization of the Marketing Rule, compliance is increasingly automating employee preclearance of marketing materials and content. What’s next?
There isn’t a one-size-fits-all answer, but one thing we know for sure is that compliance teams are always searching for intelligent ways to monitor employee behavior. There’s one question that will be on the top of everyone’s mind in 2021: Where will AI take us?
The past week’s events prove that political contributions will be a top concern, as well. Companies are beginning to reevaluate their pay-to-play strategy following the election, and in response to the attack on the Capitol, some have already started to halt PAC contributions, and it’s likely that other company giving policies will be reviewed going forward.
“We intend to pause our contributions during the quarter as the country goes through the presidential transition and hopefully emerges from these events stronger and more united.” ~ Candi Wolff, Head of Global Government Affairs, Citi
Whether your company’s policy allows contributions or not, it’s always important to trust and verify. In 2021, ComplySci will significantly enhance its Political Contribution Verification tool so you can have peace of mind that your employees are following the rules.
The Rise of the Data-Driven CCO
Today’s CCO is expected to be a legal expert, have soft skills, understand the business, and be a big data expert. For many CCOs, this can be both incredibly challenging and exciting. The Goldman Sachs 1MDB corruption scandal is a powerful reminder that regulators are holding firms to a higher standard than ever before, and those in the leadership team can be held liable.
When I interviewed Helen McAuley from Breckinridge Capital Advisors, she spoke about the data challenges compliance professionals face: “We need to look at vast amounts of data, which is really tough when we don’t have the tools we need to help us. There are a lot of compliance professionals that still do much of their work manually, which of course creates risks and becomes a huge time sink.”
One exciting initiative ComplySci is launching in Q1 is Compliance Control Room, which will be an integrated solution that tracks firm activities alongside employee activities to proactively identify potential conflicts of interest and market abuse.
For many firms, managing the flow of sensitive information is a crucial step in preventing conflicts of interest, but to do this requires the analysis of an ever-growing amount of data. The compliance team at Montagu Private Equity, one of ComplySci’s clients, suggests that one solution is to leverage tech: “Using technology to monitor MNPI can ensure data is accurate, complete, and easily accessible.” We hope Complysci’s Compliance Control Room solution can help resolve some of your data concerns.
Just as regulators expect CCOs to become more data-driven, CCOs should expect vendors to provide services that meet the moment. ComplySci is prepared to help your team alleviate the burden and comply with the most complex rules and regulations.