Advisors Take Note: Compliance Officers Are Watching

Nearly half of compliance officers report that they’ve taken action against an employee in the past 12 months for ethics violations, and 11% of those actions resulted in termination

Financial advisors beware: Your firm’s compliance department is watching you, surveilling your personal brokerage accounts and possibly monitoring your Facebook, LinkedIn and Twitter pages. A new survey from Compliance Solutions at Charles Schwab found that compliance officers spend approximately 11 hours per week monitoring and surveilling employees’ brokerage accounts, and half are also watching employees’ social media pages.

More important, 49% of compliance officers report that they’ve taken action against an employee in the past 12 months for failing to follow his or her firm’s code of ethics, and 11% of those actions resulted in termination.

“The role of the compliance officer has changed dramatically over the past decade as technology has allowed businesses to operate at lightning speed, and as the regulatory environment evolves at a breakneck pace,” said Scott Rister, vice president and general manager of Schwab’s Compliance Solutions, in a statement.

Despite the reported vigilance of compliance officers, only 51% said they were very confident about the effectiveness of their employee monitoring policies, and only 17% said their training program was “very good.”

Rister was surprised by those responses but said it was encouraging “that action is being taken when an infraction occurs.”

He stressed that compliance departments need the proper resources to “monitor effectively,” which starts with an “effective training program.”

“If employees do not have clear, ongoing training, or understand the appropriate way to respond to a new situation, then it becomes much more challenging to manage risk effectively,” Rister said.

Adding to that challenge are cyber threats and social media, which puts everything on display 24/7, said Rister. “Even alleged noncompliance can result in swift adverse business effects, such as decreased sales, decreased productivity, reduced share price and reduced brand value, all putting a company in serious jeopardy,” said Rister. “In this environment a highly effective compliance program is not just a business advantage, but also a business necessity.”

The survey results were based on 134 online surveys among compliance officials in financial services firms, including money management firms, that were conducted from Aug. 12 through 26. 

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