The Dangers of Complacency on Compliance

There are several ways management can include the CCO in the management process. One way is to schedule a regular quarterly meeting between senior management and the CCO. Management could also have the CCO attend management meetings (of course, he or she can be excused for certain issues such as compensation, etc.). Finally, to the extent maintained by the firm, have the CCO attend standing committee meetings on investment, marketing or technology. Of course, if the CCO is already a member of senior management, then access issues are mitigated.

No other exercise can assist a firm in determining its true exam readiness than a mock exam. Note that a mock exam is not simply an intensive document review followed by a written report, but a hands-on review of how to respond to each exam issue. To do otherwise can not only prove to be both an imprudent and costly use of firm resources, but can potentially backfire because unless conducted by an attorney, the report is subject to turnover to the SEC or to plaintiffs’ lawyers.

If your compliance processes are not exam-ready, then you’re doing something wrong. Before regulators come knocking or plaintiffs’ lawyers come suing, would an advisor voluntarily engage in all of his or her current compliance efforts? Understand what the regulators and plaintiff’s lawyers will be looking for, and be ready to defend your business.