One of the Securities and Exchange Commission’s current important initiatives is employee education. An advisory firm must be able to demonstrate how it educates its staff members on compliance-related matters. Education applies to all firm employees, from the most junior to the most senior, from the mail room to the board room. The firm needs to be able to demonstrate that it has a strong culture of compliance, starting from the top down.
The top, meaning the firm’s senior management team, needs to make clear at a staff meeting, at least annually, that compliance applies to all firm members, including all members of senior management. During that meeting, senior management should also make clear that the chief compliance officer speaks for senior management relative to compliance matters, and that what applies to the most junior staff member also applies to the most senior staff member. By so doing, firm senior management will have successfully empowered the chief compliance officer with the authority required of the position.
Adopting and maintaining this “top-down” approach will demonstrate to the commission during an exam that there is an excellent tone at the top, and that there is a strong culture of compliance at the firm. I know these terms have been bandied about for years, but in the current aggressive regulatory environment, they have been given real import.