Compliance Solutions for Investment Advisers

The Compliance Manifesto

In a recent speech an SEC official said that the presence of robust, effective compliance programs would allow companies to reap significant credit in their dealings with regulators. He spoke about the ways the SEC supports compliance and ethics programs.

  • Informal Guidance – He urged companies to walk the walk – to demonstrate a highly ethical and compliance-driven culture – at the front end of investigations.  Conversely, just talking the talk – without the program to back it up – engenders serious distrust.
  • Formal Guidance – That the better the compliance program, the less likely a parent company may be charged for the acts of a subsidiary; that the compliance program may factor into the calculation of an appropriate penalty in a resolution; and that isolated conduct combined with good compliance and internal controls make it less likely that an action will be brought at all.
  • Enforcement Actions – He discussed several enforcement actions – and alluded to many more – that demonstrate the SEC’s commitment to accountability for insufficient compliance, oversight and controls.
  • Initiatives – Under the “Compliance Initiative”, the SEC has begun bringing actions against advisers who lack effective compliance programs and procedures.  The Whistleblower Program provides financial incentives to report internally first when appropriate to do so.

He concluded with his own personal checklist of both warning signs (pushing the envelope, technical compliance, lack of empowerment) and the hallmarks of effective programs (sufficient resources, ethical decision-making, incentivizing proper behavior, whistleblower protection, continual self-examination and improvement).

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