- Pushing the Envelope – Risk taking in the areas of legal and ethical obligations.
- Technical Compliance – Adhering to the letter of the law, but not the spirit of the law.
- Lack of Empowerment – Compliance personnel that have limited access to senior management.
- Tone at the Top – Senior management actively supporting the compliance function.
- Resources – CCO is provided with the necessary resources, independence, standing and authority to be effective.
- Culture & Values – Advisory firm promotes integrity and ethical values in the decision making process.
- Incentivizing Compliance – Rewarding the right behavior and not just punishing the wrong behavior.
- Confidence and Protection – Eliminating the fear of whistleblower retaliation within the advisory firm.
- Self Evaluation and Improvement – Advisory firm proactively keeps pace with best practices.
SEC Chair Mary Jo White identified five areas that the SEC would focus on as part of the SEC’s initiative of shorter, more streamlined “presence exams” for newly registered advisers. The areas of focus include:
- Portfolio management;
- Conflicts of interest;
- Safety of client assets; and
SEC Chair Mary Jo White also assured compliance officers that if they act “within the law” they should not fear enforcement action.
“Although we occasionally bring enforcement actions against compliance personnel, compliance officers who perform their responsibilities diligently, in good faith, and in compliance with the law are our partners and need not fear enforcement action.”
We still suggest a good E&O/D&O policy. Make sure that if your firm does have a policy, that it specifically covers the chief compliance officer position.
- Insider trading;
- False advertising and performance claims;
- Overvaluing assets in order to charge excessive fees;
- Benefitting favored investors at the expense of other investors; and
- Using private fund assets for the personal benefits of the fund’s advisers.