The Importance of an Empowered Chief Compliance Officer

Empowerment, Seniority, and Authority.

The Director of the Office of Compliance Inspections and Examinations, Peter Driscoll, in this linked SEC Speech, called advisers to action to strengthen and improve CCO integration in business practices to meet regulatory obligations and avoid inadequacies in company policies and procedures. Driscoll first outlined the impact of and changes to compliance considerations due to COVID, as well as the continued success of examinations and compliance initiatives.  Driscoll also discussed the OCIE Risk Alert which identified notable observations and commonly cited deficiencies related to the “Compliance Rule” (Rule 206(4)-7 under the Advisers Act).  

The speech then focused on the important role of Chief Compliance Officers, and the challenges associated with maintaining the balance between regulatory requirements and business activities, to avoid falling short of meeting compliance and securities requirements.

Driscoll explained that although compliance responsibilities and challenges are significant, the critical function of compliance should not all fall on the shoulders of Chief Compliance Officers alone.  Not only is an investment adviser required to have a CCO that is competent and knowledgeable regarding the Advisers Act, but the CCO should also be empowered with full responsibility and authority to develop, implement, and enforce appropriate policies and procedures for the firm.  The CCO should have a position of sufficient seniority, and authority within the organization to compel others to adhere to the compliance policies and procedures.”

Driscoll stressed that “Empowerment, seniority and authority.  These three words matter.  Some firms take the “check-the-box” approach to the CCO requirement, merely looking at it as a way to satisfy the rule as opposed to thinking of the role as an essential component of running an advisory or fund business.”

Driscoll also stated that “One of the most important aspects of an effective compliance program is having adviser management support compliance and empower CCOs to perform their jobs effectively.  Without the support of management, no CCO, no matter how diligent and capable, can be effective.”

For more information: View the full SEC speech or our blog post describing the OCIE Risk Alert.

How Coast to Coast Compliance Can Help

Coast to Coast Compliance can empower your CCO and help provide the support and confidence needed to affect a strong compliance program.  We can also remain an as-needed resource for your firm and develop new-hire employee compliance training, or customized compliance training to keep your CCO and/or compliance personnel current on the latest regulatory requirements and best practices.