We occasionally have the opportunity to post articles from industry experts. Below please find an article from Katy McBride (bio below) on how to implement an effective compliance program.
10 Elements of an Effective Compliance Program
By Katy McBride
1. Organizational Leadership and Culture
The organization’s governing authority is knowledgeable about content and operation of the Program with specific individual(s) among high-level management assigned overall responsibility for the Program. One or more individuals is responsible for daily and ongoing operations of the Program. Employees are encouraged and comfortable talking openly and honestly about risk, within a culture of constructive challenge.
2. Designate a Compliance Officer and Compliance Committee
The Program identifies a compliance officer and compliance committee who are responsible for developing, operating and monitoring the Program. This team reports directly to the governing authority periodically and on an as needed basis.
3. Implement Written Policies and Procedures (including code of conduct/code of ethics)
The compliance officer is responsible for developing and distributing written compliance procedures to guide the organization and its employees. These procedures should include a code of ethics to guide employee conduct, detail fundamental principles, and create a framework for action within the organization.
4. Create and Retain Records
The Program will develop and implement a records system which ensures complete and accurate record documentation and addresses retention and destruction of records as well as privacy concerns. Records will be maintained within all applicable regulatory standards and easily retrievable for regulatory inquiry.
5. Develop Effective Lines of Communication
The compliance officer and compliance committee must create and maintain effective lines of communication with all employees to support an ongoing culture of compliance. Questions, complaints, and suggestions will be encouraged and supported. When appropriate, confidentiality and anonymity of complainants will be protected to safeguard against retaliation.
6. Conduct appropriate training and education
The Program’s policies and procedures and code of conduct are widely promulgated and employees are trained on the Program’s objectives and policies. Proper training is required for all employees including organizational leadership, employees, and the organization’s agents as appropriate. The content may vary according to the specific group being trained, and may employ a variety of training methods to account for the skills and experience of the individual trainees. Training will be tracked, attested to, and documented.
7. Internal Auditing and Monitoring: Assess Effectiveness of Compliance Program
The Program will include monitoring and auditing systems designed to confirm adherence with laws and regulations and detect improper conduct. Ongoing evaluation with regular and periodic compliance audits by internal or external evaluators will identify and resolve problem areas and gaps in the Program.
8. Respond to Detected Gaps and Develop Corrective Action
Should the compliance officer or compliance committee receive reports or identify areas of non-compliance, it must take immediate steps to determine if there has been any violation of laws or policy statements, and take decisive action to correct the deficiency and impose remedial action as necessary. Additionally, the compliance officer must take immediate steps to prevent recurrence of similar deficiencies or misconduct, which may include modification of the compliance program, audit, corrective action, and employee training.
9. Enforcing Standards Through Clear Guidelines
Violations of the organizations policies and standards of conduct will be immediately addressed with corrective action to correct and prevent further misconduct. Appropriate action will be “case specific” and will be done throughout all levels of the organization. Disciplinary action will be proportional to the conduct.
10. Compliance as an Element of Employee Performance
The Program considers adherence to all compliance elements as a factor in evaluating employee performance and incentives employee participation in strengthening the Program. The organization promotes commonality of purpose: each employee individual interests, values, and ethics are aligned with the organizations risk strategy, appetite, tolerance, and approach.
About the Author
Katy McBride is the Compliance and Operations Manager for LJM Partners, a Commodity Trading Advisor and Commodity Pool Operator registered with the CFTC and NFA member firm. Katy has over 9 years experience in compliance and operations management with both start up and fortune 500 organizations. Prior to her role at LJM, Katy provided consulting services to Registered Investment Advisors and Broker Dealers, where she developed and maintained full service customized compliance programs in addition to serving as Chief Compliance Officer and Director of Operations for several of her clients. Katy’s expertise includes regulatory compliance, broker-dealer compliance and risk management, Investment Advisor registrations, regulatory filings, and operations management. Katy has her bachelor’s degree from the University of California at Davis and holds her FINRA Series 7, 9, 10, and 66 licenses.
About Sansome Strategies
Sansome Strategies is a compliance consulting firm specializing in high-touch, outsourced compliance services for businesses in the investment management industry. Clients include investment advisers, futures managers, broker-dealers, hedge funds, and private equity firms. Sansome Strategies provides tailored compliance management solutions to the unique needs of each client and is focused on helping clients build and enhance their business by simplifying the compliance and regulatory process. For more information, please contact us here.