Episode 44: How to Create a Strong Culture of Compliance

On episode 44 of the CCO Buzz we have Core Compliance President Tito Pombra discussing 10 key points on how to build a strong culture of compliance at any firm.



CCO Buzz: Hello and welcome back to the CCO Buzz! This week we are in for a treat, we have Core Compliance’s President Tito Pombra here to discuss his 10 key points on How to Create a Strong Culture of Compliance at any organization. Later, we will also breakdown a few key components to any successful compliance program for you to consider within your own organizations.

With that take it away Tito!

Tito Pombra: Good Morning! This is Tito Pombra from Core Compliance on the CCO Buzz. I’s going to talk about how to have a strong culture of compliance in your firm.

The SEC, you know, during the examination - is very interested in how your firms demonstrate a strong culture of compliance or “tone from the top.”  It is actually very essential for investment advisers and broker-dealers to have a strong culture of compliance in their firms. And how to create a strong culture of compliance- the top ten key points in building and creating it, from my perspective, is training, training and training.  It is really important that all employees in the firm understand their compliance obligations, related to the clients they are serving. And compliance, like I say, is everybody’s job – not just the compliance team’s job.

So, to start with…

  1. Every new employee must complete compliance orientation, and this should be a part of the onboarding process at every firm. You know, coming into an Investment Adviser firm they need to understand the business and the compliance obligations they have and for the clients the investment adviser is serving fiduciary.
  2. It is essential that firms have mandatory annual compliance training that encompasses all high-risk compliance areas of the business and attendance should be recorded or memorialized. And it should be mandatory. All employees, at a minimum, have annual compliance training presented to them.
  3. Also, all employees must have easily available all Policies & Procedures available to them, either through the Intranet, Online or digital manual, and/or a physical copy. They need to review the Policies and Procedures and tests to it that they understand their compliance obligations.
  4. Every organization needs to implement a Compliance Oversight Committee which needs to meet regularly and typically includes members of the C-Suite - and shows a “tone from the top.” It’s actually absolute critical that all compliance matters are escalated with this committee and this committee makes the determination on sanctions, breaches, or employee violations related to the compliance rules and policies and procedures.
  5. In addition, companies should also provide Ad-hoc Training for any aspect of high-risk business, such as Sales, Portfolio Management, Trading, Anti-money Laundering, personal trading, portfolio trading, etc. I strongly recommend to get industry experts to come and do this training to make an impact on employees, related to how important compliance should be to your firms.
  6. Businesses should develop an on-going communication and conversation about regulatory matters and enforcement actions that would be of interest to the employees, this includes, but not limited to Insider trading and other SEC actions. Topics of current SEC environment ad enforcement brings a good flavor to understand why compliance is important to firms, why everybody should pay attention to compliance and compliance personnel when they provide training and guidance during testing and reviews.
  7. Organizations must also incorporate an annual or bi-annual industry expert training- So, I’ve talked about this already, but especially on areas where there are greater risks, such as the investment management area; where your investment managers are investing money on behalf of your clients. It is an area that can have clearly a lot of conflicts that you need to mitigate, and the training is really really good part for addressing those conflicts.
  8. If you can, companies should also create and implement a regular compliance newsletter within your firm related to hot topics, industry news, best practices, the SEC’s current focus, priorities, Risk Alerts, and guidance. It’s a good way to inform you employees about what going on in regard to the regulatory world and it crates a strong culture of compliance and “tone from the top.”
  9. Also, I highly recommend that CEOs speak about importance of compliance at Company meetings, inf you have those. Understand the stress and importance from the top will reaffirm the message as it trickles down to other departments. It is critical that this message is, you know, from the top and it gives the reassurance to the clients and the SEC that the C-level is very in-tune with the compliance of the firm.
  10. And lastly, organizations should work with and leverage their HR department to ensure ethics and compliance principles are integrated and part of the individual performance reviews. It’s really really important that compliance is part of providing information to the employees, so they understand their obligation and if they do breach these obligations there are ramifications and those ramifications can come from the HR department.


CCO Buzz: Well that’s it for this week’s episode. If you’d like additional information, please check out our website at www.corecls.com. You can also follow us on Facebook, LinkedIn or Twitter @CoreCLS. Thank you and we hope you tune into next week’s episode of the CCO Buzz.