Episode 85: Establishing an Effective Culture of Compliance

On episode 85 of the CCO Buzz, Senior Compliance Consultant Janice Powell joins us to discuss establishing an effective culture of compliance at your firm.

 

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CCO Buzz: Hello and welcome back to the CCO Buzz. How is it March already? Where is the time going? As we all know or are experiencing, we are currently in the last push to meet the Form ADV deadline. March is always a crazy month, but the team at Core Compliance also takes this specific opportunity during Form ADV season to further assess the changes and needs of our clients and their firms in order to pivot and establish a stronger and unified approach to compliance for the rest of the year.

Today, we’re in for a treat, as we’re joined by another new member of the Core Compliance team, Senior Compliance Consultant Janice Powell. Aside from being a new California resident, Janice offers years of insight as a former CCO to numerous firms in the industry. She joins us today to help us understand how we can leverage compliance and office culture to further a firm’s short- and long-term goals and objectives.

With that, let’s begin…

Janice, before we dive headfirst, let’s take a moment to get to know you. As one of the newest team members, can you share with us a little about yourself?

Janice Powell: Certainly, I’d be more than happy to. Hello everyone! My name is Janice Powell, and I am a Senior Compliance Consultant at Core Compliance. I have almost 20 years of industry experience and I have dedicated my career to collaborating with clients in an effort to enhance their risk-based compliance programs and build an understanding of their fiduciary responsibilities to their clients. Over the years I have found that a dynamic approach is necessary when working with C-Suite executives. This lends itself to expedite efforts to mitigate conflicts of interest and regulatory scrutiny, while developing solutions to help firms expand and grow their business in a compliant way. I pride myself on my natural ability to inspire and cultivate long lasting relationships while building and developing a culture of compliance, which is why I am on today’s episode of the CCO Buzz.

CCO Buzz: Wow, what a great segue. I hear that you authored this month’s Risk Management Update on establishing an effective culture of compliance. Understanding that that’s a huge undertaking for firms, how would you define culture of compliance?

Janice Powell: I think it was Lori Richards, a former Director of the Office of Compliance Inspections and Examinations, or “OCIE,” for The Securities and Exchange Commission (“SEC”), who defined it as “establishing, from the top of the organization down, an overall environment that fosters ethical behavior and decision-making. Simply put, it means instilling in every employee an obligation to do what's right.”

CCO Buzz: I’m not going to lie, that definition in itself pretty was loaded. I’m not even sure where to start with it – as I’m sure many firms don’t either. How would you recommend starting?

Janice Powell: Well, I urge clients to start where it says to… at the top. Firms need to ensure that they start by establishing an executive buy-in. Executive or senior management buy-in is commonly referred to as the “tone from the top”. In order to be successful in compliance efforts, it is vitally important that the CEO and senior leaders exhibit the behavior, which indicates that non-compliance with policies and procedures, applicable regulations, ethics and the firm’s undivided loyalty to clients will not be tolerated.

CCO Buzz: Interesting, but how though? In your opinion, what kind of methods or practices could a firm implement from the top?

Janice Powell: Funny you ask that, I provide more best practices and suggestions within my article, but two are:

  • Senior management should encourage employees to act legally and ethically as well as in accordance with their fiduciary obligation. Consistent messaging from leaders reminding employees of the firm’s expectations toward doing what’s right can instill a solid culture of compliance.
  • Also, Senior management should attend and participate in required training for employees, alongside the employees. This will demonstrate to those in attendance the importance of compliance. In other words, lead by example.

CCO Buzz: Wow, I never thought about [how] the simplicity of seeing senior management present would further perpetuate the importance of compliance firm-wide. Understanding that it just starts at the top, what are other considerations firms can implement to further engage compliance within their own corporate structure and/or culture?

Janice Powell: Well, there’s a myriad of things that firms can implement within their corporate structure and routine but taking the time to assess how these steps can be adjusted, customized, and enhanced for your business model, your regulatory requirements, and efficiency as well as personnel needs are where true value can be added.

A few things that come to mind are:

  • Establish protocols for reporting and surveillance. Adhere to all deadlines and consequences for failure to act as defined in your policy, and then report them appropriately. Maintaining consistency is necessary in the success of a culture of compliance.
  • Next, report all compliance violations to senior management and the employee’s manager and suggest appropriate steps and sanctions.
  • Ensure every employee has access to the firm’s policies and procedures, code of ethics and any other important documents, such as the firm’s mission statement, their company values, etc.
  • And lastly, work closely with human resources to include compliance obligations during new hire orientation, as well as action plans for those who fail to meet those obligations.

Again, these are just blanketed recommendations for general implementation. I do offer more best practices in this month’s article that is due out in a few days.

CCO Buzz: That’s plenty to start off with and a great tease for your article. So much that I’m personally, looking forward to it. Is there anything else you’d like to share with listeners regarding building a culture of compliance?

Janice Powell: Of course. The industry must understand that developing and implementing a culture of compliance begins with the basics of compliance. Senior management should define and educate [on] their expectation and then require that behavior. Leading by example is key to helping ensure adherence.

If you have any questions or would like insight on a custom approach to establishing your firm’s culture of compliance, please feel free to reach out to me and the Core Compliance team. I know that with Form ADV fast approaching our team is ready to assist you with any of your compliance needs and objectives. You can contact us at (619) 278.0020 or at www.corecls.com.

CCO Buzz: Thank you so much for joining us today, Janice. And welcome to the team.

Janice Powell: Thank you!

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-in to next week's episode of the CCO Buzz.

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