Conversations at the top: the tone of the independent chief compliance officer

Abstract

PurposeThe purpose of this paper is to clearly set forth before fund business leaders certain current relevant investment management compliance regulatory issues, to communicate the necessary areas of expertise and duties of a chief compliance officer (CCO), and to reinforce the need for effective communication and tone at the top.Design/methodology/approachThe paper explains the general requirements of independent and proactive investment company CCOs and other compliance professionals, including required areas of knowledge, and the tasks associated therewith, illustrations of enforcement actions and other practical difficulties in day‐to‐day conduct of compliance activities, practical guidance regarding communication techniques and problem‐solving, and a bottom‐line assessment of the responsibilities of a fund CCO.FindingsFund CCOs must have extensive experience in the investment management business and bring a “best practices” perspective to their responsibilities. They will know the letter of the law and yet also have a real world perspective on how regulations will impact the firm or the fund. They should be independent‐minded, giving a fund or advisor's board and their investors an objective perspective on regulatory compliance. They should be able to proactively communicate effectively, rendering complex compliance requirements into manageable and executable policies, processes and procedures that investment professionals can work with. Lastly, the investment managers they work with must remain well‐informed and highly‐motivated to understand and assist their strong and independent CCO in ensuring that their firm's compliance tone starts at the top but does not end there.Originality/valueThe paper discusses recent enforcement actions with real‐world consequences for business leaders and CCOs, speaks to the actual types of difficulties that CCOs face every day in executing their responsibilities, and gives practical and insightful guidance on problem‐solving.