By Adam Turteltaub
adam.turteltaub@corporatecompliance.org
It seems lately that every week or so there’s another article about the threat that faces compliance officers. The Wall Street Journal chimed in last week with an article describing compliance officers as being in the cross hairs.
It’s a prospect that sends chills down spines and provokes visions of slamming jail cell doors.
If you read past the headlines, though, a clearer picture emerges: these compliance officers tend to be at financial services firms and, quite often, they were complicit in the wrongdoing. It’s not just that they missed something. Sometimes, they were a part of the incident that got the company in trouble in the first place.
It’s worth noting that there is an enormous difference between compliance officers in financial services and those elsewhere. For one, while all of us begin our discussions with the Sentencing Guidelines, in financial services that is very rarely the case. When I first joined SCCE back in 2008 we exhibited at a conference for financial services compliance officers. I set up our booth and explained that we would help them learn from other industries how to align their programs with the Sentencing Guidelines.
I was met with blank stares.
One person was shocked to learn that compliance existed outside of financial services. Worse, of all the people I spoke with, not one person had ever heard of the Sentencing Guidelines. That’s no exaggeration. I even ran into someone I went to high school with who was chief compliance officer for the asset management arm of a very large bank. He had no idea what the Sentencing Guidelines were either.
Now, that isn’t to say that these people have no clue. I don’t doubt that they are very good at ensuring that their organizations stick to the compliance requirements of the SEC and other regulatory bodies. But when you talk compliance with them, you’re talking a very different profession.
You’re also talking about a very different position within the organization. In the compliance that we know the issue is often whether compliance should report directly to the board, CEO or be a part of the general counsel’s office. In many investment firms, especially smaller ones, compliance is a part time responsibility of someone who might also have operational responsibilities. Bernie Madoff’s Chief Compliance officer was also in charge of operations. Oh, and he was also Madoff’s brother.
So, while this doesn’t mean compliance officers in healthcare, manufacturing, technology and elsewhere can act with fear of impunity, they shouldn’t be overly fearful that doing their job will land them in handcuffs.
And we all should take solace in the words of Stephen Cohen, the Associate Director of the Division of Enforcement at the SEC, who said in a recent web conference with the SCCE and HCCA that there is no truth to the rumor that the SEC is targeting compliance and ethics officers.
So the next time someone tells you that compliance is an endangered species, stop, take a breath, then shrug and get back to work.
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Having spent some time in Wall Street compliance, I found that these firms are governed by very exhaustive and exacting compliance expectations. The US Sentencing Guidelines’ expectations are pretty well covered by various securities acts, SEC and other government regulations and self-regulatory bodies. Generally, compliance systems are serious business in financial services. That being said, sometimes the industry’s ‘culture of compliance’ does not embrace a broader ‘culture of principles and integrity’ and where I see many problems occurring there. To Adam’s point, financial services regulations often set specific duties for compliance officers; those finding themselves in the cross hairs typically have seriously overlooked one or more of these duties.
Jason: Good points all. I don’t doubt that they have extensive requirements that they work towards.
One thing that does concern me, though, is that they are indifferent to the compliance programs of other industries. Our membership meetings are filled with compliance professionals from virtually every industry under the sun, except financial services. And while every other industry is willing to learn from each other, they are the exception.
That’s a huge gap in learning that they have created for themselves
I would say s that the vast majority of lawyers, who do not deal with things like white collar crime or financial services or Medicare coding have no idea what we mean by “compliance.” If they are not involved with defending or prosecuting federal crimes, they will not have heard of the Sentencing Guidelines. Is it any wonder that many businesspeople are reluctant to invest in a compliance program for their company?
On the flip side, I have seen websites for law firms where every lawyer in the firm is listed as a compliance expert. For some reason, I’m skeptical.
Ted, the law firm that advertises its lawyers as compliance experts has made the incorrect assumption that compliance is a natural subset of legal and that anyone who has a law degree and has read the FSG can “do” compliance. Walmart, Siemens, GM. VW and many others in the headlines have proven this naiive assumption WRONG! See Ray Campbell’s white paper “The End of Law Schools ” where he methodically and articulately makes the opposite case. My deftiniton of a Compliance “expert” is someone who has a documented track record of designing and managing all aspects of an effective, robust compliance program, or like you, have spent significant time with the profession And I’m not talking about a checklist based paper program, but one that involves all the internal people and experts, including the businesses, in the correctly defined roles that are needed to actually make the program “work” as contemplated by the Joint SEC?DOJ FCPA Guidance. Compliance is a new and separate subject matter expertise and profession that works collaboratively with Legal and many others to implement a program that works to find,fix and prevent problems and supports a culture of organizational integrity. Companies need compliance subject matter expertise in the same manner that a patient needs a brain surgeon, not a pediatrician or general internist with a brain surgery textbook, to perform brain surgery. This is the reason that GM’s compliance group didn’t find the ignition flaw that killed so many people, while the lawyers were running around with a’69 Naughty Words” powerpoint and telling people not to take notes in certain meetings. Lawyers and those who work for them who try to do compliance through a “protect and defend” mandate will never find and fix problems. Look at VW, with a labor lawyer partner as Compliance chief, which failed to even follow up on several “tips” about the emission testing cheating scheme, including from a vendor (Bosch). Now, trying to get over this scandal and restore its reputation, VW has borowed Daimler’s CCO and given her a seat on the Supervisory Board. I hope all companies with that failed model were watching carefully.
I am a compliance officer in Financial Services who had his compliance world opened since finishing law school in 2011. I’m also a member of and have attended various SCCE meetings and events as well as the FINRA, SEC and other regulatory agency events.
One of the things that distinguishes financial services compliance from any other is the fact that often Compliance Officers have to get registered by taking various qualification exams. The exams that most, if not all of us take are the Series 7 – General Securities Representative and Series 24 – General Securities Principal. These exams have very little to do with the job that a Compliance Officer does.
As far as the sentencing guidelines, they have a small bearing on what compliance does in a securities firm. What governs are the FINRA/NASD and SEC rules and regs.
Then the other big issue as someone pointed out is that at some firms, Compliance does other jobs in addition to Compliance. At one firm, I was the Chief Compliance Officer, The Chief Financial Officer and a Investment Banker (by default). So at times, being complicit may be a part of the job.
As I said, my compliance world opened up to me, once I finished law school in 2011. Then I became more aware of the fact that as a Compliance Professional, compliance not only dealt with the FINRA and SEC rules but there are more aspects that involves us such as labor issues, personnel issues, corporate governance,etc.
But more recently, I have become more aware of the issue of compliance officer liability. It scares me to know that something that I had nothing to do with could result in me losing my livelihood and my reputation. As such, I am now looking to the corporate side to see if the skills that I have from financial services cna translate into the corporate side. You will see me at more and more events and I will comment from time to time based upon the insights that I have gained over the years.
Yes, compliance can be a rewarding career but only if you see the entire picture.
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