Instead of a one-time top-down review, compliance officers say the better way to test the firm’s compliance strength is by reviewing individual business functions and operations throughout the course of the year.
The Securities and Exchange Commission (SEC) requires registered fund advisors to review their compliance programs annually.
Compliance officers say this rolling routine is the more efficient way of meeting the SEC requirement as it allows the firm to spread the workload – avoiding busy periods for particular business units – and adapt to constantly changing regulations.
“We don’t have set intervals but it’s driven by what is in the news, so when there were a lot of local elections we have gone in and reviewed everybody’s political contributions to make sure that they had been pre-cleared and reported,” said one US-based compliance officer.
Compliance officers also say it can help to have an outside pair of eyes review the firm’s compliance program. Having an outside consultant come in once a year acts as a “safety net” that no particular firm function or business activity is overlooked and adds “an element of independence to the review”, said the CCO.
Compliance officers who do not get third parties to check their work often let individual business units carry out review with their oversight. This adds a degree of independence so long that employees are not reviewing their own work, said a separate CCO.