Compliance Professional Yesterday, Today And Tomorrow

Complinet WebinarFebruary 25, 2010

Ann OglanianPresident and CEOReGroup, LLC

Compliance Professional of Yesterday, Today and Tomorrow

Speaker: Ann Oglanian

President and CEO of ReGroup, LLC, a San Francisco-based consulting firm

ReGroup provides strategic and tactical guidance to investment advisers, boards of directors, hedge funds and broker/dealers

Areas of expertise: strategic planning, organizational development, operation efficiency, risk management, compliance programs, executive recruiting

Over 20 years of professional experience in the financial services industry and a JD

2©ReGroup, LLC 2010

Agenda

The compliance profession: a review

•Using yesterday and today to provide insight on tomorrow

•Educated guesses and wish list What can compliance professionals do to prepare? Introducing a debate:

• Is compliance a “Profession”?

•Should it be?


Trends

Enron, market timing, etc. Growing recognition of the cost of non-compliance More regulation: CCO required Financial crisis; Madoff More regulation Evolving compliance skills required


Yesterday: the role of compliance

An afterthought A second job for the office manager Subordinate to the legal function Overhead Expectation = “Keep me out of jail”


Today

Top of mind Increasing recognition: the role is evolving Redefinition of essential skill sets Move to the executive office A client of the legal function Recognition of compliance its own budget line Risk Management De facto Chief Ethics Officer Expectation: Competitive Advantage


Stages of Compliance Program Development: Leadership Required

Stage 4 Orchestrating• Manage in Unison

Stage 3 Collaborating• Coordination

Stage 2 Anticipating• Acceptance

Stage 1 Reacting• Panic!

•Set enterprise objectives•Coordinate analysis and action•Transparency into risk,

exposure and performance

•Identify and assess risks•Prioritize actions•Use technology for

multiple purposes

•Efficiency•Automation•Seeing connections•Plan future approach

•Get it done!•Operate in isolation•Get resources from

wherever

Tactical to Strategic

Source: AMR Research7

Evolutionary Process

Other industries•More mature, more integrated

•We’re going where they are already

Evolving: 1. Expectations

2. Compensation

3. Skill Sets

4. Management Mindset

5. Law vs. Compliance

6. Conflicts and Liability

7. The CCO’s Mindset


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1. Expectations - Skills

Strategic and Tactical Higher Profile Management/Delegation Communication Business Analysis and

Insight Effective Use of

Technology

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Risk Assessment and Analytics

Ethics Management Manage dilemma: The

Opposable Mind Tell the Truth

Expectations – Delivering Value

More money for compliance More compliance for the money Use of specific priorities to drive deliverables Measurable: moving toward evidence-based

evaluation


©ReGroup, LLC 2010

Overhead vs. Value-Added

Assist in protecting the firm’s reputation

Design a compliance program to meet regulatory requirements and improve internal efficiencies

Strengthen client relationships; improve sales and retention

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Create transparency by packaging information in a manner designed to enhance decision-making

Reduce regulatory and business risks

Improve individual employees’ efficient execution of their compliance responsibilities

Interact, transact and integrate with vendors

2. Compensation

Skilled compliance professionals are garnering higher salaries and higher corporate positions

Law degrees = a premium Sources of information Advice to CEOs: recruit and retain


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Hard skills: assumed

•Know the rules, write policies and procedures, training, sanctioning, ethics, identify conflicts of interest, assess risk…

Soft skills make the difference

•#1 Skill = Communication

The Market’s View: CCO Recruiters

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3. Skill Sets

Greater skills are needed to support compliance programs: •Communication

•Conflict Management

•Strategic Planning

•Complex Project Planning

•Ethics and Telling the Truth to Power

•Credibility

•Knowing the business

Emergence of certification programs


4. Management’s Mindset

A greater understanding of:

• The need to resource compliance

• Getting the CCO involved in planning earlier

• A higher expectation of competitive advantage

• A higher expectation of executive leadership

A greater amount of focus and questioning:

•Are we doing a good job?

•How much is enough?


5. The Practice of Law vs. The Practice of Compliance

Tomorrow

•Recognition that compliance is a unique function

•Not subservient to the law; the law is a compliance tool

•Lawyers interpret the law (what) and must focus upon protecting the firm

•Compliance professionals implement (how), and create transparency


The Practice of Law vs. The Practice of Compliance

Pfizer Corporate Integrity Agreement between The Office of Inspector General of the Department of Health and Human Services and Pfizer

•The CCO shall not be, or be subordinate to, the General Counsel or Chief Financial Officer


6. Conflicts of Interest

Emerging realities of conflicts between compliance professionals and their firms

Emergence of ‘compliance counsel’ Awareness of need to protect from liability:

•Premium on working for an ‘ethical’ firm

• Insurance coverage

• Indemnification


7. The CCO’s Mindset THE MIND-SET OF THE TRUSTED PROFESSIONAL

1. Professionals have a bias for results.

2. Professionals don’t just try...they’re invested!

3. Professionals realize (and act like) they’re part of something bigger than themselves.

4. Professionals have standards that transcend organizational ones.

5. Professionals know personal integrity is all they’ve got.

6. Professionals aspire to be masters of their emotions; not be enslaved by them.

7. Professionals aspire to reveal value in others.

8. Professionals continue to learn throughout their careers.

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© Wiersma & Associates

Required By Law

The law gives the Compliance Program legitimacy and relevance…

•The Compliance Program is the only risk management function that is required by law

You give the Compliance Program credibility.


©ReGroup, LLC 2010

Setting StandardsExpectations for Compliance Professionals*

Be proactive, inquisitive, able to exercise professional skepticism, and able think critically

Contribute to the identification, assessment and mitigation of compliance risk

Assist in the creation of policies and procedures to address the identified risks

Properly and appropriately escalating compliance issues

Participate as appropriate in industry efforts to develop and implement good compliance practices for advisers

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Speech by Gene Goehlke, SEC, OCIE, 2005

©ReGroup, LLC 2010

Setting StandardsExpectations for Compliance Professionals*

Conduct compliance responsibilities in accordance with the highest ethical standards

Demonstrate knowledge of the firm’s technical compliance requirements

Know the role of the compliance department; Demonstrate knowledge of the business Conduct compliance responsibilities in a

consultative and professional manner

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Speech by Gene Goehlke, SEC, OCIE, 2005

Should Compliance be a Profession?

A profession forms when:•Any trade or occupation transforms itself through the development of formal qualifications based upon education, apprenticeship, and examinations, the emergence of regulatory bodies with powers to admit and discipline members, and some degree of monopoly rights.

Law Accounting Medicine Estheticians


Gaps

Ethics

•Conflict between the CCO and the Firm Standards Definition of the function

•“Serving the Public”? Liability

•DOJ statements regarding ‘going after’ the gatekeepers, including compliance professionals who ‘should have known’

Credibility


Pros

Recognizes the ‘practice of compliance’; builds credibility A professional organization would:

•Set standards of conduct

•Advocate on behalf of members

•Counsel professionals on ethical issues

•Provide continuing education Status: puts compliance on an equal footing with related

professions – law, auditing, CFA Support higher compensation May engage academics to respond with programs


Cons

It’s already a profession Educational requirements might keep talented

people out of the job Expensive Compliance is too varied for a single profession

•Health Care

• IA

• BD

Unnecessary burden


Regulatory Recognition

FINRA: Compliance Officer - Series 14

•A qualification examination intended to insure that the individuals designated as having day-to-day compliance responsibilities for their respective firms or who supervise ten or more people engaged in compliance activities have the knowledge necessary to carry out their job responsibilities.

•110 multiple choice questions; 3 hours testing time.

•Required by the New York Stock Exchange.


Where do we go from here?

Will these patterns continue? How should compliance professionals prepare?

• Keep learning the business

•Develop skills – purposefully

• Focus on insight vs. information


Ann [email protected] 415-681-2230

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Thank You

mailto:[email protected]