Rutherford is proud to introduce its Leadership Series, a new series of interviews with key players within the compliance, legal and financial crime sectors. These informal conversations will serve as an opportunity for professionals in the financial services industry to get insights on what topics are trending within their field.
We recently sat down with a top Head of Compliance in the financial services sector, who has worked in the past at a major hedge fund and a big corporate bank, to get their thoughts on what a new Compliance Officer should pay attention to when starting at a new firm.
"Take time to find your feet; you have to find your balance before you dive in"
Anonymous Head of Compliance
Build Strong Relationships From the Start
In the beginning, the better compliance officers are the ones that spend time building relationships with the front office, portfolio managers and execution staff. Don’t go in to reinvent the wheel straight away, have some humility. This doesn't mean playing the fiddle while Rome is burning. If Rome is burning, put out the fire.
Try and get a sense of the culture within a firm, talk to your COO or CEO, try and spend time with them. Also, get an understanding of how the processes work between the front, middle and back office.
Get Familiar With the Systems & Controls
There are multiple systems that people use, so if you don't have experience with one of them, make sure to spend time learning that particular system. You've got to familiarise yourself with the pre and post trade control environment.
You've got to know all the other processes, policies; just take your time to go through it all. As you go through it, compliance officers with experience will typically find some gaps.
Carry Out a Gap Analysis
Once you have introduced yourself properly to key players at the firm, it is time to carry out a gap analysis. If you don't know what that is: it is an analysis that compares the current state of affairs with an ideal state of affairs.
Particularly under SMCR (Senior Managers Certification Regime), if you are taking on a SMF16 role, make sure that your record keeping in relation to this is up to date.
Make a Formal Assessment
Once you've done an initial assessment, start to put together a formal, written document. This should include weaknesses in the current systems with suggested improvements.
Make it methodical, include pre and post trade control and an analysis of the policy framework, the compliance monitoring plan and other areas of the business that are regulated, including financial promotions, governance structure, or internal controls.
Meet With Managers and Don't Surprise the Board
Once you have a formal gap analysis, then it is probably time to meet with your line manager, who may be the CEO or COO. The purpose of the meeting should be to discuss implementing the suggested changes.
It is important not to cut out those conversations and saying directly to the board "look at all these problems". You need to be tactful and go to the people who can make some changes without blowing a hole in the boat.
The Board Presentation
Good compliance officers manage up and down very well, and it starts right at the beginning.
Once you have sign off from your line manager with proposals on how to improve processes from them added to your own, it is time to produce the report to the senior executive (or board) to review.
This will say that "we've identified these issues, this is how we are going to address them, and we expect to achieve that within X number of months or weeks".
If you have done your job properly, you will have now successfully established yourself with the key players in the firm and have begun the long process of safeguarding the business effectively.
Spend Quality Time With Traders and Portfolio Managers
Once you have successfully ingratiated yourself with the leadership team, it is time to spend quality time with the front office.
Your role is to guide and advise fund managers on trading and the investments that they make. Try to educate them on rules that are applicable to their funds. The fund manager will need to have some understanding about risk, spread and fund marketing, for example.
And Don't Forget Formalities!
The last and best piece of advice is: don't forget to formalise everything. Your neck is on the line along with everyone else's, so be safe out there. If you are having really worrying issues, pick up the phone to an external lawyer for confidential advice.