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Time to Use the Bat Phone: Who to Call When a Compliance Officer Needs Help?

Time to Use the Bat Phone: Who to Call When a Compliance Officer Needs Help?

It seems that the burden of work continues to increase for compliance professionals in the investment management industry. While also ensuring that their compliance program is effective, compliance officers must also be aware of cybersecurity threats, business continuity plans, new regulations, changes in business strategy, and more – all while doing this under a work from home protocol due to COVID-19.

So how does a compliance officer keep his/her head above water in these trying times? Consider taking a cue from Commissioner Gordon and pick up the “Bat Phone” to call for help! OK, so you may not have a red desktop phone to use, but there are many solutions available to a compliance professional looking for supplemental assistance. #OutsourcingCompliance

First, let’s focus on some of the benefits of outsourcing a portion or all of your compliance program to a third party. Imagine the benefits of having supplemental resources to complement your existing program. To start with, offloading certain compliance tasks from your in-house compliance team to a reputable service provider can free up significant time for compliance professionals to focus on other mission-critical tasks.  As an example, delegating the email surveillance process to a qualified service provider can allow a CCO to focus on enhancing compliance testing, further strengthening supervisory practices, or even proactively engaging with the firm’s business leaders to ensure effective controls exist (or are created) as they embark on new initiatives. Time management just might cease to seem like a concept straight out of a science fiction movie. Third-party compliance professionals can also increase the flexibility of your team as an additional resource to step in during critical projects, providing a second set of eyes and expert knowledge to better ensure effective and efficient implementation. And, a service provider will likely have an array of experienced professionals ready to jump in with the particular expertise that is needed for your firm’s unique circumstances—regulatory reporting, exam response and management, compliance systems management—just to name a few…

At one point in time, the SEC toyed with the idea of requiring investment advisers to retain a third-party to perform the annual compliance review pursuant to Rule 206(4)-7. The value of independent testing is echoed across many disciplines and a mandatory component of anti-money laundering audits, custody audits and branch office exams underscores the very core of compliance monitoring and testing across a firm’s control environment. Though this requirement was never codified, there are significant benefits to having a third-party compliance consultant assist with the annual review of your compliance program. In addition to providing an impartial view of a compliance program, a compliance consultant can often identify additional risks to your business that you may not be aware of as a result of being embedded in the day-to-day demands and operations of the firm. Consultants also bring a wealth of ideas relating to best practices from across the industry, simply resulting from engaging with numerous other firms on a regular and ongoing basis.

So, what compliance tasks can be outsourced? Frankly, just about any activity can be outsourced, ranging from the most tedious (email reviews, advertising reviews… anyone??), to the most nuanced (Section 13 reporting, Form CRS…), and even extraordinarily complex compliance projects (business restructuring, product line expansion, enforcement remediation, merger/acquisition support).

Outsourcing enables you to focus on what you want/need to focus on. Time-consuming tasks such as email surveillance and reviewing advertising materials need to get done, but at what resource cost to managing the other aspects of your compliance program? Tasks where the underlying issues are typically consistent from one firm to the next, and less tied to the particular busines structure of your firm, are easily, and often, outsourced to a compliance services provider.

Remember we mentioned flexibility earlier? Outsourcing does not have to be permanent. Many financial firms will retain temporary compliance assistance on an ad hoc basis depending on their need for additional resources or due to turnover in staffing. Then again, some firms decide to fully outsource the compliance function as part of a long-term strategy. It all comes down to what help you need to ensure your compliance policies and procedures are appropriately designed and effectively administered.

If you’re considering outsourcing a small part or the entire compliance program, remember the importance of performing thorough due diligence on the service provider. It is critical that you entrust your compliance program to a partner that is well-qualified, understands your business model, investment strategy, and has a solid reputation in performing the work you seek to outsource. Like any other due diligence review, be sure to thoroughly evaluate the service provider and retain documentation of it, including for service providers you choose not to hire.

The reality is that even Batman needed help sometimes. Whether it was Robin or Batgirl lending a hand, dealing with compliance is challenging and no joke (pun intended), so reinforcements might be needed. And remember…superheroes come in all shapes and sizes – even that of a compliance consultant!

For more information on outsourcing compliance, please contact: info@cssregtech.com.

#Happy Halloween


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CSS frequently publishes blog posts which are written by our team from their observations in the field, at conferences and through experiences with compliance professionals. These posts are designed to further knowledge and share industry best practices. Topics run the gamut, including Form ADV, cybersecurity, MiFID II, position limit monitoring, technology challenges and more. Complete and submit the brief form below to receive notifications when we publish new content.