Selecting a Chief Compliance Officer for Your Advisory Firm

Richard ChenAdvisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

Chief compliance officers (CCOs) are vital to an advisory firm’s efforts to ensure that the firm remains in compliance with applicable laws and to avoid regulatory sanctions that can cripple a firm financially and reputationally. This important responsibility, along with the individual personal liability that attaches to serving as a CCO, is why advisors must choose the right person to assume such a role. In this article, I will discuss what compliance officers do and the various factors advisors should consider in determining who should serve as their CCO.

Filling a key role

At the outset, before discussing who advisors should choose as their CCO, it’s important to understand what functions CCOs perform on behalf of advisors. In short, CCOs are responsible for developing, implementing, and administering an advisor’s compliance program. Among other things, CCOs typically perform the following duties on behalf of advisory firms:

  • Conducting assessments to evaluate operational and compliance issues that pose the most risk for the firm;
  • Drafting and updating the firm’s compliance policies and procedures to address risks and conflicts of interest;
  • Training employees to ensure they understand the firm’s compliance policies and procedures and their individual compliance responsibilities;
  • Reviewing and testing the firm’s compliance policies and procedures;
  • Identifying if any compliance violations have occurred;
  • Taking corrective actions when compliance violations occur including enforcing any disciplinary actions;
  • Drafting and submitting the firm’s regulatory filings;
  • Keeping abreast of business and regulatory developments that warrant update to the firm’s compliance program;
  • Documenting and maintaining books and records pertaining to the administration of the firm’s compliance program; and
  • Interfacing with regulators responsible for overseeing the advisor’s compliance program.

For a more in-depth discussion of what components make up an advisor’s compliance program, please click here.