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The New Role of the Compliance Officer

With the unprecedented rate of change in the financial markets, and with regulators across the board stepping up the enforcement of existing regulation, one can’t help but wonder: what does this mean for the compliance officer?

Compliance officers are facing a deluge of new regulations on top of an existing heap of rules and requirements which makes oversight of all compliance consequences difficult to gain. Compliance officers need to spend increasing amounts of time reading consultation papers, providing feedback, and then reading new guidelines and regulations as they become available. They then need to ensure that systems and processes are updated to match new requirements, often to very tight deadlines imposed by regulators. They should also not underestimate the risk of accidental breaches, even if one has the best intentions in mind. Ultimately, the compliance officer today needs to focus on convincing internal stakeholders and budget keepers to spend money and increase headcount – a tall order in today’s regulatory climate.

At the same time, new trading structures and advanced trading strategies coupled with huge data sets makes the task to monitor trading activities and markets a very interesting challenge today. If monitoring is executed properly, it can provide useful feedback to business functions on its performance, and early detection of misconfigured OMS/algo systems can be vital to avoiding mistakes and poor trading results, or even accidental market abuse.

Within all of this, compliance officers are finding they must manage a delicate balance between business interests, culture, increasing cost pressures and heightened regulatory demands on reporting, due diligence monitoring, and surveillance. To add even more pressure, the compliance officer is now taking on increased personal risk. If major misconduct is revealed within an organization, the compliance staff can be held personally accountable.

If this doesn’t put the compliance officer between a rock and a hard place, I don’t know what does. Why would anyone in his right mind want to find himself in this position? Is there an upside to the story, or should a compliance officer just cut his losses and run?

The flip side of the new world for the compliance staff is the ability to create a platform for increased job satisfaction. Because of the increased focus on rules enforcement, a compliance officer is gaining increased authority and clout to do a thorough job. And since that is the case, it is now gradually becoming more likely for a head of compliance to secure budgets and resources to deploy systems and processes that are up to the task.

As the global trading environment gets more and more complex, the compliance function is getting the ears of senior management and is now forming part of corporate risk thinking. A strong compliance and trading monitoring function coupled with the right systems and strategies have become critical, and say to the outside world: “We are a firm that takes fair and orderly trading and transparency seriously. You can trust your transactions to be safe with us.” Who wouldn’t want to be a key part of fulfilling that message?


Comments: (1)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 14 September, 2012, 13:34Be the first to give this comment the thumbs up 0 likes

I only hope that your prediction that "a compliance officer is gaining increased authority and clout to do a thorough job" comes true. However, as someone who receives - and pays for - compliance guidance regularly, I wouldn't bet on that. Instead, the stature of the compliance function can grow with a different approach. In addition to advising the business on what can be done and what can't be done, compliance officers should also try and reach out to rule-makers and impress upon them the need to establish the optimum level of regulation. While there are several factors that determine the optimum, nothing is more important than to realize that the fundamental purpose of a business is to do business and not just stay compliant. To quote an analogy, a credit card business makes money only by authorizing a transaction. It's not helped by an overzealous fraud detection system that blocks each and every transaction that has the slightest whiff of fraud.

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