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SEC: Don't Save Money By Cutting Compliance

Some good news for compliance specialists: The SEC says financial firms shouldn't consider compliance an area for cost-cutting.

In an open letter to the chief executives of registered financial firms, Lori Richards, the agency's director of compliance inspections and examinations, admonishes firms to "be vigilant and proactive" in making sure they follow accepted practices.

"While many firms are considering reductions and cost-cutting measures, we remind you of your firm's legal obligation to maintain an adequate compliance program reasonably designed to achieve compliance with the law," Richards writes. The letter is posted on the SEC Web site.

"Firms must be vigilant and proactive in preventing, detecting and correcting problems that could occur," Richards continues. "Firms should pay attention to ensuring that their interactions with investors meet high standards, that sales and trading practices are appropriate, that financial, valuation and risk controls are followed, and that all disclosure obligations are met - as well as meeting all other obligations in conformity with the securities laws."

Compliance is one area that's experienced continued demand and relative security in total compensation. In tough times, insiders say, firms need to retain professionals who are overseeing critical legal and regulatory functions. So not only will some firms be adding in this area, bonuses may reward compliance officers and analysts across a range of specialized areas.

AUTHORMark Feffer Insider Comment
  • co
    8 February 2011

    Especially careless about the law are Hedge Funds and Fund of Funds who seem to think the SEC and FINRA will never come knocking on their door.

  • kw
    22 March 2010

    Apparently, not too many firms have understood or read Ms. Richards letter or the FINRA pronouncements as in my case, I was laid off because "I can't afford to pay 2 compliance guys!" So the question becomes, do you want to pay me now or FINRA and/or SEC later?

  • rl
    27 January 2010

    The Regulators do not tolerate regulatory ignorance and is very unforgiving to those firms who consider compliance a secondary issue. (Reference the monthly monetary sanctions imposed on firms by FINRA). However, when push comes to shove,firms will take a top producing registered rep/trader/revenue producer over any compliance person - the non producer - and take its chance with the expensive monetary sanctions that are imposed by the regulators. If firms have this ability to gamble and paying the hard dollars to the regulators, why can't they inject this surplus into doing compliance correctly? Firms do not think twice about paying tens of $1000's to secure a top producer, but nickle and dime when it comes to compliance.

  • Co
    11 March 2009

    Unfortunately, compliance is still considered expendable and the higher up you go and more you cost the quicker it seems that you are cut. Now is the time for firms to focus on execution and compliance controls. Many firms have lost a ton of institutional knowledge and have increased their compliance exposure without realizing it.

    Compliance needs to become a bonus and compensation measure or the CEO should become the Chief Compliance Officer. That way they are directly liable for failures in regulatory requirements changing how they manage the firm. Then we would be considered key players in protecting the CEO's back side.

  • di
    6 February 2009

    Firms are laying off compliance people and obviously haven't read the SEC's view on this topic in today's stressed market.

    As far as training, much of it is really getting a job in the industry and learning by on-the-job training. FINRA offers online classes, as well as the (very expensive) FINRA/Wharton certification mentioned by someone else. NSCP - the National Society of Compliance Professionals - offers educational regional meetings and a reasonably priced certification process.

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