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compliance officer

experience

How to Be a Voice of Experience

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You got to where you are today due to your experience. You were hired because of your experience.  How then, will you make that experience count as you provide guidance to key contributors and decision-makers in your organization?

As I’ve addressed in previous posts, developing a network of “Friends of Compliance” who engage in mutually beneficial exchanges of information will help you stay relevant, needed, diligent and more effective overall.

Draw on What You Know and Seek to Know More

Your experience and skill set will be an invaluable asset to your organization; however, like many professional service careers, you will need to keep up with regulatory expectations and norms, industry best-practices and more. Your experience will only be valued if it continues to grow and be added upon.

To protect your “brand” and add value to your organization, you will build on this experience through fostering relationships and connections both internally and an externally. A compliance officer needs to understand industry trends and use that intelligence to develop smart, strategic ways to address challenges.

You can successfully accomplish this by:

  • Being actively involved with your industry – participating in conferences, discussions, groups, etc to keep abreast of developments, expectations and best-practices.
  • Establishing value-add relationship with Legal and risk peers, to seek support and collaboration.
  • Making your involvement with fellow business leaders a priority as you build a network of “Friends of Compliance” (FOCs) throughout the organization help encourage interest, identify red flags and provide candid feedback about your ideas and work.

Make it your mission to help those around you understand the importance of compliance at the executive level and throughout the organization.  Go beyond your compliance experience to understand the drivers of business interests, behavioral incentives, and the importance of relationships. As a compliance officer, you need to know the rules, but that knowledge and its value will increase when you apply this technical knowledge to the inner-workings, motivations, and priorities of the organization you work for. To keep increasing your knowledge, visit Bethhaddock.com

Networking

Networking: How and Why You Should Engage “Friends” (FOC)

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Trying to do anything of significance unaided is difficult, let alone provide protection, productivity, and impact to an organization. It’s why the most successful compliance officers and departments rely on their relationships in and out of the companies they work for.

Networking is a critical skill – one that will be as crucial to your success as a compliance officer as it potentially was to navigate your career thus far. As compliance professionals, it’s our job to be the “eyes and ears” of the company, prepared to offer preventative guidance and effective solutions when necessary. To do this successfully requires having a comprehensive view and understanding of the industry, business, and relevant stakeholders. That can’t be done alone.

Seek to establish a network of “Friends of Compliance” (FOCs) within your company that will provide diverse perspectives, identify issues – helping you build smart controls, and create effective alliances. Remember, a solo compliance officer will have a tough time making an organizational impact.

Building Your Network

Research shows there is a common behavioral pattern, called a social exchange, that compliance officers can leverage to help build their FOC network. Social exchange theory essentially states that through a series of interactions, employees build a state of reciprocal interdependence, which leads to mutually beneficial trust relationships.

Building this network will not only increase engagement in your compliance program – which will help achieve sustainable governance – these FOC will be able to highlight blind spots, operational challenges, and obstacles that lead to ineffective policies and controls. As you create programs and processes to provide protection, productivity and impact, your FOC will often become a source of information about business perspectives, strategy, and priorities. The result?  This network becomes a secret weapon, boosting diplomacy skills before important presentations or requests for resources. Time spent building an FOC network helps not only the organization, but your reputation as well.

Look at your compliance team as individuals strategically sprinkled throughout your organization, as well as key individuals outside of it. Leverage their different perspectives, skills, priorities, etc., to shape your approach to sustainable governance. Read more in my book: Triple Bottom-Line Compliance

organization

3 Ways to Change Organizational Dynamics Through Compliance

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Think about the organization you work for today.  How many employees know what you do?  How many understand how critical compliance really is?  Consider why that is the case and how it has impacted the company.  As I’ve addressed in previous articles, the integration of compliance within the fabric of a company’s culture and process is important.

The Why of Compliance

You know compliance is important – but does your organization?  Ultimately stakeholders and employees need to understand what compliance is there for and why it’s important to care – there are three major reasons: avoid liability or prosecution, meet legal or regulatory requirements, and set internal expectations for ethical conduct and shared values.

These reasons have been well-accepted as reflected in a 1999 Harvard Law Review article advocating for more corporate disclosure and sustainable governance that promotes management integrity as well as business acumen.

“Shareholders should have information on the overall pattern of management’s compliance with applicable federal statutes for an additional reason: compliance with the law bears on management integrity and honesty, and ultimately on the quality of management generally. Management integrity may be of particular concern to social investors, but the honesty and integrity of management is information of potential interest to economic investors as well. Indeed, the SEC evaluated the materiality of management integrity from the perspective of the economic investor during the discussions about corporate accountability in the I970s.”1

When a company adopts an effective compliance program, it shows investors, consumers, potential recruits, and donors that the organization is well-run. Compliance programs can be used like an insurance policy (against liability or prosecution), it can be treated as a requirement, or it can be leveraged as a business differentiator. When an organization leverages its compliance program as a competitive advantage, that fuels its ability to truly impact culture and results, changing the way we look at its cost and value.

Changing the Dynamics

Helping your organization reap the benefits a “compliant company” may seem overwhelming – but it’s entirely possible. Regardless if you’re fresh on the scene, or a veteran in the organization, it’s never too early or late to make changes for the better.  Considering trying these three ways to change your organization’s dynamic:

  1. Invite someone from the business to speak at a Compliance staff meeting about “What Compliance does well and what can be done better.”
  2. Make it clear that employees will be rewarded for helping and being cooperative. Partner with Human Resources to change how employee performance is calculated and include a Compliance grade for identifying and reporting issues, helping implement policies, and responding in timely ways to requests for needs, such as certification or training.
  3. Give credit during audits to the business for cooperation such as self-reporting and expediting surveillance and testing.

You can be a force for change that will have a positive impact on your company.  Get more constructive strategies on how to achieve this by getting your own copy of Triple Bottom-Line Compliance.

  1. The Securities and Exchange Commission and Corporate Social Transparency, Cynthia A. Williams, Harvard Law Review, Vol. 112, No. 6 (Apr., 1999)
business

How to Avoid Easy Compliance Mistakes in Business

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Mistakes happen in every discipline and industry of business – we are after all, human. However, the thought of mistakes is not a reality we, as compliance officers, want to experience.

As individuals, we have a certain amount of control in preventing mistakes. With critical self-analysis, we can find a problem before someone else does. As compliance officers, finding an issue before a customer, regulator, or the public becomes aware of it is the key to providing not only protection but also value for the organization.

However, because we are human, it is difficult to take on the task of protecting the entire company as an individual (or Compliance team).  Which is why the avoidance of many compliance-related mistakes can be solved with one major focus: building solid relationships throughout the company.

A compliance officer must be a diplomat, understanding many different stakeholders, and must be someone who doesn’t just find problems but fixes them and proactively avoids them. To do this requires an understanding of who we’re working with.  Earlier in my career, a brilliant businessperson with extraordinary people skills taught me to know my client and adjust accordingly. She taught me an important starting point for understanding clients is to expect differing views of Compliance and its ability to incentivize good business judgment. With a smile and a curious mind, she helped the Compliance team build rapport and reminded us that a compliance officer who doesn’t understand varying behaviors and simply announces edicts will have a tough time making a sustainable impact on anyone’s business judgment.

When we accept that understanding behavioral drivers and incentivizing behavior is more effective than dictating rules and expecting adherence simply because we say so, there will be a culture of compliance. When the culture encourages engagement with Compliance, where self-reporting to Compliance is valued and rewarded as a form of leadership, issues can be addressed more easily and resolved earlier.

This approach takes time.  It’s a long-term approach, changing the way people work together by aligning interests and relying on incentives to win wider engagement that helps avoid problems. This kind of sustainable compliance develops its own momentum – allowing compliance officers to almost step back and only calibrate improvements as needed.

The more awareness and involvement you instill within your organization, the less likely your company will find itself making compliance-related mistakes.  Learn more about strategies to effectively incorporate compliance within your organization by visiting, www.bethhaddock.com

compliance

Compliance Question: What Would You Do with a Rogue Tweeter?

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Imagine if you were the compliance officer for Tesla. What would you do?

In light of Elon Musk’s (the CEO of Tesla) recent string of tweets – – the tech genius’ uncontrolled social media posts have highlighted the importance of social media governance and how difficult it is to eliminate the risk that emanates from executives’ individual conduct.

The question becomes, can you really control a founder, CEO or a favored executive of a company? The short answer, no, but you can influence and have safeguards in place to protect your organization and its stakeholders including clients, investors, and board. Those who have founded and built successful companies likely feel entitled to speak their mind about the company they have created.

What would be your first order of business if you were the new compliance officer at Tesla implementing social media and other governance controls?

First, do what is necessary to understand what the company has in place currently, what it doesn’t, and why.  Understand why certain protocols are missing or if they are in place, why have they been ignored.  You will earn the trust of the business and others by assessing the current state before making changes. Then start to build trust by explaining and implementing controls that facilitate marketing and promotion by the company’s leaders and proactively protect the company for liability and any reputational crisis.

Most often, public companies like Tesla have controls guiding executives and PR agents who speak on their behalf. The SEC alleged there was not enough of both.  Following Musk’s “$420 per share tweet,” SEC Chairmen Jay Clayton stated, “Tesla had no disclosure controls or procedures in place to determine whether Musk’s tweets contained information required to be disclosed in Tesla’s SEC filings.  Nor did it have sufficient processes in place to that Musk’s tweets were accurate or complete.”

This situation is a good reminder to consider whether your company has the following best practices in place when it comes to public statements about the company:

  • Limit who may publicly speak or represent the company in the media, so the company can control the message,
  • Require pre-approval of content to ensure any message is fair and balanced and accurate, and
  • Create “rules of the road” for social media posts, public appearances etc. — such as communicate what is true, already verified and fair and balance. Do not communicate feelings, beliefs or hopes – unless pre-approved to confirm there is no bias, conflict or misrepresentation.

Now, instead of imaging “what if I were at Tesla,” take the time to consider the “what if” in your current organization and do everything you can to influence leaders, implement protocols, and prevent a similar reality from happening to your company.  Learn more about best compliance practices by visiting www.warburtonadvisers.com

Business people shaking hands, finishing up a meeting

How to Make Compliance Become an Integral Part of Your Company Culture

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Your ability to be successful as a compliance officer will require more than applying relevant rules and regulations. Without the cooperation and understanding of those within the organization you serve, those rules, regulations, and processes will merely become obstacles to productivity and good relations. Which is why it is absolutely critical that compliance be a part of your company culture.

Ideally, you will have joined a company that understands and respects the role of compliance already. However, the relationship with compliance and business is often complicated, and regardless of the environment you have entered, there is likely an opportunity to improve upon it and make it even more productive and impactful.

Whether you are building on an existing culture of responsibility or serving as a change agent to prevent scandal or challenges, you need to do two things: (1) understand and leverage behavioral economics, and (2) understand the drivers of your organization. These are crucial aspects of knowing how to persuade and influence key decision-makers and implementers to “buy-in” to a culture of compliance.

The following is a four-step process to help compliance officers undergo due diligence – whether they are considering a new job or are already in a role – In order to assess their need for better integration of compliance within the company culture:

  1. Get informal intel. The organization’s current and former employees and service providers are among those who can provide information.
  2. Be bold about grading the company culture. Interview the organization. Do research online but also talk with mentors and peers. Get a sense of the health and reputation of an organization. Grade its culture.
  3. Research regulatory history. Find the results of the last independent audit or exam and how long ago it happened. Inquire about the biggest risks facing the organization. Check public websites for regulatory disclosures.
  4. Design your reporting line. Don’t just accept whatever reporting line is offered. Respectfully propose an employment arrangement to minimize conflicts and maximize your support within the business. Report to a board or independent body when possible. Confirm that you are covered by directors and officers (D&O) insurance. As a senior compliance officer, negotiate your exit in advance—if you can—with a contract and severance package: Get a contract or at least a detailed offer letter covering severance, attorney fees, etc., should you be terminated, laid off, or named in a regulatory investigation.

Sustainable governance will require more than your efforts as a compliance officer; sustainable governance requires the intentional adoption and practice of compliance throughout the organization by all employees. If your company isn’t there yet, be the change agent it needs to get there. Learn more tips on how to do that by visiting, https://warburtonadvisers.com/ or checking out my latest guest spot on The SupplyChainBrain Podcast.

compliance

Compliance Best Practices: Focus on The Means, Not Just the Ends

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Focusing on the end result is often what many compliance officers are concerned with.  If you get the result you want, that’s all that matters in the end – right? Not quite.  After all, so much rides on how you achieve the end result.

As a compliance officer, you likely wear a number of “hats” within your business. From change agents and business managers to quality assurance representatives, project managers, and therapists – each role plays a critical part in successfully doing your job of ensuring successful “end” results for the company.

A strategy for mastering these different roles – or for achieving any goal – is to focus on how it is to be done and done effectively.  As a compliance professional, consider how you advise, support, and contribute currently – are you maximizing your influence to get things done?

Ask yourself the following questions to see if you are leading with a focus on the “means” or the “ends”:

  1. Do you use fear of enforcement or fear of the government when challenged?
  2. Do you think what you say is more important than how you say it?
  3. Do you think Compliance issues are more important or more serious than business issues?
  4. Do you feel as though you are siloed or alone in your work?
  5. Do you identify issues that are “out of scope,” distancing yourself?
  6. When you innovate to support the business, do you exclude business ethics considerations?

If you’ve answered “yes” to any of these questions, consider whether you are losing an opportunity to be influential and make a more meaningful impact.

Becoming an Influencer

Building influence takes time. A fantastic place for compliance officers to start is with building trust by excelling as a project manager, tailoring surveillance to material business risks, and connecting with clients and those associated with your regulatory duties as a gatekeeper.

Trust won’t come automatically with your job title as a compliance officer; instead, an influential compliance officer makes an impact by earning the trust of the business while maintaining his/her gatekeeper role. Trust will be earned has you show knowledge of the regulatory landscape, listen to colleagues and develops approaches that meet current and future commercial or organizational needs.

The goal is to become more than just an advisor on legal issues. As MaryJean Bonadonna, CCO at AXA Advisors, believes: “Compliance has to be embedded—not just inserted.” When you become a true influencer, you’ll find yourself engaging on non-compliance issues such as business products, internal controls, or any number of other topics.

When we become influencers in our organizations, we can more effectively insert compliance within each element of the business – applying our knowledge, expertise, and anticipation of business or legal challenges, ultimately allowing the company to be effectively proactive.

In the end, ironically, it’s “the means” – how we achieve results through influence – not “the ends” that will create successful compliance within your organization.  The how is done with earned influence.  Learn more about becoming an influencer who focuses on “the means” by visiting, www.Bethhaddock.com

dilemmas

Being “True North” when Dilemmas Surface

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There is one question at the center of many dilemmas compliance professionals will face in their career.  The answer is often obvious; sometimes not: What is ethical?

By focusing on one’s “True North” orientation, compliance professionals can strengthen their professional value-add and their organization’s compliance and business standards.

For example, when compliance departments prepare annual certifications to boards, regulators and others to report on the compliance program (and potentially disclose compliance gaps), compliance should conduct research, schedule interviews, and obtain supporting certifications.

What if a compliance officer is asked to prepare and submit a certification but doesn’t have the time or authority to conduct the due diligence? Is it ethical to do so?

The answer may seem obvious, but it is not necessarily easy.  And therein lies the challenge.

Uncommon but Inevitable

Such dilemmas are rare.  However, those times are the true test of one’s commitment to ethical standards and the organization’s best interest, essentially this is a compliance officer’s True North orientation.

There will inevitably be times when there are conflicts between a compliance professional’s responsibility to the organization and the gatekeeper function for government regulators. In this example, a compliance officer will need to get help or conduct the due diligence in order to meet his or her ethical responsibilities as a gatekeeper.

Compliance officers need to balance the need to be client-centric and effective gatekeepers, equally guarding the employer’s interests while delivering on legal requirements. Compliance must give regulators and others a genuine and accurate certification of good health. If a gap were to be discovered later, but mistakenly not disclosed in the certification, the firm and the unprepared compliance officer both could have been held accountable for being negligent.

To be impactful, compliance officers should be aligned with and believe in the culture, the organization, and the business efforts they serve. Compliance officer job descriptions routinely contain phrases like “strong ethics needed” included in the list of qualifications. “True North Ethics” is one of the keys to a compliance officer’s success – protecting an organization and one’s contribution.

Ethics and Leadership

Dilemmas will inevitably arise that challenge a compliance officers’ responsibility to both protect their organizations and serve as a gatekeeper for government regulators. They need to avoid focusing only on protection.  Compliance officers must be simultaneously aligned with and believe in the culture, the organization, and the business efforts they serve.

This need creates the opportunity to serve as a True North ethical beacon that communicates and demonstrates advocacy for sustainable governance while also managing their personal liability.

You can learn more about True North Ethics in my book Triple Bottom-Line Compliance: How to Deliver Protection, Productivity, and Impact as well as my podcast What’s Ethical?

To learn more about how you can innovate with compliance, contact my office today. If you would like to read about my philosophy and how to support business growth so there is measured and informed risk-taking, here’s a look inside my book.

Insider Trading

Ask Beth: How Can A Compliance Officer Make a Sustainable Impact Preventing Insider Trading?

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A first step towards preventing insider trading is managing non-public material information. Compliance officers that don’t stop there and also test the technology behind related regulatory reporting and surveillance and train employees to combat Fudge-Factor Thinking can bring more sustainable value.

On Sept. 13, 2018, the Securities and Exchange Commission (SEC) announced that Cowen Execution Services LLC (formerly Conergex Execution Solutions LLC) will pay $2.75 million to settle charges that the broker-dealer firm provided the SEC with incomplete and deficient securities trading information known as “blue sheet data” because of coding errors. Blue sheet data is used by the regulators to detect illegal trading practices and firms can use the same data analytics for their own trading surveillance programs. The technology is powerful. As the Cowen case shows, so are coding errors that go undetected.

The coding errors occurred over a period of nearly four years which caused, according to the SEC, approximately 29 percent of Cowen’s submissions to contain deficient customer identifying information and other errors involved trade details. Although the firm was previously sanctioned in March 2012 for deficient blue sheet submissions, the order found that the firm did not take reasonable steps to ensure that its blue sheet submissions to the SEC were accurate and it failed to identify the deficiencies during this period.

As the fourth quarter approaches, compliance officers should consider not just completing an annual review of policies, but also testing core technology such as trading reporting, regulatory submissions or algorithms within investment software. Compliance has an opportunity to protect the firm and add-value to the business operations by helping find errors before they have a bigger impact.

Just over ten years ago, a young hedge fund manager named Tom Hardin was swept up in a much bigger insider trading scandal that involved the Galleon Group, at the time one of the largest hedge funds in the world with over $7 billion under management.

On the way to pickup his dry-cleaning, Tom was approached by the FBI regarding his own illegal trades. Tom agreed to cooperate as an informant helping the FBI build more insider trading cases including a one against the Galleon Group insiders.

I recently interviewed “Tipper X” Tom Hardin on my podcast.  In the interview, he provides insightful tips about how to prevent insider trading. We also discussed the power of using behavioral incentives to drive good business decisions and combat Fudge-Factor Thinking.

Fudge-Factor Thinking, the behavioral economics term that describes when people use common rationalizations to justify unethical behavior, comes into play more significantly than it should.  Tom used it when he placed a trade he thought would be fine because there weren’t any real victims and it was the way he thought everyone secured an “edge” trading the capital markets. His training didn’t involve behavioral incentives. He recalls simply being told, “Don’t email anything you don’t want on the cover of the Wall Street Journal”.  Today, his advice to others is more pragmatic. He encourages compliance officers to have an open door, be there to answer questions and challenge Fudge-Factor Thinking. His training wasn’t adequate. He didn’t have a mentor.  He tells a compelling story any compliance officer who doubts the impact of engaging training or his or her individual contribution should listen to. For more information, you can listen to my podcast here.