Oyster Stew - A Broth of Financial Services Commentary and Insights

CCO - Behind the Scenes Episode 4

October 07, 2020 Jeffrey Hiller
Oyster Stew - A Broth of Financial Services Commentary and Insights
CCO - Behind the Scenes Episode 4
Chapters
Oyster Stew - A Broth of Financial Services Commentary and Insights
CCO - Behind the Scenes Episode 4
Oct 07, 2020
Jeffrey Hiller

In this episode of CCO - Behind the Scenes, Jeffrey Hiller talks about what "Tone at the Top" means, and why it's important to embed the Compliance Department within the firm.   Listen as, during these short discussions, Jeffrey shares his real experiences and lessons learned during his vast experience as both a CCO for several global investment firms and Senior Counsel for the SEC's Division of Enforcement. Being CCO is more than just checking boxes.    

Show Notes Transcript

In this episode of CCO - Behind the Scenes, Jeffrey Hiller talks about what "Tone at the Top" means, and why it's important to embed the Compliance Department within the firm.   Listen as, during these short discussions, Jeffrey shares his real experiences and lessons learned during his vast experience as both a CCO for several global investment firms and Senior Counsel for the SEC's Division of Enforcement. Being CCO is more than just checking boxes.    

Jeffrey Hiller:

Welcome to the October 7th episode of my Oyster Stew podcast, mini series, CCO Behind the Scenes I'm Jeffrey Hiller and in this episode, I'd like to talk about "tone at the top" and the importance of embedding the CCO in the firm's culture. I've mentioned "tone at the top" in other podcasts, but I think it's critically important to a successful compliance program. In fact, the former Director of the SEC's Enforcement Division, Andrew XXXX stated in a speech that the SEC would ask the following questions: "Are Compliance people included in important meetings? Are Compliance views typically sought and followed? Does the CCO report to the CEO and does the CCO have Board access? Is the Compliance department considered an important partner? W here i s it considered an expense a nd overhead? And does the Compliance department have sufficient resources?" I always add whether the firm rewards good compliance and sanctions bad compliance is another important factor. I once had a trader call me and report he thought that he had received material nonpublic information from a broker and that if he acted upon it, it would benefit his clients. The security was blocked and a few weeks later the facts proved true. The CEO accepted the compliance recommendation and rewarded the trader with a bonus. That is "tone at the top." In many firms, I have observed that the Compliance department has its own unit, and because they have confidential information may be segregated from other departments. While this may meet privacy and security concerns, it's not particularly helpful to Compliance. Compliance needs to be visible and informed. I've always ensured that Compliance has a seat in the trading room, and having someone there during market hours. You need to get to know them before there's an issue so that when a matter arises, you've already built rapport and have credibility with them. A now-defunct business magazine, MBA Jungle , used to reach out to business people for lessons they learned in the course of their career. Each month they'd share comments from three or four business people. In one issue, they asked Vivian Tam, a fashion designer and business founder, Brian Cashman, Senior VP and General Manager of the Yankees, and me at the time, a Managing Director of CitiGroup Asset Management. Tam shared the Chinese notion of harmony and that she practiced it with her clients. She would intently listen to her clients in a non-threatening, but informative way. Mr. Cashman shared that he responds to everyone, even if he doesn't know them; you never know when you meet someone how you may interact with them in the future. Even if there's no foreseeable benefit, he corresponded with someone over the years and this communication led to signing an unknown ballplayer, Orlando Hernandez, who helped the Yankees win three world series. I told a story of how I got a promotion. I hope you found these insights valuable, and thanks for listening. Don't forget to follow the Oyster Stew podcast on whatever platform you use. If you have any questions or would like to request a consultation, call us at (804) 965-5400, or visit us on the web at www.oysterllc.com.