Compliance Calculus

Norm Champ’s Compliance Calculus™ is a methodology that financial services firms can use to develop a compliance program.

While no two organizations are the same, Norm draws on his experience at the SEC Division of Investment Management and the Office of Compliance Inspections and Examinations to offer the Compliance Calculus™ to firms as they undertake a compliance program. Such a  program seeks to attain the right balance of effort and resources to place on compliance. In his keynote address at the ACA Compliance Conference, Norm outlined the principles of the Compliance Calculus™ program, which includes treating clients fairly, staying informed on the issues that are of concern to the SEC, developing a plan, and consistently testing and reevaluating a compliance program for effectiveness.

If you’re interested in having Norm speak at your next event on the Compliance Calculus™ program, please contact adam@adam-friedman.com.

norm champ

KEYNOTE ADDRESS: ACA COMPLIANCE CONFERENCE

New Kid in Town

Today I will try to bring together my experience in the Division of Investment Management and the Office of Compliance Inspections and Examinations to talk about what I will call the “Compliance Calculus” that every firm must do as it decides what resources it will devote to compliance.  Each of your firms must balance many factors in deciding how to staff and fund compliance:  your duty to your clients; the nature and complexity of your business; the ability of individuals or your firm to disadvantage clients or steal from clients whether intentionally or unintentionally; the likelihood of wrongful conduct being discovered; and the possible penalties for such conduct.  There is no one methodology or one solution to the Compliance Calculus.  Firms vary greatly in their structure and organization and each of your firms will have to find the right balance among these factors.  However, I hope you will find it helpful as I discuss how I evaluate the elements of the Calculus in light of my experience at the SEC.  In particular I think exploring some of the changes that SEC leadership made over the last five years will help you as you undertake this calculus to allocate your resources.

After discussing the Compliance Calculus in terms of the SEC, I will introduce a new factor that all of you must take into account as you balance compliance needs against all the other priorities in your firm.  The Dodd-Frank Act has ushered in a new era in the financial services industry, and, as the Eagles sing, there is a “New Kid in Town”.  This new kid is the Financial Stability Oversight Council composed of ten regulators, including the heads of the top US financial services regulatory agencies. The Council also has an international cousin, the Financial Stability Board, of which the US Treasury, the Federal Reserve and the SEC are also members. The Council spent much of 2014 considering the potential systemic risks of the asset management industry and in late 2014, the Council issued a series of questions about the asset management industry for public comment. If you work in a firm that is not in the asset management business you may view the Council’s interest in the asset management industry as an issue that does not concern you.  Today I commend to you that the Council’s interest in financial services in the United States is not a distant battle being fought between a few large asset managers and the federal government but is in fact important for everyone in the US financial service industry.  Much of the publicity around the Financial Stability Oversight Council has been centered around the designation of banks and insurance companies as systemically important financial institutions. Those of you in compliance in the nonbank portion of the financial services industry should also be paying attention to what the Council is doing and should understand that the question of designation of firms as systemically important has ramifications for the entire industry.

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