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Time for chief compliance officers to get tough and get smart, or else

Double-checking, delegating (giving virtual head slaps) and becoming a student of the Investment Advisers Act of 1940 are part of the deal

Author Les Abromovitz, National Compliance Services July 13, 2011 at 1:58 PM
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Les Abromovitz: [Chief compliance officers] are putting their necks on the line if they don’t know their jobs and fulfill their responsibilities.

Bill Winterberg

Bill Winterberg

July 13, 2011 — 5:27 PM


In your opinion, should owner-advisors also occupy the role as CCO, or should the responsibility be addressed by a separate individual or outsourced relationship?

Les Abromovitz

Les Abromovitz

July 13, 2011 — 7:20 PM

Bill has raised a great question, which I kicked around with a few people. The primary argument for an owner being CCO is that the individual has the most to lose if a compliance problem occurs. This approach also avoids a situation where a CCO does not have the clout to enforce compliance policies and procedures. As the firm grows and compliance issues become more complicated, however, it may be impossible for an owner to handle the CCO duties. At that point, it makes more sense for a senior person to become CCO or to outsource some of those responsibilities.

At many small RIAs, the owner wears many hats, which includes serving as the firm’s CCO. Although examiners are usually sympathetic to the economic constraints imposed on small RIAs, they still expect the firm’s CCO to fully understand the Investment Advisers Act and its rules. Examiners won’t lower the bar, because an owner/CCO has too many things on his or her plate.

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