CCO - Behind the Scenes Episode 3

Join Oyster Consulting's Jeffrey Hiller in his new podcast mini-series, CCO - Behind the Scenes, as he shares 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.  Listen and learn in these short discussions as Jeffrey shares his real experiences and lessons learned. In this week's episode Jeffrey discusses personal compliance violations and what you should do. Some things you just won't get from a textbook. 

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Episode Transcript

Jeffrey Hiller (00:15):
Welcome to CCO- Behind the Scenes, an Oyster
Stew podcast mini series.
I'm Jeffrey Hiller, ManagingDirector at Oyster Consulting,
former Senior Counsel for theSEC's Division of Enforcement,
and I've also served as the CCOfor many well-known global
investment firms.
I've seen both sides.
I've been on both sides, and Iliterally helped write the

(00:38):
textbook for US ModernRegulatory Compliance.
Being CCO is more than justchecking boxes.
There are office politics tonavigate, nuances to dealing
with regulators and boardmembers, and of course, ethical
issues.
Join me as I share my realexperiences and lessons learned
from my decades in the industry.
Some things you just won't getfrom a textbook.

(01:10):
Another important topiccompliance officers have to
manage is personal complianceviolations.
Many people at advisors andbroker-dealers have procedures
that they have to follow topre-clear securities to make
sure that there's not openorders on the desk.
This usually/oftentimesautomated, sometimes not.

(01:31):
It also, in many cases, appliesto the portfolio manager, the
trader, or whoever involved withit applies to their family
trading.
It wouldn't be unusual forsomeone, to their spouse or one
of their children living athome, to forget they had to
pre-clear and then they have aviolation in those cases.

(01:56):
I think you just need to realizethat, yes, you're going to note
the violation.
You're going to sit down andtalk with the employee.
You're going to talk with theirsupervisor and get them to
understand how the processworks.
And most importantly, peoplehave to understand that
compliance should never, eversanction or discipline an

(02:18):
employee.
The compliance officer orwhoever is managing this, should
share the information with thesupervisor, should make
suggestions to have thesupervisor handle it and let the
supervisor handle the sanctionor discipline or talk and notify
compliance that they've done it.

(02:39):
Because, if you startsanctioning someone as a
compliance officer, you become apoliceman.
You also become theirsupervisor, and that's not what
you're looking for.
You're looking to embed a firmwith a culture of doing the
right thing, and supervisors areresponsible for that.
As an example, one time I had asales guy who was a CPA and he

(03:06):
taught at the CPA AmericanInstitute.
I got a note from the Institutesaying that my employee had
fraudulently submitted expenses,that he said that he took a
plane, but he flew his ownplane, said he had meals, but he

(03:28):
didn't.
And so the AICP sanctioned him.
When I got the notification, Iconducted a soup-to-nuts
examination of everything thatperson had done at the firm
because my theory is that ifthey're going to cheat in one
way, they're going to cheat inanother way.
I'm always amazed by people withlarge incomes who take these

(03:52):
little shortcuts that theyreally don't need to take.
But in this case, I presented itto the employee supervisor.
We happened not to find thatanything else where he cheated
the firm he was with or cheatedus, but we also sanctioned him
for the violation he occurredoutside.

(04:13):
We put restraints restraints onhis activities and we entered
and provided enhancedsupervision of him for two years
to make sure that we weren'tcaught with surprises.
And when the SEC came in andthey requested files, they saw

(04:35):
that we did this and theythought,"We are impressed." And
so those are a very importantthing to find periodically.
I would look at the emailperiodically.
I would try and do a, or havesomebody on my staff, do a
Google search of people.
If you find a violation, don'tassume it's the only violation.

(04:58):
It could be, and you could havea happy ending, but you need to
do the footwork and show thatyou've done it.
If you haven't written it, ithasn't happened.

(05:19):
Thanks for listening, and I hopeyou found this helpful.
If you like what you heard, makesure to follow the Oyster Stew
podcast on whatever platform youlisten to.
Oyster consultants are industrypractitioners; we aren't career
consultants.
We've done your job and know theissues you face.
If you'd like to learn how wehelp firms start, run, and
protect and grow their business,visit our website at www dot

(05:44):
oysterllc.com.