CCO - Behind the Scenes, Episode 5

In this episode of CCO - Behind the Scenes, Jeffrey Hiller discusses what makes a good CCO, the importance of being a "straight shooter," giving bad news. Listen as 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.    

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Episode Transcript

Jeffrey Hiller (00:18):
Welcome to the October 14th episode of my
Oyster Stew podcast mini series,CCO- Behind the Scenes.
I'm J effrey Hiller, and in thisepisode I'd like to talk about
the importance of being astraight shooter, giving bad
news and what makes a good CCO.
A good manager doesn't only wantto hear the good news.
Those in charge need the whole,honest picture, and they often

(00:41):
reward those to provide it.
My biggest career break cameseveral years before my tenure
at CitiGroup.
The company I worked for at thetime had been fin ed ov er a
billion dollars in salespractice violations.
Shortly before I was hired, theCEO called a meeting with his
top 20 compliance people, and heasked them to rate the
effectiveness of the Compliancedepartment and th eir respective

(01:03):
businesses.
On a scale of 1 to 10, everyonesaid seven or eight.
I said four.
He asked me to explain.
The huge fines we recently paidwere evidence that we're not
where we need to be.
My experience was that peoplewant to comply, but the
structure was not effective.
I give the employees a seven oreight, but my department is a

(01:26):
four, but going in the rightdirection.
Three weeks later, the companyreorganized i ts many businesses
into four companies.
The CEO called my boss and said,"I want the person to lead Asset
Management Compliance- that isthe guy that gave us a four." I
got a major promotion.
If you're a Compliance Officer,there's no escaping the fact

(01:48):
that there will be complianceexceptions, some big and some
small.
You could see trade errors,personal trading violations,
violation of various custodyrules, or other matters, and you
have to be prepared for that.
A good Compliance Officer wi lls cope the issue as quickly as
possible and at the same time,look for the causes of the error

(02:09):
and ways to fix it.
If there's a large trade error,you should notify the business
as soon as you know that it's atrue issue.
You should also be prepared toexplain the best way to fix or
address the issue.
And, remember not everyone willagree with you.
I once encountered a large,six-figure trade error that

(02:29):
occurred overseas.
In some countries, such tradeerrors are considered the cost
of doing business.
At the particular firm I waswith, the firm would deduct the
cost of the trade error from thebonus pool of the unit causing
the error.
This in and of itself created aconflict.
The best way to address this isto inform the CEO and let

(02:50):
everyone have their say.
Then present critical facts,explaining the regulatory and
reputational risk of notaddressing it in the appropriate
way.
This will be effective if thetone at the top of the firm is
open to listening to the factsand understanding the
consequences.
The lesson here is rely on thefacts, let others have their

(03:10):
say, and use the facts to leadthe CEO or business head to the
right direction.
We paid for the overseas error,and shortly thereafter a
regulatory exam proved that thefirm took the proper course.
I'm asked from time to time whatI think the critical skills are
needed for a compliance officer.
When I hire compliance people, Ilook for the following: first,

(03:34):
curiosity.
Did they pursue any unexplainedissues?
Even if minor inconsistentdates, numbers that s eem
slightly off- this may soundobvious, but it's not.
They can look for alternativesolutions if the first idea
doesn't work.
So you do want to have thecuriosity, even if you find the
answer.

(03:55):
Next, I look for courage.
Are they willing to deliver badnews directly and quickly?
Will they take a positionopposite of a group of others,
such as traders.
Third, I look for what I call"touch." As an example,
portfolio managers, traders arevery busy and can be abrupt.
Can you look past that to listenand find out what they need and

(04:18):
then communicate what they needto know?
Finally, I look at technicalexpertise and compliance.
If the first three qualities arepresent, then I'm certain people
can learn the substance rulesand regulations.
I'm not sure you can teach thefirst three qualities, but I'm
certain that most can learn theregulatory rules.
I hope you found these insightsvaluable, and thanks for

(04:40):
listening.
Don't forget to follow theOyster Stew podcast on whatever
platform you use.
If you have any questions orwould like to request a
consultation, call us at(804)965-5400 or visit us on the web
at www.oysterllc.com.

Speaker 2 (05:21):
[inaudible].