Title: Surveillant and Counselor: A Reorientation in Compliance for Financial Firms
Abstract: This Article argues that the compliance officer should play a major role in the ongoing reform of financial firms because compliance is now well established and accepted and compliance officers are close to decision-making at all levels of a firm. The contention is that the role of compliance must be rethought and reoriented if it is to contribute fully to the reform. Compliance officers now ensure that the firms and their employees comply with the numerous laws and regulations governing them and their activities, primarily by producing detailed compliance procedures and policies and then revising, and monitoring compliance with, them. The policies and procedures direct the conduct of employees by surrounding them with a web of detailed instructions, procedures, supervisory review, reporting, oversight and investigation, where necessary. This approach, which is based on a well-established “external” model of direction, discipline and surveillance, is necessary to prevent self-interested and opportunistic conduct by financial firm employees. However, there is a risk that employees follow only the letter of compliance and even at times ignore it because they understand that the rules are different from, and necessarily secondary to, the actual securities business. Moreover, the external approach “crowds out” another model that is necessary to achieve the most effective compliance. Ideal financial firm compliance would promote “internal,” in addition to external, compliance. The goal of the internal approach is to have firm employees internalize the policies of the laws and regulations and the professional and ethical standards so that they come into the foreground when the employees are making business decisions. In psychological terms, the internal model of compliance would ensure that the policies and standards do not “fade” in employee decision-making. Thus, rather than being only a transcriber of rules and monitor of their enforcement, a compliance officer would be an educator about policies, standards and the appropriate firm and industry culture and an adviser and counselor concerning how they should inform daily employee decisions.
Publication Year: 2013
Publication Date: 2013-01-01
Language: en
Type: article
Indexed In: ['crossref']
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Cited By Count: 2
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