Independent Review of Compliance Program Design
A Board of Directors of a $300B mutual fund complex voluntarily commissioned an independent review of its compliance program.
The board wished to assess the program’s design, governance, oversight, supervisory structures, and risk identification and mitigation process in light of the firm’s unique business, compliance, and regulatory needs.
The affiliated investment adviser offered a wide range of single-country, regional, and global capabilities across major equity, fixed income, and alternative asset classes, delivered through a diverse set of investment vehicles. The Chief Compliance Officer of the investment adviser and fund family was responsible for coordinating and administering compliance programs for the registered investment adviser’s U.S. investment management activities and registered funds globally.
We planned and executed a design review of the compliance programs of multiple affiliated entities, including the registered funds, against related regulatory requirements, leading practices of similarly situated advisers and funds, and anticipated SEC expectations, using both quantitative and qualitative components.
Specifically, we used an interdisciplinary approach to understanding the firm’s business model, organization, and further complexities to assess:
- Whether the necessary elements of the Compliance Programs and related controls were purposefully designed to achieve specific regulatory objectives assuming they operate as defined, and;
- Whether the design was capable of supporting the complexity of the related business practices.
We then assigned a value to each design element based on the criteria set forth in our proprietary 10 Pillars of Effective Compliance Program Design and provided recommendations that recognized the significant role of the firm’s business units, leadership, and multiple internal control units.
Our client appreciated the practical and achievable recommendations related to their compliance programs. The 'design review' and ten pillars allowed the mutual fund board and investment adviser senior executives to:
- View its compliance program with a fresh set of eyes,
- Discuss the program’s development with senior management and the fund board using a common set of evaluation criteria, and
- Facilitate coordinated efforts with other business units to anticipate, report, and reduce risk exposure.