A Hedge Fund Uses a Compliance Committee to Manage Risk
A $1B AUM hedge fund with an affiliated research firm negotiated an SEC settlement offer that required that the firm create a compliance committee to guide and oversee the firm's compliance program.
The SEC order required that the committee include an independent investment management expert, and the firm asked ReGroup’s CEO, Ann Oglanian, to chair the committee.
Working in concert with the Chief Executive Officer and Chief Compliance Officer, we established a framework for effective governance that included a Compliance Committee Charter that met the requirements of the SEC order, a standing agenda, the committee composition, and the periodicity for the meetings. We scheduled periodic in-person discussions with the firm's leadership to review progress.
We initially agreed upon the key elements of a well-designed compliance program, and how progress would be measured. During quarterly meetings, we collaborated with the firm’s compliance professionals to identify key regulatory risks.
The SEC order also tasked the Committee with overseeing an independent review of the compliance programs for the investment adviser and broker/dealer. The committee drafted an RFI, assessed candidates, reviewed the work plan and resulting report, and assisted in prioritizing the resulting recommendations.
In addition to satisfying terms of the SEC order, the committee provides an outside, independent perspective to both senior management and the compliance department, while nurturing a risk-based and anticipatory compliance program. When the firm experienced turnover in compliance staff, the firm relied upon the Compliance Committee to provide continuity, and to preserve the institutional memory related to the compliance programs.
Under Ann's leadership, the committee continues to provide independent guidance to committee members and senior executives related to regulatory priorities and leading industry practices.