Mutual Fund Board Seeking a Chief Compliance Officer
During a routine inspection, the staff of the Office of Compliance Inspections and Enforcement of the US Securities and Exchange Commission (OCIE) took a dim view of the fact that the investment adviser and affiliated mutual funds had an outsourced Chief Compliance Officer.
The CCO lived on the opposite coast and visited the adviser's office only quarterly. In the preceding three years, the funds' AUM had grown four-fold, and had outpaced the effectiveness of an outsourced CCO.
The board of the mutual funds asked ReGroup to advise them on:
- What skills are required for a successful CCO;
- A framework for setting expectations and evaluating the performance of a CCO; and
- What constitutes a constructive relationship between the mutual fund board and the funds' CCO.
As a result of this foundational work, the Board also engaged ReGroup to conduct a nation-wide executive search for a Chief Compliance Officer.
ReGroup evaluated the manner in which the current CCO operated, and assessed areas of risk. Working closely with the board members, ReGroup drafted a CCO Blueprint that included the skills the Board should target in a new hire; a clear set of duties and substantive areas of knowledge necessary to do the job well based upon the size, investment mandates, and distribution structures for the funds; and a 'map' of the elements of a strong and meaningful relationship between the board members and the CCO.
In addition to advising the board on the most successful CCO profile and reporting relationship, we assisted the board in establishing a Compliance Committee to oversee and support the activities of the CCO, who also functioned as the CCO of the funds' adviser.
Subsequently, the board engaged ReGroup to conduct a search to fill the CCO position. ReGroup prepared a position profile and conducted a nationwide search that relied heavily on our industry network and organized, thoughtful, and thorough candidate evaluation process. The blueprint formed the foundation of for the engagement, and created a common understanding that supported a successful search.
The Funds hired their first insourced Chief Compliance Officer, and were able to satisfy the concerns lodged by OCIE.