Compliance - it's a word that elicits an array of responses from mutual fund managers and ETF providers alike, and very few of them are good. But that general uneasiness should not only be attributed to the greater regulatory scrutiny that has become the norm in the post-crisis/Dodd-Frank era. It also comes from the uncertainty about ever-changing regulations, the effort it takes to build the best compliance program and the impact it will have on a fund's operational processes and costs.
Some mutual fund / ETF firms have taken a check-box approach, buying an off-the-shelf program that may or may not fit their needs. Others adhere to the "it's not going to happen to me" model, underestimating the importance and under allocating compliance resources. Many firms have taken their compliance responsibility seriously and have practices in place to ensure what they perceive to be a peak level of compliance. However, these processes, as costly as they may be, can still be ineffective or inefficient. Compliance is not a one-size-fits-all proposition and mutual fund / ETF firms have to build programs that balance cost and effectiveness while matching their evolving business needs. The SEC is casting a wider net, eliminating wiggle room and increasing resources to ensure a greater level of oversight and enforcement. With that increased scrutiny come new levels of anxiety and uncertainty for managers. To ease that anxiety and level the compliance playing field, below are a set of critical considerations to help managers balance their risk and resources in the new era of heightened focus.