7 Deadly Sins of Compliance
Published October 3, 2012 7:58 PM
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Updated April 26, 2016 4:50 PM
1 Min Read
7 Deadly Sins of Compliance (Or How Not to Sink the Ship)
Before embarking on first or next dance with the regulators, Jennifer Woods Burke, President of CompliGuide provides her thoughts on the top 7 ways that firms sabotage themselves.
Thinking they can't afford it
Is compliance really expensive or have you just not valued it properly? Vendors exist to fit every type of budget. Yes, the firm would rather spend the money elsewhere but in the long run investing in compliance is like changing the oil in your car- necessary maintenance to prevent expensive problems in the long run.
Not Reading Enough
Someone else's bad news can actually be good news for your firm. Firms that routinely read disciplinary actions online, keep ahead of the curve. Inevitably, a light bulb will go off and you will realize that your firm has the same or similar practice. Promptly curing the issue going forward can save your firm big bucks because it is not just the disciplinary fine. Firms often forget that the fine can be small in comparison to other associated costs: legal fees, re-direction of scarce personnel, morale issues and reputational damage.
"Fixing" Things
When an issue is identified, people panic. The wrong approach (ie. destroying documents, altering documents, failing to produce documents, coaching witnesses etc.) compromises everything and everyone. Integrity matters. While many things can be handled - actions that destroy credibility typically cannot.
Keeping It on the Shelf
The firm bought it and takes it off the shelf for regulators when they come to visit - but an unused compliance program is a tool that will be used to hammer the firm. Your compliance program can be effectively used as both the firm's shield and sword - when the firm knows how to use it.
Not Having Any Fun
You secretly enjoy TMZ, love auto-biography's but haven't done email surveillance in months - why not?! Crazy things can and often do happen in a corporate environment. Compliance typically knows (or at or least should know) all about it as personnel issues often lead to compliance problems. Tread carefully on the employment law front but in compliance - it is your responsibility to know things and how they affect the firm.
Failing to Connect the Dots
Regulators routinely post notices stating quite starkly what they consider to be red flags. Not recognizing a red flag when you see it is a big mistake. If the firm found an issue, the individual responsible for reviewing or supervising it should have the requisite experience to recognize it for what it is worth. If no one at the firm has that assistance then you should bring in outside assistance.
Closing the Loop
The firm has all the tools, realizes it has a problem, but forgets to set an internal deadline for correction. Do you think a regulator or plaintiff's attorney will perceive the non-action to be intentional? Absolutely! Forgetting to set a resolution timetable and sticking to it is probably the number one thing that a firm can do to sabotage itself.
