Innovation and your Culture of Compliance

It’s all about E-T-H-I-C-S

 Your goal is transparency in the monitoring and controlling of earnings-at-risk.  Avoiding the pitfalls of a ‘short-term mindset.’  Commissions are superb incentives, when properly designed and controlled. E = Earnings

 Teamwork happens when there are properly- chartered N EW P RODUCT W ORKING G ROUPS (or full- blown committees) and/or a R EPUTATIONAL R ISK C OMMITTEE characterized by collaborative discussions.  Innovation is often measured in terms of speed-to- market.  Clear roles and measurable opportunities for contributions/rewards --– and accountability for on- time deliverables. T = Teamwork

 Sometimes folks prefer to say end-to-end. It is often very helpful to have a schematic of the new product, especially complex ones, and legal entities used for booking purposes, as well as workflows for approvals.  In your packet, you will find a schematic entitled “Six Degrees of Independence.” It takes you from the client’s buying experience through to reporting of the revenues to shareholders. H = Holistic

“End-to-End” Roles Front Office Client & revenue focused. Middle Office Client & Transaction focused. Back Office Transaction & Process focused. Risk Disciplines Risk & Process-focused, e.g.,Credit & Market, Ops & IT,Legal/Compliance,BSA External Audit Process & Disclosure focused. Internal Audit Process & Risk focused. Highest level of perceived independence; furthest from the firm’s clients. Six degrees of Separation? NO. Six Opportunities to obtain expert views? YES! Transactional information moves left to right: from point of sale, through the governance, compliance and control processes, and eventually “out” onto the firm’s publicly disclosed books & records. A “weak link” in your enterprise chain will lessen the confidence and satisfaction of clients, shareholders and regulators. Links are kept strong through clear workflows, roles & responsibilities = TEAMWORK. Low level of perceived independence; closest to the firm’s clients.

 Avoid “silo’d” governance. Several departments, business units and/or legal entities may be involved.  Your approach must be cohesive.  Your systems platform will likely not be cohesive - because what you are doing is innovative/new!  It is especially important that people have shared goals/language.  This is an ever-present challenge at U.S. firms – and doubly so for firms in which English is the second language. I = Integrated

 It’s not optional. It’s not a ‘best practice.”  It’s required.  Our panelists have covered the key requirements and have shed light on best practices to avoid or minimize non-compliant outcomes. C = Compliance

 You need to work toward an enterprise-wide system of sustainable Governance, Compliance and Control over all new products. Focus on authorities & communications, escalation channels and record-keeping.  As Steve Strombelline and Doug Freedman have ably pointed out at IIB events, your sustainable systems also need to be resilient systems. S = Solutions

A culture-of-compliance is all about Earnings, Teamwork, Holistic and Integrated Compliance Solutions. Recap

ICS NY Contact Information: Thank you 11 Penn Plaza 5 th Floor New York, NY Phone John C. Soffronoff President Jim Wistman Director – NY Region Jill Shann, CAMS, CRP Assistant Director – Foreign Branches Bill Sachs, CFSA, CBA Compliance Manager Jim DeMieri, CFSA Compliance Manager