Professional Ethics for Compliance Professionals.ppt

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1、ProfessionalEthicsforComplianceProfessionalsKurtWachholzPresidentandCEOWellspringComplianceAnnOglanianPresidentandCEOReGroup,LLCNRSFallComplianceConferenceNovember,6,2009LasVegas,NVAContinuingEducationOfferingfortheComplianceProfessionalAgendaIntroductionEthicsFiduciaryDutyConflictsofInterestBestPra

2、cticesRolesProfessionalCodefortheCCOAppliedEthics2Overview:AttorneyConductAddressvariousissuescontainedintheRulesofProfessionalConductTheRulesofProfessionalConductandthevarioussecuritieslaws/regulationsandSelfRegulatoryOrganizationrulesofpractice.Thelegalandregulatorybasesforethicalconductbylegaland

3、compliancepersonnel(CARule1-100.RulesofProfessionalConduct,inGeneral)Discussionofrecentregulatoryandenforcementactionsagainstsuchemployeesandseveralcasestudies.Attorneyreportingrules,Sarbanes-Oxleyrequirements.Maintainingclientsconfidentialinformation(CARule3-100)Financialrelationshipswithclientswit

4、hrespecttogifts(CARule4-400)3IsGoodEthicsGoodBusiness?RequiredbylawPreservesbusinessvalueResearch:4EthicalDimensionsFamilyProfessionalandPersonalRelationshipsClientCo-workerManagementCompany5InvestmentManagement:FiduciaryDutySimpleform:puttingyourclientfirstConductprinciplesLoyaltyto/BestInterestofC

5、lientTreatClientsFairlyFullandFairDisclosureRespectforConfidentialityDutyofCare(Reasonableness)BestExecutionRule204A-1oftheAdvisersActFundamental principles of openness,integrity,honesty and trust.6ConflictsofInterestfromAnecdotetoCodificationInsiderTradingGiftsandEntertainmentBlack-outs,restrictedl

6、ists,prohibitionsLimitationsontradingactivitiesshortselling,markettiming,etc.Approvedbrokers,LimitedBrokerageAccountsNewInvestmentOpportunitiesPaytoPlayPoliticalContributionsOutsideBusinessActivitiesConfidentialityandPrivacyDualRegistrations7BestPractices:PracticeofComplianceConflictsofInterest:Iden

7、tificationSanctionsTrainingRewardStructuresHotlinesorWhistle-blowingProtectionEthicsCommitteeEthicsAuditCustomizeforyourbusiness8Workshop:TopFiveBestPracticesIdeas1.2.3.4.5.9BestPractices:HowtoImproveConduct1.EffectiveTraining2.CEOparticipation3.COE(andforms)writteninEnglish4.Leadbyexample5.Imbedcom

8、plianceconductintoperformanceevaluation6.Non-retaliation10StagesofComplianceProgramDevelopmentSetEnterpriseObjectivesCoordinateanalysisandactionVisibilitytorisk,exposureandperformanceIdentifyrisks,AssessexposurePrioritizeactionsUsetechnologyformultiplepurposesEfficiencyAutomationSeeingconnectionsPla

9、nfutureapproachGetitdone!OperateinisolationMarshallresourcesfromwhereverTacticaltoStrategicSource:AMRResearch11HowdoestheCoderelate?WhataretheRoles?“C-Suite”,executivesManagersandsupervisorsEmployeesInternsandtempsServiceprovidersandsub-advisersJobapplicantsSupervised and Access Persons12TheCEOsRole

10、LeadbyexampleEnsuretheCCOhascloutEnsuretheCCObehavesprofessionallyIncorporatecomplianceconductintoincentivescompDiscusstheethicsofbusinessdealswithseniormanagementInsistontoughdisciplinefortopexecswhobreaktherulesorthreatenretaliationCo-presentCOEtrainingSendoutCOEremindersundertheCEOssignatureRecru

11、itaCCOfromanothercompanyforyourboardsaudit/compliancecommitteeGetanindependentreviewofthecomplianceprogram;resultsreporteddirectlytotheaudit/compliancecommitteeRequirevendorstoembraceyourcommitmenttocomplianceandethics13TheCCOsObligationObligationTothePublicTotheEmployerTotheProfessionComplianceProf

12、essionalCodeofConductSCCENSCPState-basedattorneyconductrules14Issues Contained in the Rules of Professional ConductModelRulesforthe(Legal)ProfessionPreambleacknowledgesthatlawyersmustbeguidedby“personalconscience”Requirehonestyandintegrity;onemaynotengageinconductinvolving“dishonesty,fraudormisrepre

13、sentation”ormakeafalsestatementoffactTheseconceptcanbeappliedtocomplianceofficersaswellEthical/moraldimensiontobeingaWallStreetprofessionalandespeciallya“DoubleFiduciary”15Rules of Professional,continuedAframeworkfortheethicalpracticeoflaw.Notexhaustiveofmoralandethicalconsiderations.Notdesignedtobe

14、abasisforcivilliability.EachstatebodythatregulateslawyerconductwithinitsjurisdictionisfreetoadoptallorpartoftheRules,ortorejectthem.TheRulesaddresseightseparateareas:(1)theclient-lawyerrelationship,(2)thelawyerasacounselor,(3)thelawyerasanadvocate,(4)transactionswithpersonsotherthanlawyers,(5)lawfir

15、msandassociations,(6)publicservice,(7)informationaboutlegalservice,and(8)maintainingtheintegrityoftheprofession.16Legal and Regulatory Bases for Ethical Conduct by Legal and Compliance Personnel1933SecuritiesAct1934SecuritiesExchangeAct1940InvestmentAdvisersAct1940InvestmentCompanyActERISASection307

16、ofSarbanes-OxleyActof2002(SECrulesimplementingprofessionalresponsibilityforattorneys)17Advisory Professionals:Regulatory FrameworkSEC:Section206(1)and(2)oftheInvestmentAdvisersActof1940ProhibitedTransactionsbyInvestmentAdvisersRule204A-1oftheInvestmentAdvisersActof1940InvestmentAdviserCodeofEthicsRu

17、le206(4)-7oftheInvestmentAdvisersActof1940ComplianceProgramsofInvestmentAdvisersRule17j-1oftheInvestmentCompanyActof1940PersonalInvestmentActivitiesofInvestmentCompanyPersonnel18Maintaining Clients Confidential InformationInsiderTrading/ConfidentialitypoliciesandprovisionsinCodesofEthicsCARule3-100(

18、ConfidentialInformationofaClient)Howtomonitorandensurecompliance19Financial Relationships with Clients with Respect to GiftsBusinessrealityofclientdevelopmentNASDRuleCodeofEthicsRules,InvestmentAdvisersActCARule4-400(GiftsfromClients)20Instructive SEC Enforcement ActionsIntheMatterofMonettaFinancial

19、ServicesInc.-Rel.No.IA-2136(June9,2003):/sec.gov/litigation/opinions/33-8239.htmIntheMatterofJamison,Eaton&Wood,Inc.-Rel.No.IA-2129(May15,2003):/sec.gov/litigation/admin/ia-2129.htmIntheMatterofGintelAssetManagement,Inc.,etal.,Rel.No.IA-2079(Nov.8,2002):/sec.gov/litigation/admin/ia-2079.htmIntheMatt

20、erofStrongCapitalManagement,Inc.etal.Rel.No.IA-2239(May20,2004):/sec.gov/litigation/admin/34-49741.htm21StretchBreak(11:20amto11:30am)22HowtoRationalizeUnethicalConduct:Itseasy!IdeserveitNoonewillgethurtNoonewillknowEveryonedoesit23FourCoreWorkplaceValuesFairness:PlaybytheRulesHonest:TelltheTruthInt

21、egrity:KeepyourPromisesRespect:TreatotherswithdignityHowdoyouusethesevaluesindecision-making?24Isthereabetterway?25LanguageofEthicsTheComplianceTestTheRippleTestTheGutCheckTest26TheComplianceTestWhatarethefacts?Whatarethechoices?Arethechoiceslegal?(Thelawisaminimumstandard.)Dotheycomplywithregulator

22、yexpectations?Dotheymeetyourorganizationsstandardsandvalues?ProcessofInvestigation.Getthefacts.27TheRippleEffectTestDoesthedecisionreflectwellonmeandmyorganization?Whatarethelikelyeffects,goodandbad,onmyorganization,mycolleagues,myfamily,mycommunity,andthewiderworldoncethedecisionbecomeswidelyknown?

23、ProcessofEvaluation.28RippleEffect29TheGutCheckTestIsthedecisionconsistentwithmycorevalues?Doesitfeelliketherightthingtodo?IsthisadecisionIwillbeproudof?WillIbeabletosleepatnight?ProcessofReflection.30OURJOBISNOTTOMAKEUPANYONESMIND,BUTTOOPENMINDS-TOMAKETHEAGONYOFDECISION-MAKINGSOINTENSETHATYOUCANESC

24、APEONLYBYTHINKING.-FREDW.FRIENDLY31Situation#1Yourearisingexecutivejustpromotedtocorporatecontroller.Shortlyafteryoulandthenewjob,severalseniorexecutivespressureyoutodistortthecompanysrestructuringchargesinawaythatwouldbemisleadingbutnotcriminal.Whatwouldyoudo?32Situation#2Youjoinanonprofitfirminaju

25、nioraccountingrole.Asyoureviewtheyearscorporatedonations,youquicklyrealizethatnostandardprocedureexiststodeterminethevalueofin-kinddonations(giftsintheformofgoodsorservicesratherthancash).SomeofyourmostprolificdonorsinflatevaluationstodeceivetheIRS.Youroverworkedexecutivedirectormakesapointofemphasi

26、zingrelationshipsabovedata.Whatwouldyoudo?33Situation#3Youreajunioremployeeatalargeinvestmentbank.Hoursbeforeaclientmeeting,aportfoliomanagertellsyoutoreviewtheportfolioofoneofthebankssmallestcustomersandfindanewbenchmarkthatwillmakeitlookliketheportfoliohadperformedbetterthanitreallyhad.Youknowthat

27、theclientremainswiththebankasafavortoafriendwhoworksthere.Whatwouldyoudo?34Situation#4YoureaChiefComplianceOfficerofaregisteredinvestmentadviser.YoureporttothefirmsGeneralCounsel.ShetellsyouthatcertainfindingsandrecommendationsyouincludedinyourdraftwrittenAnnualReviewreportwillprovideapathtoadeficie

28、ncyfortheSECandinstructsyoutodeletethem.Whatwouldyoudo?35Situation#5YouretheCCOofahedgefundthatchargesperformancefees.YoualsoserveasthefirmsCFO.Whenyoustartatthefirm,theCEOtellsyouthattheypre-paythemselvestheperformancefeeeveryquarterbaseduponexpectedreturns,whichiswhatfundstheoperatingexpensesofthe

29、firm,includingpayingyoursalary.TheCEOmakesitclearthattheyintendtocontinuethepractice.Whatwouldyoudo?36Situation#6Youreresponsibleforyourcompanystravelandentertainmentpolicy,whichsaysthatcompanybusinesstravelandentertainmentpolicylimitsemployeetravelmeals(asapposedtonon-employeeentertainment)tonomore

30、that$100fordinner.TheCEOturnsinanexpenseof$800forameetingofherselfandfivesubordinates.Whatwouldyoudo?37Situation#7Youreaportfoliomanagerthathasworkedwithacoupleforanumberofyears.Theyhavebeenoneofyourfavoriteclients.Recentlytheyhavehadmaritalissues.Thehusbandcontactsyouandasksyoutohelphimopenanaccoun

31、tsothathecantransfersomeassetsovertoit.Heasksyounottotellhiswife.Whatwouldyoudo?38Situation#8Youhandleorderprocessingforthefirmandnoticethatanaccountdoesnothaveenoughavailablefundstosatisfyarecenttransactionfee.Youmentionthistotheportfoliomanagerandhesayshewillpaythefeesinceitisanimportantclientandh

32、ewouldprefernottobotherhimwithsuchaminorcharge.Whatwouldyoudo?39DealingwithEthicsBreaches40ToDoListReadtheSCCEComplianceProfessionalCodeofEthics(considerjoiningSCCE)ThinkaboutyourroleinethicsHelpyourCEOandSeniorManagersConsiderhowtoimproveyourethicstrainingGetclearonyourfirmsethicaldimension41PollingQuestionSendusexamplesofethicalsituations.42ThankyouAnnOglanianPresidentandCEOReGroup,LLC415-681-2230KurtWachholzPresidentandCEOWellspringCompliance404-606-066343