What Fund Managers Should Consider When Hiring and Onboarding CCOs; Determining CCO Governance Structures; and Evaluating Risks of CCO Turnover (Part Two of Three)

Hiring a dedicated chief compliance officer (CCO) requires both an expansive and focused search; although a fund manager would ideally hire someone who possesses competencies that match closely with its activities, it may not have that luxury depending on the pool of qualified candidates. Once a manager has hired a CCO, it should properly onboard him or her and develop a governance structure specific to its values and culture. Although the U.S. government tends to prefer separation between an organization’s compliance and legal departments, a priori departmentalization may lead to several unintended consequences. A manager must not stop once the CCO has been hired and onboarded, however; managers must understand and be prepared for the attendant risks of CCO turnover, such as the breakdown of day-to-day responsibilities. This article, the second in a three-part series, examines CCO hiring and onboarding; explores whether managers should separate their compliance departments from their legal departments; and analyzes the risks of high CCO turnover. The first article discussed the SEC’s proposed rule on business continuity and transition plans; the potential impact of the rule’s withdrawal; the importance of CCO succession planning; and the risks of using an outsourced CCO. The third article will evaluate the risks of poor succession planning and provide a roadmap for developing a robust succession plan. See “Survey Reveals Compliance Weaknesses of Hedge Fund Managers Relative to Other Financial Services Firms, Including CCO Qualifications and Frequency of Annual Compliance Reviews” (Sep. 15, 2016).

To read the full article

Continue reading your article with a HFLR subscription.