1、Professional Ethics for Compliance ProfessionalsKurt WachholzPresident and CEOWellspring ComplianceAnn OglanianPresident and CEOReGroup, LLCNRS Fall Compliance ConferenceNovember, 6, 2009Las Vegas, NVA Continuing Education Offering for the Compliance ProfessionalAgendaIntroductionEthicsFiduciary Dut

2、yConflicts of InterestBest PracticesRolesProfessional Code for the CCOApplied Ethics 2Overview: Attorney ConductAddress various issues contained in the Rules of Professional ConductTheRules of Professional Conduct and the various securities laws/regulations and Self Regulatory Organization rules of

3、practice. The legal and regulatory bases for ethical conduct by legal and compliance personnel (CA Rule 1-100. Rules of Professional Conduct, in General)Discussion of recent regulatory and enforcement actions against such employees and several case studies. Attorney reporting rules,Sarbanes-Oxley re

4、quirements.Maintaining clients confidential information (CA Rule 3-100)Financial relationships with clients with respect to gifts (CA Rule 4-400)3Is Good Ethics Good Business?Required by lawPreserves business valueResearch:4Ethical DimensionsFamilyProfessional and Personal RelationshipsClientCo-work

5、erManagementCompany5Investment Management: Fiduciary DutySimple form: putting your client firstConduct principlesLoyalty to/Best Interest of ClientTreat Clients FairlyFull and Fair DisclosureRespect for ConfidentialityDuty of Care (Reasonableness)Best ExecutionRule 204A-1 of the Advisers ActFundamen

6、tal principles of openness, integrity, honesty and trust.6Conflicts of Interest from Anecdote to CodificationInsider TradingGifts and EntertainmentBlack-outs, restricted lists, prohibitionsLimitations on trading activities short selling, market timing, etc.Approved brokers, Limited Brokerage Account

7、sNew Investment OpportunitiesPay to PlayPolitical ContributionsOutside Business ActivitiesConfidentiality and PrivacyDual Registrations7Best Practices: Practice of ComplianceConflicts of Interest: IdentificationSanctionsTrainingReward Structures Hotlines or Whistle-blowing ProtectionEthics Committee

8、Ethics AuditCustomize for your business8Workshop:Top Five Best Practices Ideas 9Best Practices: How to Improve Conduct1. Effective Training2. CEO participation3. COE (and forms) written in English4. Lead by exampleImbed compliance conduct into performance evaluationNon-retaliation10Stages of Complia

9、nce Program DevelopmentSet Enterprise ObjectivesCoordinate analysis and actionVisibility to risk, exposure and performanceIdentify risks, Assess exposurePrioritize actionsUse technology for multiple purposesEfficiencyAutomationSeeing connectionsPlan future approachGet it done!Operate in isolationMar

10、shall resources from whereverTactical to StrategicSource: AMR Research11How does the Code relate? What are the Roles?“C-Suite”, executivesManagers and supervisorsEmployeesInterns and tempsService providers and sub-advisersJob applicantsSupervised and Access Persons12The CEOs RoleLead by exampleEnsur

11、e the CCO has clout Ensure the CCO behaves professionallyIncorporate compliance conduct into incentives compDiscuss the ethics of business deals with senior managementInsist on tough discipline for top execs who break the rules or threaten retaliationCo-present COE trainingSend out COE reminders und

12、er the CEOs signatureRecruit a CCO from another company for your boards audit/compliance committeeGet an independent review of the compliance program; results reported directly to the audit/compliance committeeRequire vendors to embrace your commitment to compliance and ethics13The CCOs ObligationOb

13、ligation To the PublicTo the EmployerTo the ProfessionCompliance Professional Code of ConductSCCENSCPState-based attorney conduct rules14Issues Contained in the Rules of Professional Conduct Model Rules for the (Legal) ProfessionPreamble acknowledges that lawyers must be guided by “personal conscien

14、ce”Require honesty and integrity; one may not engage in conduct involving “dishonesty, fraud or misrepresentation” or make a false statement of factThese concept can be applied to compliance officers as wellEthical/moral dimension to being a Wall Street professional and especially a “Double Fiduciar

15、y”15Rules of Professional, continuedA framework for the ethical practice of law. Not exhaustive of moral and ethical considerations.Not designed to be a basis for civil liability. Each state body that regulates lawyer conduct within its jurisdiction is free to adopt all or part of the Rules, or to r

16、eject them.The Rules address eight separate areas: (1) the client-lawyer relationship, (2) the lawyer as a counselor, (3) the lawyer as an advocate, (4) transactions with persons other than lawyers,(5) law firms and associations, (6) public service, (7) information about legal service, and (8) maint

17、aining the integrity of the profession.16Legal and Regulatory Bases for Ethical Conduct by Legal and Compliance Personnel1933 Securities Act1934 Securities Exchange Act1940 Investment Advisers Act1940 Investment Company ActERISA Section 307 of Sarbanes-Oxley Act of 2002 (SEC rules implementing profe

18、ssional responsibility for attorneys)17Advisory Professionals: Regulatory FrameworkSEC:Section 206(1) and (2) of the Investment Advisers Act of 1940 Prohibited Transactions by Investment AdvisersRule 204A-1 of the Investment Advisers Act of 1940 Investment Adviser Code of EthicsRule 206(4)-7 of the

19、Investment Advisers Act of 1940 Compliance Programs of Investment AdvisersRule 17j-1 of the Investment Company Act of 1940 Personal Investment Activities of Investment Company Personnel18Maintaining Clients Confidential InformationInsider Trading/Confidentiality policies and provisions in Codes of E

20、thics CA Rule 3-100 (Confidential Information of a Client)How to monitor and ensure compliance19Financial Relationships with Clients with Respect to GiftsBusiness reality of client development NASD RuleCode of Ethics Rules, Investment Advisers ActCA Rule 4-400 (Gifts from Clients)20Instructive SEC E

21、nforcement ActionsIn the Matter of Monetta Financial Services Inc. - Rel. No. IA-2136 (June 9, 2003) ://litigation/opinions/33-8239.htm In the Matter of Jamison, Eaton & Wood, Inc. - Rel. No. IA-2129 (May 15, 2003) ://litigation/admin/ia-2129.htm In the Matter of Gintel Asset Managemen

22、t, Inc., et al., Rel. No. IA-2079 (Nov. 8, 2002) ://litigation/admin/ia-2079.htm In the Matter of Strong Capital Management, Inc. et al. Rel. No. IA-2239 (May 20, 2004) ://litigation/admin/34-49741.htm 21Stretch Break (11:20am to 11:30am) 22How to Rationalize Unethical Conduct: Its eas

23、y!I deserve itNo one will get hurtNo one will knowEveryone does it23Four Core Workplace ValuesFairness: Play by the RulesHonest: Tell the TruthIntegrity: Keep your PromisesRespect: Treat others with dignityHow do you use these values in decision-making?24Is there a better way?25Language of EthicsThe

24、 Compliance TestThe Ripple TestThe Gut Check Test26The Compliance TestWhat are the facts? What are the choices? Are the choices legal? (The law is a minimum standard.)Do they comply with regulatory expectations? Do they meet your organizations standards and values?Process of Investigation. Get the f

25、acts.27The Ripple Effect TestDoes the decision reflect well on me and my organization? What are the likely effects, good and bad, on my organization, my colleagues, my family, my community, and the wider world once the decision becomes widely known?Process of Evaluation.28Ripple Effect29The Gut Chec

26、k TestIs the decision consistent with my core values? Does it feel like the right thing to do? Is this a decision I will be proud of? Will I be able to sleep at night?Process of Reflection.30OUR JOB IS NOT TO MAKE UP ANYONES MIND, BUT TO OPEN MINDS - TO MAKE THE AGONY OF DECISION-MAKING SO INTENSE T

27、HAT YOU CAN ESCAPE ONLY BY THINKING.- FRED W. FRIENDLY31Situation #1Youre a rising executive just promoted to corporate controller. Shortly after you land the new job, several senior executives pressure you to distort the companys restructuring charges in a way that would be misleading but not crimi

28、nal.What would you do?32Situation #2You join a nonprofit firm in a junior accounting role. As you review the years corporate donations, you quickly realize that no standard procedure exists to determine the value of in-kind donations (gifts in the form of goods or services rather than cash). Some of

29、 your most prolific donors inflate valuations to deceive the IRS. Your overworked executive director makes a point of emphasizing relationships above data.What would you do?33Situation #3Youre a junior employee at a large investment bank. Hours before a client meeting, a portfolio manager tells you

30、to review the portfolio of one of the banks smallest customers and find a new benchmark that will make it look like the portfolio had performed better than it really had. You know that the client remains with the bank as a favor to a friend who works there.What would you do?34Situation #4Youre a Chi

31、ef Compliance Officer of a registered investment adviser. You report to the firms General Counsel. She tells you that certain findings and recommendations you included in your draft written Annual Review report will provide a path to a deficiency for the SEC and instructs you to delete them. What wo

32、uld you do?35Situation #5Youre the CCO of a hedge fund that charges performance fees. You also serve as the firms CFO. When you start at the firm, the CEO tells you that they pre-pay themselves the performance fee every quarter based upon expected returns, which is what funds the operating expenses

33、of the firm, including paying your salary. The CEO makes it clear that they intend to continue the practice.What would you do?36Situation #6Youre responsible for your companys travel and entertainment policy, which says that company business travel and entertainment policy limits employee travel meals (as apposed to non-employee entertainment) to no more that $100 for dinner. The CEO turns in an expense of $800 for a meeting of herself and five subordinates.What would you do?37Situation #7Your