Fry Speaks to Hedge Fund LCD About Building Cultures of Compliance
While the concept of a “culture of compliance” is “a fairly amorphous one, [it] is ultimately the manifestation of a group-think,” Partner Bertrand Fry told Hedge Fund Legal & Compliance Digest (“HFLCD”) in an article published on September 8, 2016.
Although difficult to define in absolute terms – especially in large firms where culture is often diffuse and the product of a broad array of inputs – Fry explained that a true culture of compliance stems from “senior management’s making clear that the firm aims always to ‘do the right thing,’ and that this aim applies equally to everyone in the firm. Staff look to their firm’s leadership for a guide to the real priorities of the organization.”
How Firms Can Create a Culture of Compliance
To this end, Fry recommends that firms deputize compliance personnel who carry authority and respect within the enterprise: “It is important that the people who make compliance decisions have a prominent and significant role in the organization. You can’t make the regulatory compliance function into something ancillary – it’s integral to running a business.” He went on to say that legal and compliance officers who are “higher up the pyramid of control” are best equipped to manage risk.
Additionally, Fry advises firms to outline their goals and expectations clearly in compliance materials. “Write compliance material in plain English, and make it accessible. The manual should track the [relevant statutes and] rules, but at the same time present the ideas in a format that makes them usable for the people who refer to it for guidance.”
Consider the Impact of Fiduciary Obligations
Because investment advisers have a fiduciary obligation to their clients, “the touchstone of every decision should be, ‘is this in the best interest of my clients?,’” Fry emphasized. He referenced the Investment Advisers Act’s rules, which set forth the framework for a culture of compliance; requiring investment advisers to adopt a Code of Ethics, policies and procedures designed to prevent violations of the Act, and appoint a chief compliance officer.
Know That Compliance Requires Ongoing Monitoring and Reinforcement
When asked if a firm can rest on a culture of compliance once it’s been reached, Fry responded, “Compliance requires constant vigilance. You have to monitor your firm’s culture of compliance because it exists in a dynamic with the firm’s general culture – and a firm’s culture is ever-evolving. Maintaining a culture of compliance is not something you are ever done with.”
More About Fry’s Practice
Fry is the co-chair of Pryor Cashman’s Investment Management Group and a member of the firm’s Corporate Group. Over the course of his distinguished career, he has launched and advised on a wide range of U.S. and non-U.S. investment products.
When investment managers encounter obstacles, they look to Fry to provide strategic, goal-oriented counsel, whether structuring a fund to originate loans, advising a firm’s marketing unit on the JOBS Act, assisting a portfolio management team in their spin-out, or crafting a compliance department’s responses to Dodd-Frank Act reforms.
To learn more about Fry’s practice, please visit here.
