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THREE AREAS OF CHANGE FOR CCOs

Knowing the fundamentals of compliance will still remain core to the CCO's mission, but three other areas will increasingly demand the manager's attention in the next decade:

1. Technology Management – As the firm updates the technology it uses, the CCO will need to understand it well enough to ensure that it is being used in an appropriate and compliant manner.

2. Cybersecurity – As firms become more reliant on online resources to conduct their activities, the challenge of ensuring that its data is secure will become even more daunting.

3. New Investment Products and Markets – The almost limitless ingenuity of capital markets has created new financing vehicles. At the same time, investment markets grow increasingly internationalized – and drawing in nations with underdeveloped legal systems and infrastructure. CCOs must assess the new risks and ensure the integrity of the valuation process for such assets and the documentation of investment due diligence.

Social media platforms are evolving along with technology, and that can complicate the life of the CCO. The old marketing and advertising rules won't change much, but the forums – Twitter, LinkedIn, and so on – will continue to develop and pose significant challenges to the industry.

Compliance officers won't be able to rest on their laurels in such an environment, experts say.

“CCOs must become aware of how the younger investment managers use technology in the normal course of a business,” says Tina Petruzziello, founder and compliance principal at Boston Compliance Associates. “Identifying the risks and potential compliance issues will force the CCOs to continuously learn about and keep abreast of new ways of communicating with the public. The ability to use new technology and social media platforms must be incorporated in a robust compliance program.”

Her colleague, David Rozenson, counsel and senior consultant at Boston Compliance, sees an inherent compliance conflict looming.

“As the social media platforms become more complex, the best approach for CCOs may be to keep it simple – to establish basic principles and prohibitions regarding employees' use of social media and stressing that they apply to all communications outside of the work environment,” he says.

Compliance training for employees must explain the specific risks associated with the careless use of social and other communications media, he adds. It helps to offer samples of both appropriate posts and ways to respond to social contacts from current and prospective clients.

 
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