Who Wants To Be a Compliance Officer?!


BrokerDealer.com blog update courtesy of extract from WSJ’s “The Most Thankless Job on Wall Street” by reporter Emily Glazer, with sub title courtesy of our inhouse curator: “Who really wants to be a compliance officer?!”

Those officers on Wall Street in charge of ensuring that traders and other employees stay on the right side of laws and regulations are increasingly in the cross hairs themselves. And, not in the context of traders aiming spitballs at the compliance cops whose job, according to traders and sales/traders is to (i) be annoying by blocking every move, including the one to the restroom (ii) pretend they are cops, because they couldn’t pass the local police dept application exam (iii) have an opinion about the nuance within every email or chat message.

Several recent enforcement actions found compliance officers personally liable for mistakes within their firms. Meanwhile, New York’s principal financial regulator, backed by New York Gov. Andrew Cuomo, wants the power to seek criminal charges against compliance officers in some cases.

Compliance officers are “shaking in their boots,” said Carrie Mandel, a member of recruiter Spencer Stuart’s legal, compliance and regulatory practice. She is among a number of recruiters, lawyers and executives who say the heightened accountability is driving experienced people to be more cautious about the profession and making it difficult for banks to find replacements.

Around three dozen senior bank-compliance executives left their jobs in 2015, three times the number of a year earlier, said Daniel Solo, a managing director at recruiter Sheffield Haworth. Most of those were in positions overseeing anti-money laundering or financial crime, he said.


Compliance officers say they feel unfairly singled out. ​

“It’s easier for firms to give up their compliance officer, because what are they going to do, give up the CEO?” asked a compliance officer who has worked for large U.S. and foreign banks.

​Since the financial crisis, banks have hired compliance officers by the thousands to address internal issues that led to massive fines. They are also often responsible for getting banks to adapt to the flood of new regulations in recent years.

While industry-wide figures aren’t available, many banks have touted their investment in this area: J.P. Morgan Chase & Co., the country’s biggest bank by assets, said in its annual CEO shareholder letter in April that the firm added 8,000 compliance employees.

When Goldman Sachs Group Inc. recently said it had increased its head count by 8% to 36,800 in 2015, the firm cited compliance as the main area of growth.

To keep reading Emily Glazer’s column, click here

The demand for qualified people is driving up salaries, with chief compliance officers at some large banks earning more than $2 million a year, according to recruiters and compliance executives. Specialists in anti-money laundering executives can earn more than $600,000.

Regulators are also focusing on who the compliance executives report to. The Office of the Comptroller of the Currency recently told some big banks that it doesn’t want the compliance officers to report to executives who run businesses directly, people familiar with the matter said.

The idea is to give compliance officers more independence from those executives who help set policies and manage people in the field.

At J.P. Morgan, the chief compliance officer may begin reporting this year to the chief risk officer or another executive, instead of the chief operating officer, people familiar with the matter said.

Regulators increasingly want to make sure compliance officers aren’t merely rubber-stamping bank decisions and that there are penalties in place when the executives willfully overlook bad behavior or fail to see it through monitoring systems they have signed off on.

In a November speech before the National Society of Compliance Professionals, Andrew Ceresney, director of the SEC’s Enforcement Division, said the agency sees itself as being on the same side as compliance officials in terms of being watchdogs for potential wrongdoing.

He said he was aware of the concern within the industry over the recent enforcement actions but stressed that the agency brought cases “only when the conduct crossed a clear line.”

In April 2015, the SEC fined  Bartholomew A. Battista, chief compliance officer at BlackRock Advisors LLC, $60,000 for failing to report a conflict of interest involving one of the firm’s executives, according to the SEC. The executive invested $50 million of his money in a family-owned energy company, which became a joint venture with another company that was a major holding in a fund he managed, an arrangement the SEC said was a breach of fiduciary duty. Mr. Battista was aware of the conflict and didn’t report it.

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The penalty was the agency’s first under a 2003 rule allowing it to hold compliance officers liable for such mistakes. Mr. Battista and BlackRock neither admitted nor denied wrongdoing.

That case, along with a similar action in June involving another firm that the SEC disclosed, prompted then-SEC commissioner Daniel Gallagher to write the only dissent of an enforcement action in his four-year tenure.

Mr. Gallagher, a Republican, wrote that the agency “should strive to avoid the perverse incentives that will naturally flow” from targeting the officers who are on the front lines in preventing wrongdoing. He said the SEC “seems to be cutting off the noses of [chief compliance officers] to spite its face.” Mr. Gallagher left the agency in October. ​

Other regulators, including the Financial Industry Regulatory Authority and the Treasury Department’s Financial Crimes Enforcement Network, have taken actions against compliance officers in the last two years.

In response, some executives are increasingly seeking their own lawyers, asking for more protection in employee contracts and requesting banks pay for liability insurance coverage, said Richard Marshall, a partner at Katten Muchin Rosenman LLP who has represented compliance officers.

The issue could come to a head soon.

The proposed rules by New York’s Department of Financial Services, which regulates some of the world’s largest banks, would require compliance officers to certify bank systems for monitoring suspicious transactions that violate U.S. economic sanctions and other rules.

Brazil’s Top Investment Banker Busted; BTG Pactual Chief in Bribe Probe

andre esteves

Andre Esteves, Brazil’s top billionaire investment banker and until this past Sunday, Chairman and CEO of brokerdealer Grupo BTG Pactual SA, submitted his resignation this weekend after being busted last week by federal prosecutors for purported bribery charges.

47 year old Esteves  is not only Brazil’s top investment banker, he is one of the top ‘cool kids’ across the global investment banking industry. Esteves, who many have likened to being Brazil’s version of Lloyd Blankfein, is also the controlling shareholder of Brazil’s equivalent of Goldman Sachs. The finance industry star delivered his resignation from a Sao Paulo jail cell, where he is being held without bail consequent to his arrest on purported bribery charges relating to a probe of Petrobas aka Petróleo Brasileiro SA, Brazil’s largest state-controlled energy company. Though expected to have been released this weekend, the Supreme Court of Brazil ruled to make the arrest “preventative”—which in layman terms means that Esteves will be cooling his Gucci-covered heels for an indefinite period.

Prosecutors suspect the billionaire dealmaker, along with a senior senator, tried to obstruct a long-running graft probe involving Petrobras. Esteves, through his lawyer, has denied the allegations. Shares and bonds in Latin America’s largest independent investment bank were bashed further on Monday, reflecting concerns about the impact of the investigation on operations after the Supreme Court extended the financier’s detention indefinitely.

It was the first time the bank, which has long been synonymous with Esteves, has been directly implicated in the bribery scandal. Prosecutor General Rodrigo Janot used evidence and other suspects’ testimony to persuade the country’s Supreme Court to extend Esteves’ detention on a preventive basis.

Documents obtained by Brazil prosecutors purportedly suggest BTG Pactual had paid 45 million reais ($12 million) to Eduardo Cunha, speaker of the lower house of Congress, in exchange for passing legislation favoring the bank, the newspapers said.

BTG Pactual denied making such payments in a statement on Sunday, and pledged to cooperate with authorities. Cunha also denied the allegations.

BTG Pactual named two founding partners, Chief Operating Officer Roberto Saloutti and Chief Financial Officer Marcelo Kalim, as co-CEOs. Persio Arida, who became acting CEO after Esteves’ arrest, is now chairman, with Huw Jenkins, head of the bank’s international arm, becoming vice chairman.

The full article from Reuters is at this link

Piper Nabs Lauded Investment Bankers After Stifel Deal


Brokerdealer.com blog update profiles that Piper Jaffray Cos. has hired a few top investment bankers from a company recently sold to Stifel Financial Corp. Bloomberg reports that the Minneapolis-based investment bank hired two Boston bankers: Bob Hutchinson and Daryle DiLascia from Sterne Agee Group, the financial services firm that Stifel bought last week. 

To find brokerdealers like these from Piper, click here. BrokerDealer.com provides a global database of broker-dealers registered in the US as well as those performing brokerdealer services in upwards of 30 major countries throughout the world.

Stifel Chief Executive Officer Ron Kruszewski bought Sterne Agee to focus on businesses such as wealth management and bond trading. He struck a deal to sell Sterne Agee’s equities business to CRT Capital Group LLC.

So, the hiring of these bankers does not come to much a surprise after taking a look at the bigger picture. Bob Hutchinson–who received an MBA from Ohio State University’s Fisher College of Business and a bachelor’s from Boston College–will lead a group dedicated to financial clients including insurers. Daryle DiLascia–who earned his MBA from Boston College and bachelor’s from Syracuse University–is joining to oversee capital markets for the same industry.

This blog update is courtesy of the Bloomberg Business’ article, “Piper Adds Investment Bankers as Stifel Deal Displaces Talent”. To read more, click here.

Broker Dealer Firm Acquires The Producers Choice In A Move That Will Boost Control Over Annuities

broker dealer firm raymond james

Brokerdealer.com blog update profile broker dealer firm, Raymond James Financial Inc, making big moves in the industry as it announced Friday, that it would acquireing The Producers Choice. This move made Friday will help  the broker dealer firm gain greater control over the way annuities are wholesaled to advisers. This brokerdealer.com blog update is courtesy of InvestmentNews’ article, “Raymond James bolsters indexed annuities and life wholesaling with acquisition“, by Darla Mercado. With an excerpt from the article below.

Looking to step up its indexed annuities and life wholesaling game, Raymond James Financial Inc. announced Friday it would acquire The Producers Choice, an insurance marketing organization.

The deal is expected to close mid-summer, and Producers Choice will act as part of Raymond James Insurance Group. Sixty Producers Choice employees will join the firm.

The acquisition addresses two major objectives for Raymond James, which has partnered with Producers Choice for nine years: It gives the broker-dealer greater control over the way annuities are wholesaled and marketed to Raymond James’ advisers, and the firm will have the opportunity to work with Producers Choice’s client base of independent insurance agents, broker-dealers and banks.

To continue reading about Raymond James acquistion of The Producers Choice from InvestmentNews, click here.

Finra Focuses On Educational Communication With Investors In New Compensation Proposal


Brokerdealer.com blog update profiles a new proposal from Finra that has educating investors as their main focus. This proposal is a revised version of the one Finra filed last spring with the SEC. In the previous filing, brokers would have required brokers to disclose to investors recruiting incentives above $100,000 they received for switching to a new firm. This new proposal requires firms to send “educational communication” to investors when a broker moves to that firm. This educational communication proposal is drawing a lot of backlash as critics believe it watered down the original idea for compensation disclosures. This brokerdealer.com blog update is courtesy of InvestmentNews’ Mark Schoeff Jr.  and his article, “Finra releases revised broker compensation proposal“.

Finra released a revised proposal Wednesday for a rule designed to help investors understand the financial incentives their brokers had for switching to a new firm.

Under the rule, brokerages would have to send an “educational communication” to investors working with a broker who is moving to their firm. The document customers receive would outline questions they should ask their broker about the compensation and other inducements the broker is getting to transfer to the new firm.

The questions would help investors determine whether the broker’s financial incentives create a conflict of interest and whether investors would incur costs by following the broker to a new firm.

The broker-compensation proposal is a revised version of one the Financial Industry Regulatory Authority Inc. filed with the Securities and Exchange Commission in March 2014 but later withdrew amid industry resistance.

To continue reading about this investor educational communication focused Finra proposal, click here.