Compliance Management

OpsCheck Successfully Completes SOC 2 Audit

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OpsCheck SOC 2 audit furthers its commitment to security as it advances workflow software for investment managers

NEW YORK—March 28, 2023 — OpsCheck, the leader in workflow software for investment management announced the successful completion of its Type 1 SOC 2 audit as it enhances financial and investment firms’ control and oversight of the operational infrastructure.

The SOC 2 audit was conducted by A-LIGN, a compliance partner for more than 2,500 global organizations, helping them mitigate cybersecurity risks.

“OpsCheck is workflow management software for and by investment management leaders,” said Frank Caccio, Chief Executive Officer at OpsCheck. “Your team deserves workflows that are streamlined and adhere to your culture and differentiation. Investment management is a high stakes world, and we’re built for the workflows that define leadership in that world.”

Established by the American Institute of Certified Public Accountants (AICPA), the SOC 2 examination is designed for organizations of any size, regardless of industry and scope, to ensure the personal assets of their potential and existing customers are protected. SOC 2 reports are recognized globally and affirm that a company’s infrastructure, software, people, data, policies, procedures and operations have been formally reviewed.

“A SOC 2 audit is a statement about an organization’s commitment to protecting their information.” said Stephanie Oyler-Rankin, SOC Practice Lead at A-LIGN. “As a trusted third-party assessment firm, A-LIGN independently evaluates client data processes and procedures, governance on internal controls and security posture. OpsCheck’s SOC 2 report validates its commitment to data security and protection, as well as compliance with critical standards to mitigate cybersecurity threats.”

Investment managers and financial services leaders demand cutting-edge task tracking, workflow analysis, and process oversight capabilities. Meeting this demand, OpsCheck includes highly customizable dashboards, flexible reporting functions, and enhanced collaboration tools. It delivers an efficient internal management tool for firms at all stages of the alts lifecycle and meets the external reporting demands of today’s clients and an expanding regulatory environment.

About OpsCheck

OpsCheck scales, tracks, monitors and documents every process, project, and workflow within a private capital or private markets organization, ensuring complete execution on deadline. OpsCheck enables demonstrated operational excellence meeting or exceeding the standards set by auditors, regulators and clients through transparency, detailed task ownership, documentation, and task-specific context. Founded by Frank Caccio, former Head of Global Operations for Tiger Management and Highbridge Capital, and COO for multiple hedge funds, OpsCheck consolidates contemporary workflow management best practices to reinforce and scale your operations success.

About A-LIGN

A-LIGN uniquely delivers a single-provider approach as a licensed SOC 1 and SOC 2 Assessor, accredited ISO 27001, ISO 27701 and ISO 22301 Certification Body, HITRUST CSF Assessor firm, accredited FedRAMP 3PAO, candidate CMMC C3PAO, and Qualified Security Assessor Company. A-LIGN ASSURANCE is a licensed certified public accounting firm registered as Price and Associates CPAs, LLC. A-LIGN may refer to the entities of both A-LIGN and A-LIGN ASSURANCE collectively as A-LIGN. For more information, visit www.A-LIGN.com.

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Start your risk-free 60-day trial of OpsCheck by filling out the form:

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See how OpsCheck can upgrade
your Business Operations

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OpsCheck Testimonial: Mark Ford

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Before taking advantage of OpsCheck, everything at ViewTrade Securities required a meeting. Whether in their offices in southern Florida or northern New Jersey, managers met with their teams to assign tasks. Teams met with each other before reporting back. Everyone used different spreadsheets to track their different tasks and meetings in different workflows. It wasn’t an efficient or effective way to run day-to-day operations.

Today, more than six years after first deploying OpsCheck in their business, the introducing brokerage firm is among the solution’s biggest proponents.

“Anybody in our business would benefit from OpsCheck,” said ViewTrade Securities Chief Compliance Officer and Chief AML Compliance Officer Mark Ford. “You can upload your entire written supervisory procedures, break them out on a daily basis to everyone in your organization, big or small, make a definite set of functionalities, including assignments to specific people, and have that just repeat over and over and over again.”

Ford and his colleagues use OpsCheck to assign daily tasks – both manually and automatically. The OpsCheck system makes clear who must perform a task, when it should be completed, and whether key personnel have completed it before they leave for the day. Supervisors can review work, spot check, and make sure everything will be satisfactory at the start of the next day.

The software has been especially helpful in compliance. At any broker-dealer, compliance is paramount. It requires human intervention and manual review. But it can be streamlined to complete tasks in a cascade that maximizes effectiveness and efficiency. Ford uses the solution to automate and track as much of the compliance process as possible.

ViewTrade has loaded all their compliance functions onto the daily scheduler on OpsCheck so they can be followed every day, never overlooked. ViewTrade also stores reports and other documents in OpsCheck, maintaining an archive for audits. Additionally, Ford and others have appreciated the ease of checking on the system from their phones and other devices. OpsCheck is extremely useful for remote work, for instance.

“OpsCheck ensures that tasks at hand are completed, recorded, reviewed by supervisors, and put to bed,” Ford said. “Then the employees can move on to the next assigned tasks. You have to make sure that your processes are in place and are followed every day – OpsCheck makes it a lot easier to do.”

Lastly, but perhaps most importantly for any companies considering OpsCheck, added Ford, setting the system up at ViewTrade was easy. “It was a very simple and painless process,” he said. “We’ve had to make very few changes over time. After you have the initial setup, it’s like clockwork.”

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Start your risk-free 60-day trial of OpsCheck by filling out the form:

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A Solid Compliance System Mitigates Risk

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Does your company have an integrated compliance system in place? In today’s rapidly evolving business environment, compliance management is essential for ongoing success.

Compliance is a multi-faceted issue, depending on the industry, but most businesses exist under the watchful eye of a regulatory body. Nowhere is this more apparent than in the financial services sector, where every firm needs a compliance management system interwoven throughout the company.

Since 2008, the finance industry has had to adjust from comparative freedom to increasing regulation. Now the global pandemic has further complicated matters as compliance rules and regulations continue to expand.

But what is a compliance system or compliance program? Are they unrelated elements or merely different names for the same thing? What is compliance management software? And how does operational risk management slot into the equation?

This article will answer these questions and explore how you can shield your business from unwelcome compliance issues.

What is a Compliance System?

Simply put, a compliance system protects your firm from risk.

According to the Cambridge Business English Dictionary, compliance is “the act of obeying an order, rule, or request.”

In business today, this means your firm, staff, and third-party vendors must fulfill the laws, ethical guidelines, principles, and standards that govern your company and industry.

The Securities and Exchange Commission (SEC), Federal Reserve Board, and the Financial Industry Regulatory Authority (FINRA) are the key national governing bodies for the finance industry.

Depending on the location of your organization, there will be state regulatory agencies with additional rules and requirements. Each entity has regulations that must be followed by fund managers, brokers, accountants, and other finance professionals.

But compliance is more than adhering to federal and state laws. First and foremost, the goal is to keep your business free from fines and litigation.

With a compliance system, firms keep track of the multiple internal procedures that make up the company’s day-to-day functioning. With continual oversight, missteps are picked up timeously. This protects the company from problems that can hamper operations and add risk.

Put Compliance First

This is where a corporate commitment to instituting a robust compliance system delivers a massive payoff. Most firms will set up a program or system for precise, continuous monitoring of operations.

But first, we need to know how does a compliance system differ from a compliance program?

Both terms refer to compliance management and start with a group of policies and actions put in place by a firm to safeguard its operations. The object is to fulfill the laws, rules, and regulations that govern the industry and uphold your firm’s reputation.

Along with a high-quality legal framework, a well-defined compliance system is the foundation for a good organization and is made up of elements such as:

The compliance manual
Code of ethics
Associated policies (i.e., valuation, personal trading, trade errors, allocations, best execution, and soft dollars

Ideally, a firm’s compliance team will create the compliance system based on rules and regulations set out by the regulatory bodies. The team will also monitor the system’s use and see that everyone is following the program.

Merits of a Solid Compliance Strategy

The value of establishing a robust compliance system for your company is manifold. First, the tangible benefits:

It prevents fines and lawsuits
Avoids misconduct
Circumvents fraud
Protects business reputation

And the intangible paybacks:

Protects firm’s intellectual property
Shields your client base
Preserves the business’s brand

Throughout the firm, all compliance activity should be linked. Departments and employees must work together to maintain internal standards and external regulations. When the whole organization is engaged, the risk of serious failure or fraud is mitigated.

Getting the Team on Board

Nowhere is the adage, “A chain is only as strong as its weakest link” more accurate than in business.

Without a clear understanding of a firm’s standards and expectations, an employee can unwittingly become the most vulnerable link. The best compliance system gets everyone on board and fosters a company-wide culture of compliance.

A sound compliance system will also improve communication between the employees and management. By including everyone in the loop, staff know the rules, regulations, and standards they’re expected to uphold.

But, getting employees on board with your organization’s compliance program has additional benefits:

Staff can focus on the company’s broader goals
Operations run more smoothly
Employees recognize and report illegal or unethical activity
Firm accomplishes growth

A well-maintained compliance system will also help your staff do their jobs well and further their careers.

Building a Better Compliance System

A compliance system should be sensibly planned and carefully applied, but there’s nothing wrong with using a successful formula tailored to your firm’s specific requirements.

Initially, these guidelines were laid out in the Affordable Care Act and were designed for the healthcare sector. However, these key elements are a strong foundation for any firm setting up a compliance system in a highly regulated industry.

These are the recommended components for establishing an effective business compliance system:

Create consistency with written policies and standards of conduct outlining the firm’s compliance expectations.
Provide system oversight. Who will supervise and enforce the compliance system? Who will act as the firm’s “watchdog” to deal with concerns and questions?
Supply training and education for your employees so that everyone is aware of the firm’s standards and expectations—update staff yearly with refresher courses.
Establish shared communication throughout the company. Employees must be expected to communicate: reporting problems, compliance queries, or voice ethical concerns. Include a system whereby employees may anonymously report compliance problems without fear of retaliation.
Put an auditing and monitoring system in place. A method of internal and external oversight with formal audits will measure the success of your compliance system and identify risks.
Apply reliable discipline. Maintain the company’s compliance standards with suitable punitive actions for staff who fail to comply with corporate requirements.
Take consistent corrective action as soon as necessary. When monitoring and auditing reveal weaknesses or violations, act promptly to fix the issue.

An effective compliance system fulfills one of the main objectives of operational risk management, staying compliant!

Are your compliance goals clearly defined? Do you want to update or improve your compliance system? It could be time to apply technology to the problem with workflow/task management software.

Compliance Management Systems and Software

With compliance management software, you are maintaining your business process workflow in a way that lessens risk.

These software solutions offer features with numerous paybacks and can incorporate an assortment of business processes, including:

Acts as a central data repository for business-critical information
Allows sharing of information between stakeholders
Gives selective and restricted access to employees—dependent on their authentication
Distributes information accurately
Eliminates silos
Provides a well-connected work setting

Compliance management systems are designed to allow your firm to follow best practices painlessly.

A sound system gives you visibility and control over your company’s compliance efforts. Otherwise, there isn’t a simple means of tracking or measuring what is being done and by whom.

Staying compliant and abreast of regulatory rules has always been a mission-critical concern for financial firms. Organizations with a compliance management system in place can circumvent many of the operational risks related to their industry.

OpsCheck provides transparency and oversight for regulators and clients. Try our free, no-obligation, 60-day trial today.

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See how OpsCheck can upgrade your Business Operations

All About Audit Trails: What You Need to Know

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Did you know that well-maintained audit trails indicate a high standard of operational oversight?

From the IT staff to top management, effective audit trails call for a company-wide dedication to excellence in compliance management.

With the shift away from manual logs to digital automation, we can obtain audit trails that are easily accessible, precise, and useful. As a result, firms are better able to dodge threats and red-flag potential hazards.

When your company needs answers, a meticulous, clearly-defined audit trail will provide the evidence to untangle the issues.

What Are Audit Trails?

Audit trails are a set of records documenting the sequence of actions over the lifespan of a specific event, process, or procedure. Simply put, an audit trail is the chronological record of a transaction from start to finish, where every step is traceable and verifiable.

These records – manual or electronic – are used by firms to support operations, back-up security, and minimize operational risk. An audit trail helps auditors or administrators ensure operational integrity and regulatory compliance.

Industries in the finance sector like brokerage firms, fund managers, and accountants rely on audit trails to provide a step-by-step view of events. Actions and outcomes can be validated because the records show every detail of a transaction, such as users, dates, and times.

Audit Trails in Action

Organizations use audit trails for many different purposes. One company will use it for budget projections into the future, another for reconciliation. If a firm is initiating an investigation, the audit trail becomes a “baseline” for an audit. Businesses also use audit trails for historical information, risk management, and compliance.

For example, in accounting, audit trails can verify transactions that compute a firm’s revenue, net earnings, or earnings per share. The final figures – and their elements – can be double-checked in the log to confirm the closing numbers.

Mortgage lenders will use an audit trail to confirm the origin of down payment funds. They may want the bank statement showing where funds were deposited in the account and ask for further proof of the monies’ source.

Follow the Trail for Answers

As all audit trails record basic information, auditors and regulators can trace the whole path of events to their origin. This may comprise administrator actions, attempted logins, data access, user actions, or automatic system events.

Organizations define the elements contained in their audit records to answer these questions:

What was the event?
What application, system, or user-initiated the event (may include IP address/device type in the data)
When did the event occur? (date and time)

Some audit trails go beyond and catalog actions on a deeper level than a simple system or application setup. It isn’t uncommon for IT departments to use several audit trails defined by a system, an application, or an event.

Logs like these can pinpoint specific elements such as hard-to-spot changes to a database or the information contained in it. Dodgy email usage, dubious web-browsing, and other abnormal activity will trigger an investigation.

Reviewing and Maintaining Logs

Upkeep of audit trails can be a problem for organizations; logs take up a lot of storage space that a firm may not have available. However, it is recommended that an audit trail is kept for the record’s life.

Best practices dictate that an audit log is subject to periodic review, although every firm will have different review plans. Specific regulations may prescribe a period in which a firm must conduct an audit trail review.

Who Uses Audit Trails?

Most industries need to support operations, security, and compliance. Audit records defend a company against data breaches, internal and external security threats, and support compliance reportage. As such, they form an essential part of a sound operational risk strategy.

IT department personnel – like the network administrator or security manager – will usually manage a company’s audit trails. But any user, such as a manager, employee, accountant, or someone else who interferes with an electronic record, will be trackable in that log. This could be a person who accesses the record or a system automatically changing or updating the log, such as when a computer is restarted.

Multiple Benefits of Audit Logs

The ability to track records back to their origin delivers multiple benefits such as:

Transparency of operations
Verifies records for compliance
Ensures accuracy and record integrity
Protects system from exploitation or misuse
Secures sensitive or vital information

Audit trails provide four areas that unlock these key benefits.

The first is user accountability. By using audit trails, everyone with access to the system is encouraged to apply correct user behavior. Each user knows their actions are linked to their identity and automatically recorded. This reality prevents abuse of information, unauthorized modifications, or system misuse.

Should an investigation become necessary, events can be recreated step-by-step. What happened, and when, and how was it done are all answered by the audit trail. Having a clear view of this information helps identify and prevent future incidents of data corruption, hacking, system failures, and security breaches.

Audit logs help pinpoint system breaches. With clear regulations governing information security and confidentiality, controlling unauthorized access is paramount. Personnel information, company data, and financial records are also protected.

A solid operational risk strategy relies on well-maintained logs. Up-to-date monitoring of your automated audit trails will pick up issues such as system faults, operator errors, dubious activity, or other operational problems.

Audit Trails and Compliance

Maintaining regulatory compliance means staying up-to-date with the federal and state laws that regulate the way companies conduct their business.

When an organization fulfills regulatory compliance standards, it will keep all records and related data so that it can be promptly recalled at any time.

Most businesses use their IT department to maintain electronic records for control of record keeping. This way maintains appropriate and safe user access and tracks privacy controls. Unsurprisingly, sound audit trail procedures are most needed by the financial sector, health care, universities, and e-commerce.

For financial organizations, the old way of manual archiving is obsolete. Today, critical documentation is tracked through workflow management systems or everyday desktop utilities.

It’s easier to create audit trails in a workflow management system. A process-driven environment allows you to simplify reporting and perform checks.

Whether your audit trails support day-to-day system operations or aid compliance, they also act as a type of insurance. In the event of technical problems or a suspected breach, a well-maintained audit trail will provide the answers.

OpsCheck is the SAAS workflow management system designed by finance professionals for operational excellence. See how well our system works for you with our no-risk, 60-day free trial.

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OpsCheck Spotlights Covid Needs: Fees, Costs, Financial Transactions (3/6)

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After five months of review, the SEC’s Office of Compliance Inspections and Examinations (OCIE) has released a Risk Alert regarding compliance and process protocols during the era of COVID-19. As the pandemic continues, investment management firms have been challenged to maintain the high-quality service and standards their clients and the SEC demand.

OCIE Identifies Six Areas of Concern

Firms should take time to review:

protection of investors’ assets
supervision of personnel
practices relating to fees, expenses, and financial transactions
investment fraud
business continuity
the protection of investor and other sensitive information

In this series, you’ll get a detailed breakdown of each of these six areas of concern.

Best Practices Relating to Fees, Expenses, and Financial Transactions

Due to the volatility of the markets caused by the COVID-19 crisis and increased frequency of losses for one reason or another, the SEC will likely bring more attention to transparency requirements. Service costs and management fees, firm compensation, and key personnel actions should all be monitored for conflicts of interest in the current environment.

Specifically, OpsCheck can memorialize compliance procedures to give heightened attention to actions by the firm and staff that may involve asset transfers into products and services that the firm has a direct involvement in soliciting or borrowing or taking loans from investors.

Firms may be seeking to recover certain losses through higher fees such as termination of accounts or upcharges on investment transfers. Notification and transparency rules for these fees and any changes should be stringently applied to maintain the firm’s integrity and reputation as well as compliance with SEC regulations.

Keep an Electronic Paper-Trail

Maintaining an electronic paper-trail through OpsCheck to demonstrate regulatory compliance will protect the firm against accusations of wrong-doing. To protect against such legal risks, firms should review the accuracy of disclosures, valuation procedures, and fee calculations.

Again, with increased market volatility, unusual client transfer activity, and potential firm capitalization needs, firms should take the extra step of reviewing that all moves are in the best interest of their clients and updating their procedures to reflect this attention.

Looking to learn more about industry best practices? OpsCheck brings the best parts of innovative software to a centralized product focused on Financial Control.

Watch our founder Frank Caccio break down the latest product offering in his demo:

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Keeping Your Legal Process Transparent and Consistent

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Having a comprehensive legal framework at an asset management firm will ensure a consistent approach to documentation, transparency for auditors and investors, and reduce liability issues.

Today’s Investors are Savvy

Today’s investors have become much savvier in understanding the mechanics of asset management. They seek relationships that lean more toward partnerships than previously. They want confidence that the firm is accounting for more than just producing expected returns.

Investors also want to see a high level of regulatory and investor protection should adverse situations arise. In short, they want a firm to have its ducks in a row rather than be surprised when it doesn’t, at the worst possible moment.

Through due diligence, many investors now perform a rigorous review of the firm’s operational and compliance procedures before committing major capital. A simple request for the table of contents to the compliance manual allows them to verify comprehensiveness. Some can – and will – take it a step further and want to see the specifics of valuation procedures, or how the process is distributed throughout the firm.

Controlling Operational Risk

Risk control has become a center of focus more than ever. An investor will want to see policies and the processes for executing them. They might even ask for suitable examples of processes for more clarity.

Additionally, investors seek demonstrable verification that everyone involved in the management of their funds understands these procedures, usually in the form of binding legal agreements from employees that they have read and understood compliance requirements.

As investors have become more educated on the investment process, they have also become more aware of the legal issues surrounding it. They arrive knowing SEC regulations and local jurisdiction laws and want assurances that they are being met.

The best way to respond to these requests within the scope of the client relationship is to be prepared to answer them as fully and demonstrably as an audit review.

Benefits of a Mock Audit

Instituting a regular, calendared mock audit will benefit the firm in several ways:

Staff will understand the gravity of the issues and senior management’s interest and support;
Faults and errors can be caught and corrected in a non-critical situation;
Lack of process can be exposed and implemented, and weak processes can be strengthened.

For more objectivity, contracting with a third-party to perform these mock audits can increase confidence that nothing is overlooked. An additional benefit of performing such a serious review is that at some point an actual regulatory exam will take place.

The governing body will perform its review and respond with a “deficiency letter” if it finds flaws, which can be minor or major, with a directive to correct the issue(s) within a certain time frame. These deficiency letters or the situations that produced them may be requested by potential investors as a means of gauging management’s ability and success with correcting errors.

Consistency Counts

Lastly, be consistent in all procedures and materials, internal and external, when building a legal framework and documentation. For instance, sales and marketing materials must match what is said in offering memoranda. Risk control systems must actually perform in accordance with the stated processes for compliance.

Inconsistent, vague, and even contradictory documentation will send up red flags with auditors and investors that the firm’s legal regime is not as stringent as it should be. In a competitive investment environment, an asset management firm should always avoid any matters that will cause a potential investor to invest elsewhere.

Workflow and Task Management Software Will Help

Organizations that harness the most up-to-date, SAAS based technology have several superior advantages. Task management and workflow software offers benefits for most businesses but unlike eCommerce, construction or healthcare, etc., the finance industry has its own unique set of challenges.

OpsCheck is an Operations/Compliance Control and Oversight application, specifically created by finance professionals for the finance industry. Our system mitigates operational risk, enhances communication, offers full transparency, and keeps everyone accountable.

OpsCheck promotes a culture of Operational Excellence!

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Conflicts of Interest in Asset Management

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Conflicts of interest can destroy trust in an asset management firm quickly. Investor’s interests should always come first, and even the appearance of a conflict of interest on the manager’s part can raise concerns about transparency and trust.

Establish Separation

As part of a compliance program, asset managers establish strict walls of separation between the investment team and operational teams. In doing so, investment decisions are made based on the strategy in place by the portfolio manager and confirmed by the risk control team. Issues such as pricing, reconciliations, and NAV calculations rightly belong outside the investment side.

In situations where illiquidity or opacity make valuations difficult, the best course of action is to use a third-party to determine an objective valuation. If third-party valuations are necessary, asset managers should use them to build trust with clients by disclosing their uses and the reasons why.

The areas of conflicted interest are spread more broadly in today’s industry. Most investment managers utilize third-party vendor service for everything from human resources and investment modules, to valuation and pricing. These relationships should naturally be strong, but they should never cross the line into conflicts of interest.

For instance, an executing broker who has a relationship of some kind with a trader that goes beyond the workplace can raise questions of trust. If such a situation is unavoidable from an appearance point of few, managers should periodically solicit other bids to confirm the relationship is not influencing decisions.

Examine (Business) Relationships

These types of relationships, in actuality and perception, should always be on the radar of asset managers. The staff themselves should also be legally required to disclose them to the firm for review. An arms-length agreement should be examined for potential issues, especially in areas where decision-makers can potentially benefit financially from a relationship or if the service provider is dealing in its own self-interest. As an added investor benefit, managers should routinely disclose how they handle conflicts of interest which increases trust between firm and client.

Conflict of interest can create a minefield of trouble when it exists. Whenever a new relationship is introduced into an investment process, review of all aspects of that relationship should be routinely performed. By consistently communicating the importance of disclosing these relationships and practicing by example, senior management achieve higher success through reputation, trust, and confidence for their staff and their clients.

How Can Technology Help?

Our Operations/Compliance Control and Oversight application will mitigate Operational Risk, enhance communication, give full transparency, and make everyone accountable. This solution brings proven advances in task, project and workflow management software to you in a single tool.

No more spreadsheets, emails and Outlook will be needed for managing business operations. It’s easy to get started, easy to operate and is cost effective. Internal and external stakeholders appreciate its value because OpsCheck promotes a culture of Operational Excellence!

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How to Build an Effective Compliance Program?

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From small boutiques to global giants, all financial management firms utilize third-party services to perform vital functions. Be it data providers like Bloomberg or risk control modules from lone independents, these outside vendors have become a seamless part of daily asset management. A risk exposure, of course, can occur if that third-party service becomes compromised.

Despite all the strong governance policies or technological security measures a firm can have in place, it can still remain vulnerable to business disruption or malicious hacking through no fault of its own. A firm’s security and compliance are only as strong as its weakest link, and a third-party vendor is that link.

More Regulation Demands Better Compliance

In today’s financial management world, asset management firms have more eyes on them than ever. Laws and regulations worldwide demand not only compliance, but a dedicated program to ensure that compliance takes place.

Fund domicile drives the type and level of documentation and structure. For the US, whether onshore or offshore, a typical framework will include the offering memorandum, governance documents that incorporate operating agreements, the memorandum and articles of association, and the subscription agreement.

The compliance program should, of course, have the framework for how the firm will perform, its standards for performance, and its means for review. It should be codified in a manual that outlines the firm’s code of ethics and its related polices, including the approach to valuation, trade errors, personal trading, allocation, soft dollars, and best execution guidance.

Investor due diligence will keep a firm on its toes, so a firm’s employees should understand their programs intimately. Before investing, an investor will seek clarity and assurances on such matters as liquidity rights, liability and indemnification effects, and conflicts of interest. Everyone involved in the fund’s management should be able to answer these types of questions.

Develop the Best Compliance Program

Perhaps the best way to develop a compliance program is to always operate as if an audit must pass the requirements of the Advisor’s Act and SEC requirements, even if the firm is not registered with the SEC as a registered investment advisor (RIA).

This approach will accomplish two things:

Meet investor expectations for a high level of legal compliance.
Have mechanisms in place should the firm need to register as an RIA in the future.

In other words, be forward-thinking on growth and scalability.

A compliance program can only be successful within the firm through leadership of senior management. As a component of inspiring trust and integrity in the workplace, leadership should set the example on the importance of adherence to the program.

The compliance manual should always be available to staff, and leadership should actively confirm periodically – through signed certification – that the staff has received, read, and understood the process. A regular review of actions within the firm to determine if the compliance program is being adhered to will also send a signal to staff that high standards should always be met and motivate them to practice adherence to strict standards.

By initiating the highest possible standards for compliance at the outset, firms can establish significant reputational value in the investor market as well as with governing authorities. Having a clear path of operation and execution in written form increases transparency, inspires trust across all interested parties, and reduce liability issues in the future.

How a Workflow Management Tool Can Help

A compliance control, operations, and oversight application will mitigate operational risk. At the same time, your firm gets improved communication, full transparency, and everyone becomes accountable.

Proven advances in task, project and workflow management software are available to you in a single tool. No more spreadsheets, emails or Outlook are needed for managing business operations.

OpsCheck is easy to implement, easy to operate and cost effective. Many reputable firms have already subscribed. Internal and external stakeholders will appreciate its value. OpsCheck promotes a culture of Operational Excellence!

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Third-Party Security for Financial Management

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From small boutiques to global giants, all financial management firms utilize third-party services to perform vital functions. Be it data providers like Bloomberg or risk control modules from lone independents, outside vendors have become a seamless part of daily asset management.

The reality is exposure to risk exposure should that third-party service become compromised. A firm may have strong governance policies or technological security measures in place. Still, it can remain vulnerable to business disruption or malicious hacking through no fault of its own. An organization’s security and compliance are only as strong as its weakest link, and a third-party vendor is that link.

Treat Third-Party Services as a Critical Performance Issue

The rationale for third-party services is logical from a cost perspective. Building out proprietary systems for every aspect of a firm’s functioning does not make economic sense, particularly for smaller organizations.

Third-party services can reduce staff overhead and infrastructure costs. Where the downside comes in is a lack of control over key aspects of compliance and security. This is why every third-party service decision must include not just short-term costs, but the potential costs of long-term risk.

Obviously, crucial data like stock pricing and indices can only come from outside the firm. Organizations depend on the integrity of these types of services – as do regulators – to such an extent that these sources inherently must have rigorous and transparent security practices.

Companies should not simply assume this to be true. Every third-party service must be vetted as part of the firm’s governance policy. Any introduction of outside data and systems is a risk that has to be examined.

Prioritize due diligence obligations and requirements

In today’s regulatory environment, due diligence is a necessity when hiring a third-party. As more and more laws and regulations are being put in place across the globe, firms are being held responsible for third-party service compliance.

When deciding on whether to acquire outside services, companies need to know their legal obligations for control and oversight requirements in the jurisdictions in which they operate. Also, firms must also understand the global and local requirements for the third-party service in question before proceeding.

Once these services are acquired, continual reviews and audits should be an obligation for ongoing due diligence as rules and regulations do change over time. Business continuity and disaster recovery plans are a top priority for third-party service reviews.

The Cost of Business Disruption

Financial management is now a 24/7 industry and even a short business disruption can have severe ramifications. Large third-party entities that provide global services have more business continuity assurances than smaller firms. In the event of disruption, a large firm could – or should – be able to shift operations to another location with ease.

Smaller vendors that produce crucial data management tools can be constrained by geography and their own internal systems. For these vendors, a comprehensive business continuity process must be in place, as secure as the initial operations, and transparent to the firms using them. Asset management firms need to know these plans and whether they rise to their internal standards.

Acquiring and Reviewing Outside Service Providers

Hiring outside service providers should have a stringent methodology to comply with regulation changes, internal governance and risk control polices. System updates, transparency, and auditing of services should be prominent in developing and maintaining a relationship.

Virtually every aspect of an organization’s management has the opportunity for the use of third-party services and all should be subject to the same review process. To develop a solid understanding of the use of these services, all services should be known and grouped into a comprehensive single source of information.

Since these services are invoiced for payment on a regular basis, a good place to delegate the maintenance of this responsibility is the accounting department. A best practice approach could resemble the following:

Develop a complete list of all third-party vendors
Categorize by business unit and the level of risk for each service
Assign a regular due diligence review process appropriate to the service
Keep in mind company growth and scalability of the process
Be cognizant of business continuity and disaster recovery in each case
Apply policies for information technology security and regulatory compliance to vendors
Review costs and flexibility for the service on a regular basis.

Third-party service analysis should include as many touch points as possible. Consider any introduction of an outside service as a third-party vendor such as custodians and central control points (CCPs), even the SWIFT network. Always seek out verification sources independent of the third-party vendor for reputational and current status of industry standards.

The Firm and Its Vendors are One and the Same

At the end of the day, a firm should hold third-party vendor services to the same policies that it would use if executing the service itself. From a regulatory point of view, review boards and governments are demanding this of firms anyway, holding companies jointly responsible for failures.

By developing a wide-ranged due diligence and compliance system for third-party services, asset management firms can raise their reputational credit and build higher trust with clients and regulators alike.