This paper sets out to assess the role of the chief compliance officer (“CCO”), how the CCO performs his/her duties, and how the CCO interacts with the fund's board three years after the adoption of Rule 38a‐1 under the Investment Company Act of 1940.
Reviews the CCO's responsibilities under Rule 38a‐1, discusses how the CCO role has evolved since the rule was promulgated, and focuses on key issues such as oversight versus supervision, the annual review process, risk assessement, testing methodologies, and the annual report to the fund board on the adequacy and operation of the fund's compliance program.
Properly conducted compliance requires the support of a wide range of the advisory/administrative team with the CCO playing the role of conductor of the orchestra. More and more CCOs seek to distance themselves from approving the day‐to‐day actions of other employees, so they cannot be considered to have assumed supervisory responsibility for those employees. Although a fund is required to perform an annual review of the adequacy of its compliance programs and its Primary Service Providers' compliance programs, most CCOs have found the review process is ongoing and occurs continuously throughout the year. Now that these compliance programs have been in place for two years, more CCOs are devoting time and resources to identify high‐risk areas and to implement transactional, periodic, and forensic testing programs. The CCO annual report has taken many different shapes and sizes, but generally summarizes material changes to the fund's compliance policies and procedures that have already been reported to the board.
A current, practical assessment of the CCO role by expert lawyers who advise funds on their compliance programs.
