Compliance officer
Also called chief compliance officer, head of compliance, SMF16
A compliance officer is the person responsible for making sure a regulated firm follows the laws and rules that apply to it. The role advises the business, sets policies, monitors conduct and reports breaches to senior management and regulators. In the UK, the senior compliance role is a named regulatory function, SMF16.
How it works
The compliance officer runs the second line of defence. Day to day this means interpreting new rules, approving financial promotions, training staff, running the monitoring plan and handling regulator contact. Compliance must be independent of the business it oversees, with direct access to the board. In smaller firms one person may also act as MLRO, the officer responsible for anti-money laundering.
The role carries personal regulatory accountability. Under the UK Senior Managers and Certification Regime, the SMF16 holder answers for oversight of compliance with FCA rules, and the SMF17 holder for anti-money laundering. In the US, investment advisers must name a chief compliance officer, and broker-dealer chief executives certify compliance processes each year. Regulators can fine or ban individuals.
The rules
The person overseeing the compliance function must be approved by the FCA as a senior manager and is accountable for that oversight.
Banks, building societies and PRA investment firms from 2016; FCA solo-regulated firms from 9 December 2019Where appropriate, firms must appoint a board-level officer responsible for compliance with the regulations and a nominated officer to receive suspicious activity disclosures.
Relevant persons under the Money Laundering RegulationsFirms must appoint a compliance officer responsible for an independent compliance function with the authority, resources and expertise it needs.
Investment firms and banks providing investment servicesAdvisers must designate a chief compliance officer to administer written compliance policies and procedures.
SEC-registered investment advisersCommon questions
What is SMF16?
SMF16 is the Compliance Oversight senior management function under the UK Senior Managers and Certification Regime. The holder is responsible for overseeing the firm's compliance function and must be approved by the regulator before taking the role.
Is the compliance officer the same as the MLRO?
Not always. The MLRO, or SMF17 in the UK, is responsible for anti-money laundering systems and suspicious activity reporting. The compliance officer covers wider conduct and regulatory rules. Smaller firms often combine both roles in one person.
Who does a compliance officer report to?
Compliance officers usually report to the chief executive or a board committee, with direct access to the board and audit or risk committee. Rules require the function to be independent of the business areas it monitors.
Can a compliance officer be personally fined?
Yes. Regulators can sanction individuals who fail in their duties. In the UK, senior managers including SMF16 and SMF17 holders can be fined or banned if they did not take reasonable steps to prevent breaches in their areas.
Our coverage
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