On October 24, 2005, the U.S. Institute hosted a panel discussion for Chief Financial Officers (CFOs) and Chief Operating Officers (COOs) of large investment companies and advisers on outsourcing compliance functions.
The session included WSS Treasury and Compliance Director, Michael Leary on the panel. Below are excerpts from Leary's comments.
JPMorgan performs a variety of services for the mutual funds industry including: custody, securities lending, accounting, treasury, compliance, blue sky, tax and financial reporting.
Outsourcing compliance functions has become common because smaller companies may not have the resources required to perform the functions and larger institutional companies need technical expertise, mainly in systems technology.
Outsourced functions generally include high risk areas that require significant system capabilities or high cost compliance services.
Investment companies and advisers seem to have concentration of risk surrounding back office and portfolio management functions, such as money laundering, code of ethics and distribution of portfolio information.
To arrive at an outsourcing decision companies need to do a cost benefit analysis and determine if they have the expertise and systems in-house to perform these functions. The goal is to create a comprehensive plan that can stand up to regulatory scrutiny.
Systems that provide data for analysis and consulting services that assist CCOs in performing their jobs better will continue to grow over the next few years. However, I do not feel that outsourcing of the CCO function itself will grow.
Identifying issues with a compliance program is only one part of the program - how you correct it is equally important.
For additional information on outsourcing of compliance functions contact Michael Leary at 617-557-8753.
