Compliance professionals have three main duties: 1) ensuring that their firm’s actions match its stated operational business practices; 2) ensuring that their firm complies with applicable laws, and; 3) ensuring that their firm acts in its investors’ best interests.
Hedge fund compliance professionals perform a variety of duties. Those that are employed by a recently launched hedge fund must create a compliance and business practices framework that includes a written code of ethics that governs the actions of the firm’s employees, and a written compliance manual that codifies the rules and regulations governing the firm’s operations and potential conflicts of interest that may occur during business operations. They also establishing a conflicts committee to review and address potential conflicts of interest, and review all marketing, public relations, and sales materials for compliance with Securities & Exchange Commission and Financial Industry Regulatory Authority rules (this remains an ongoing responsibility throughout the life of a hedge fund).
Once their firm is up and running, compliance officers engage in compliance monitoring and testing, including of the firm’s trading activities; ensure that all regulatory filings are made in a timely basis; prepare for and respond to inquiries and audits from regulatory authorities; use reporting, compliance program management, portfolio monitoring, electronic communication archiving and review, and other software technologies to collect information for regulatory filings and firm records; conduct periodic audits of compliance policies and procedures to identify areas of vulnerability; and provide compliance guidance regarding new fund development initiatives.
Once a year, compliance officers conduct an annual review of their firm’s compliance framework to assess its effectiveness, and remedying any issues that arise.
Throughout the year, compliance officers conduct regular training to keep employees up to date on compliance issues. They stay abreast of new regulatory developments and best practices by attending conferences and reading industry journals.