Advantages of Outsourced CCO Services for Small and Mid-sized Firms

Firms are required to maintain regulatory compliance and follow the requirements set by state law. A chief compliance officer is responsible for maintaining a firm’s compliance program, and some financial companies offer CCO services as an alternative to a full-time hire. Here are several advantages of outsourced CCO services for small- and mid-sized firms:

Provides Support Without Full-Time Hires

Choosing outsourced CCO services over a full-time hire can be beneficial for smaller firms, as it prevents the need to provide full-time benefits and salary. This allows the firm to conserve resources. Outsourcing the role provides immediate access to compliance teams with industry insight; these professionals can assist newer firms with establishing their programs. Outsourcing offers a scalable solution for smaller or new firms and helps support long-term growth for the firm.

Establishes Registration and Growth Policies

Outsourced CCOs provide leadership for firms, and they support the growth of the business’s compliance program. These professionals are able to assist smaller and mid-sized firms with policy development. They help make sure that the policies are tailored for the firm’s needs. Outsourced professionals can assist with the adoption of written procedures and draft the firm’s compliance manual.

CCOs also help the firm with the registration process. Firms that have $100 million or more in assets under management, or AUM, register with the Securities and Exchange Commission, while firms with lower AUM typically register with the state. Each has its own filing requirements; the CCO helps the firm navigate the overall process. Requirements for registering with the SEC can include forming and filing the required documents, including Form ADV.

Helps Reduce Common Compliance Risks

Growing firms face a variety of compliance risks. CCO services include day-to-day program management and supervision, helping identify and reduce risks and offer proactive solutions. These risks can include: 

• Inadequate procedures
• Insufficient disclosures
• Delays in registration status
• Insufficient supervision of third-party relationships

CCOs help prevent delays in filing or failure to update notices. They make yearly amendments to Form ADV Parts 1 and 2 and deliver the updated Part 2 within 120 days of the fiscal year ending. CCOs prepare state notice filings for the firm, and they file the amended Form ADV if there is a change to your business. They make sure the firm receives the correct representative certification.

Services also include monitoring insider trading policy, marketing material, and communications to prevent compliance issues. The CCO offers supervision for email communication, conducting random reviews. They approve outside activities, such as outside brokerage accounts and account statements. Advertising review and approval helps prevent potential issues, and the outsourced CCO makes sure to file with the FINRA Advertising Regulation.

Offers Examination Support

A CCO is able to provide exam support for FINRA, SEC, and state examinations. The outsourced CCO takes responsibility for communicating with the regulators before and during exams. They are able to help the team prepare for exams through book and record maintenance, and they address potential compliance gaps ahead of time through internal reviews.

Regulatory advisers who offer outsourced CCO services can perform an annual review that is customized to your business model; this includes going over procedures and policies to identify any gaps. The annual review focuses on areas based on the firm’s specific risk profile. They review items such as the compliance manual and conflicts of interest. Going over disclosure accuracy includes checking that client-facing information aligns with regulatory standards. Compliance professionals assess whether asset allocations match fair standards, and they check previous regulatory findings and corrective actions. They can also conduct personnel and exit interviews to identify operational issues and discuss recommendations. A final report provides action steps and specific results.

CCOs can also perform mock examinations that simulate regulatory audits, which allows the firm to prepare for what will happen during a real exam. This helps identify vulnerable areas. The CCO can provide guidance throughout the examination process; this includes assisting with initial requests and follow-up responses.

Learn More About Outsourced CCO Services

Outsourced services give small and mid-sized firms access to an experienced compliance team. These professionals can promote the firm’s growth while helping prevent compliance-related penalties and regulatory actions. Some regulatory consultants also offer outsourced FinOp services. To learn more about outsourced CCO services, contact a regulatory consultant company today.

Disclaimer

This article is provided for general informational and educational purposes only and does not constitute legal, regulatory, compliance, investment, accounting, or financial advice. Regulatory requirements for investment advisers, broker-dealers, registration, Form ADV filings, examinations, advertising, supervision, and compliance programs may vary based on a firm’s business model, assets under management, jurisdiction, registration status, and applicable federal or state rules. Firms should consult qualified legal counsel or experienced compliance professionals before making regulatory or compliance decisions.