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C. Responsibilities of Supervisors.
#analyst-notes #code-of-ethics-and-standards-of-professional-conduct #iv.-duties-to-employers
Procedures for compliance

A supervisor complies with Standard IV (C) by identifying situations in which legal violations or violation of the Code and Standards are likely to occur, and establishing and enforcing compliance procedures to prevent such violations.

If a firm does not have a compliance system, or the system is not adequate, you should DECLINE in writing to accept supervisory responsibility until the firm adopts reasonable procedures.

Adequate compliance procedures should:

  • Be drafted so that the procedures are easy to understand.
  • Designate a compliance officer and clearly define the officer's authority and responsibility.
  • Outline the scope of the procedures.
  • Outline permissible conduct.
  • Delineate procedures for reporting violations and sanctions.

Once a compliance program is in place, a supervisor should:

  • Disseminate the contents of the program to appropriate personnel.
  • Periodically update procedures to ensure that the measures are adequate under the law.
  • Continually educate personnel regarding the compliance procedures.
  • Issue periodic reminders of the procedures to appropriate personnel.
  • Incorporate a professional conduct evaluation as part of the employee's performance reviews.
  • Review the actions of employees to ensure compliance and identify violators.
  • Take the necessary steps to enforce procedures once a violation has occurred.

Once a violation is discovered, a supervisor should take the following actions:

  • Respond promptly.
  • Conduct a thorough investigation of the activities to determine the scope of the wrong-doing.
  • Increase supervision or place appropriate limitations on the wrongdoer pending the outcome of the investigation.

If a supervisory member was unable to detect violations, he or she may not violate the standard if he or she takes steps to institute an effective compliance program AND adopts reasonable procedures to prevent and identify violations.
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