Compliance Department

Categories: Regulations, Tax

A compliance department is where the pod people from The Invasion of the Body Snatchers end up.

Those who enforce the rules of their industry work in compliance. There are compliance departments from the federal level down to the local level. Each level is occupied by people trained to enforce the rules at that level. They may not be able to dance, but uh...they know the rules.

Where compliance department drama gets juicy, there is usually fraud, bad risk-taking, or bad bureaucracy, such that people are allowed to perform tasks for which they are not qualified.

Example: a hedge fund bet big on Sears becoming a huge success. As part of their investment indenture, on any given bet, should it decline more than 25%, the fund would then be required to sell all of its holdings. That hedge fund must comply with their charter, and it is the job of the compliance department to track issues like the above, and be certain that the fund is, in fact, complying with what they said they would do.

To wit, Bernie Madoff (in theory) had a compliance department. Guess they missed some stuff…like, everything from 1992 to 2009.

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Finance: What is a Compliance Department...0 Views

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Finance allah shmoop what is a compliance department You know

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that karate or tai chee move where the guy has

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your wrist bent all the way back and he's looking

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at you like your dinner Yeah uncle Well in this

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case he's the compliance department and you're you know complying

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well the same holds true in corporate ranks There are

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myriad laws not just in the securities business that executives

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everywhere have to follow Or this happens Well compliance department's

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comprise lawyers who have like a thousand eight hundred ninety

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seven things they check to be sure that your complying

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with regulations so like you're a sales exact you sell

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routers mostly the banks So that's super expensive dinner on

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your expense account What was that for And what exactly

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could you have been doing Business related at magic marty's

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exotic dance club That company rules what happened That was

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on the cover of the wall street journal How do

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you feel then Yeah comply Don't go there next All

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right You're a mutual fund manager You're visiting up big

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telecom company and you're slowly getting rid of the coffee

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pete's house Blend the three cups of it that you

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had two hours earlier Well from the next stall you

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over here The ceo of the telecom company on his

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cellphone among other noises Talking to his banker about the

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twelve dollars a share premium he hopes to get when

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a t and t buys his company Can you quickly

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put in an order and buy shares No And in

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fact you have call your compliance department as soon as

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you're you know done and halt any trading your fund

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was doing in the stock as you now have very

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inside information Alright well complaints applies also to the way

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forms get filled out the way travel is paid for

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Any quote favor unquote over and above About ten bucks

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worth all that's Something that has to be run through

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the compliance department lawyers to be sure that your behavior

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is you know complying And the same happens for complex

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stock trades as well like you work in a hedge

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fund with a risk manager of the compliance department A

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little bit different Kind of complying there you're down eighteen

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percent on a trade you made just two weeks ago

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What do you d'oh Well guess what By charter of

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your hedge fund or the indenture on it or the

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contractual agreement you set up with your investors you have

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to sell Now even though you think it's a screaming

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by here down eighteen percent you clearly didn't know what

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you were doing when you bought the stock at one

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hundred bucks a share And now it's you know eighty

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two And so now you must comply with your bylaws

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and sell and take your losses Because complying is not

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an optional thing that you just picked the follow or

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not When you feel like it You know kind of

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like romantic relationships used to be before tinder was invented

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