The Chief Compliance Officer (CCO) of a company is the officer primarily responsible for overseeing and managing compliance issues within an organization. Generally, a CCO is in charge of overseeing and managing compliance issues within an organization, ensuring, for example, that a company is complying with regulatory requirements, and that the company and its employees are complying with internal policies and procedures. The CCO typically reports to the Chief Executive Officer. The role has long existed at companies that operate in heavily regulated industries such as financial services and healthcare. For other companies, the rash of recent accounting scandals, the Sarbanes-Oxley Act, and the recommendations of the U.S. Federal Sentencing Guidelines have led to additional CCO appointments. Scott Cohen, editor and publisher of Compliance Week, dates the proliferation of CCOs to a 2002 speech by SEC commissioner Cynthia Glassman, in which she called on companies to designate a "corporate responsibility officer. The responsibilities of the position often include leading enterprise compliance efforts, designing and implementing internal controls, policies and procedures to assure compliance with applicable local, state and federal laws and regulations and third party guidelines; managing audits and investigations into regulatory and compliance issues; and responding to requests for information from regulatory bodies.

A variety of complex factors created the conditions and culture in which a series of large corporate frauds occurred between 2000-2002. The spectacular, highly-publicized frauds at Enron, WorldCom, and Tyco exposed significant problems with conflicts of interest and incentive compensation practices. These frauds and others resulted in over U.S. $500 billion in market value declines. The analysis of their complex and contentious root causes contributed to the passage of SOX in 2002. Specific contributing factors and events included:
• Boardroom failures: Boards of Directors, specifically Audit Committees, are charged with establishing oversight mechanisms for financial reporting in U.S. corporations on the behalf of investors. These scandals identified Board members who either did not exercise their responsibilities or did not have the expertise to understand the complexities of the businesses. In many cases, Audit Committee members were not truly independent of management.
• Auditor conflicts of interest: Prior to SOX, auditing firms, the primary financial "watchdogs" for investors, also performed significant non-audit or consulting work for the companies they audited. Many of these consulting agreements were far more lucrative than the auditing engagement. This presented at least the appearance of a conflict of interest. For example, challenging the company's accounting approach might damage a client relationship, conceivably placing a significant consulting arrangement at risk.
• Securities industry conflicts of interest: The roles of securities analysts, who make buy and sell recommendations on company stocks and bonds, and investment bankers, who help provide companies loans or handle mergers and acquisitions, provide opportunities for conflicts. Similar to the auditor conflict, issuing a buy or sell recommendation on a stock while providing lucrative investment banking services creates at least the appearance of a conflict of interest.
• Banking practices: Lending to a firm sends signals to investors regarding the firm's risk. For example, several major banks provided large loans to Enron without understanding the risks of the company. Investors of these banks and their clients were hurt by such bad loans, resulting in large settlement payments by the banks.
• Internet bubble: Investors had been stung in 2000 by the sharp declines in the technology stocks and to a lesser extent, by declines in the overall market. Certain mutual fund managers were alleged to have advocated the purchasing of particular technology stocks, while quietly selling them. The losses sustained also helped create a general anger among investors.
• Executive compensation: Stock option and bonus practices, combined with volatility in stock prices for even small earnings "misses," resulted in pressures to manage earnings. Stock options were not treated as compensation expense by companies, encouraging this form of compensation. With a large stock-based bonus at risk, managers were pressured to meet their targets. 
 

Please read our Terms of use, Legal disclaimer and Privacy notice. Usage of this platform is contingent to the full acceptance of the terms of use, the disclaimer and the privacy notice without restrictions or reserves.

 

 

This section is compulsory in order to gain access to the Specific Bespoke Platform designed for this profession. To request a client account please contact us by email at the following address: Info@LyscaleRiskgrade.co.uk by quoting the following reference in the Subject title of your email: ComplianceOfficers PremiumZone2007 and include your names, address, telephone number and your preferred communication means (email or telephone). We endeavour to respond to your query within two working days.