The Role of the Chief Compliance Officer

Chief Compliance Officer

In accordance with Section 11.3 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103), every registrant must designate a Chief Compliance Officer (CCO) to perform the responsibilities set out in Section 5.2 of NI 31-103. The primary responsibility of the CCO is to monitor and assess compliance by the firm, and individuals acting on its behalf, with Nova Scotia securities laws. A registrant's CCO must meet the proficiency requirements set out in Part 3 of NI 31-103.

The CCO is responsible for promoting compliance at the firm. This means establishing effective supervision and control of the firm’s activities to ensure it complies with applicable laws and regulations. The CCO must ensure the firm's supervisory structure and overall compliance program is adequate to achieve this result.

To have an effective compliance program, the CCO must have the appropriate authority and support from the board of directors and a clear scope of duties identified. Comprehensive compliance procedures must be implemented, enforced and easy to understand. It is essential that permissible conduct for the firm's staff is set out and that personnel receive ongoing education regarding compliance procedures.

The CCO must oversee the basic components of supervision. These include, but are not limited to:

  • review and approval of new client accounts - ensure that the know-your-client (KYC) information is complete and that the recommendations are suitable for the client's investment circumstances and/or meet the client's investment objectives, for example, as set out in an investment policy statement
  • daily trade review for errors, proper settlement, unusual trading activity, and compliance with clients' investment mandates
  • staff training programs to keep employees aware of changes to the firm's operations and changes to securities legislation
  • monitoring the firm's marketing activities, such as electronic and print advertising and monitoring the sales practices of the firm's representatives
  • personal trading policies - to prevent front running and conflicts of interests and ensure that the clients come ahead of any staff trades
  • relationship disclosure requirements for compliance with section 14.2 of NI 31-103
  • reviewing, responding, and investigating client complaints within a reasonable period

It is essential that an annual review of the compliance program is conducted to ensure effectiveness and that procedures are up to date with any changing securities legislation. The review should include, but not be limited to:

  • reviewing and updating the policies and procedures manual (PPM) - the PPM should be updated as needed as well as reviewed annually
  • educating and training personnel about compliance procedures
  • reviewing with personnel any key procedures and controls
  • reviewing and updating, for compliance and effectiveness, of all contracts and forms, such as the KYC forms for clients
  • ensuring point-of-sale and other disclosures, such as for conflicts of interest and leverage, are updated and provided to all clients
  • ensuring adequate suitability monitoring of security holdings in client accounts (both for KYC and know-your-product)
  • monitoring risk management practices
  • testing and updating the firm's disaster recovery and business continuity plan

If the CCO discovers violations of the firm's policies and procedures, the CCO must respond promptly to the violation and conduct a thorough investigation of the activities to determine the scope of the wrongdoing. In some cases, this may result in placing limitations on employees and increasing supervision. Certain findings may also result in the CCO contacting the NSSC and other authorities.