Home > Finance, Law > Should Compliance Report to the COO or the General Counsel?

Should Compliance Report to the COO or the General Counsel?

Tuesday, September 17th, 2013 Leave a comment Go to comments

J.P. Morgan Chase & Co. recently decided to shift its reporting lines so that the top compliance officer reports to the Chief Operating Officer instead of the company’s General Counsel. However, it remains to be seen whether this compliance shuffle is actually a good move.

The Wall Street Journal explains the dilemma as follows:

[H]aving the compliance department report to the COO can pose risks of its own. For one, the COO’s office at a company may not have the same in-depth knowledge of regulatory risks and legal issues as the general counsel’s office, said Jason Golub, managing director at K2 Intelligence. “If you’re reporting to someone who doesn’t understand the risks being raised, that’s a risk,” he said.

What’s more, reporting to the COO could raise the specter of a conflict of interest, since the COO typically oversees business operations, while compliance acts as a watchdog and may need to do independent investigations of those very business operations. Denis Spearman, associate partner at Danos Associates, a London-based compliance search firm, thinks savvy banks may move towards a model where compliance is spun off into an stand-alone unit that resembles an internal-audit function.

It will be interesting to see how other big firms address the issue of improving their internal controls in light of the increased legal and regulatory scrutiny facing financial institutions.

Source: WSJ

Hat Tip: ComplianceEX

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