Volcker could lead to boom in compliance hiring, says recruiter

January 6, 2014

By Emmanuel Olaoye, Compliance Complete

WASHINGTON/NEW YORK, Jan. 6 (Thomson Reuters Accelus) – The adoption of the Volcker rule by five U.S. regulatory agencies last week means that thousands of lawyers and compliance professionals will be working overtime to understand how to comply with the rule while keeping within the spirit of the law.

The Volcker rule, part of the 2010 Dodd-Frank Act, aims to stop banks from betting on their own capital or making investments in hedge funds and private equity funds. To comply, banks must report certain trading metrics that prove that they are involved in market making or hedging, and not making proprietary bets. 

But the rule also states that chief executive officers must attest that their firm’s compliance program is reasonably designed to comply with the rule.

Forcing CEOs to give assurances about the compliance program could mean “a huge boost to hiring in compliance,” said Jack Kelly, managing director and co-founder of New-York based Compliance Search Group, an executive search group for the compliance and legal industry.

The threat of personal liability creates an incentive for CEOs to ensure that their firm is complying with the Volcker rule, “huge huge boost to hiring in compliance,” Kelly said.

“I’ve got to believe that moving forward that CEOs have a big self-interest that the money is [in compliance] and the people are there. There’s probably going to be more money allocated to hiring in the compliance and regulatory audit space,” he said.

Kelly cited the mass recruiting by Wall Street firms when New York’s attorney general and U.S regulators negotiated a global research settlement with investment banks in the early 2000s. The settlement resolved allegations that securities analysts at some major banks used their research to hype dot-com stocks instead of providing independent research to their clients.

In the run up to the settlement, Spitzer investigated the role of former Citigroup CEO Sanford Weill in the firm’s conflicts of interest failures. The move sparked a hiring frenzy for compliance staff in Wall Street, Kelly said.

“It was probably the hottest time ever for compliance people,” he said.

Volcker-rule compliance demands have already led to a restructuring of the industry as banks spin off proprietary trading desks and make other changes. But there would still be a strong demand for compliance, audit, and legal staff, Kelly said. “Whichever scenario they go there will still be a lot of need,” he said.

The Securities Industry Financial Markets Association, the main trade lobby for the financial industry, said many of its members had already taken some steps to prepare for the Volcker rule before it was adopted. However it said its members are still assessing the implications of the final rule.

The Volcker rule comes into force on July 21, 2015, but banks with more than $50 billion in assets must begin reporting data on their trading metrics starting June 30, 2014. They must report data about their risk and position limits, inventory turnover, and profit and loss allocation. .

Mark Whiteman, co-founder of compliance technology firm Citicom Solutions, said Volcker would force firms to implement tools to match the data reporting requirements in the Volcker rule.

“Financial institutions need to change how they view data in light of these regulations,” he said.

“To do this, they will need advanced technological systems in place that turns otherwise dormant data into a valuable asset. Implementing the right technology will allow compliance departments to not just effectively meet compliance requirements but also to improve operational efficiency.”

(This article was produced by the Compliance Complete service of Thomson Reuters Accelus. Compliance Complete provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 400 regulators and exchanges. Follow Accelus compliance news on Twitter: @GRC_Accelus)

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