Chase Moves Compliance Out of the GC's Office
As JPMorgan Chase & Co. tries to straighten its wobbly ship through internal staff changes, it has opted to hire a new global head of compliance and have her report to top executives rather than to the general counsel.
Federal regulators, as well as officials who wrote the U.S. sentencing guidelines, clearly prefer a compliance officer independent of the general counsels office. So it is no coincidence that Chase made the switch while it is still under federal scrutiny for its various missteps.
Chase spokesman Mark Kornblau told CorpCounsel.com on Thursday that the compliance function is a critical component of how we manage risk across our firm.
He continued, While it remains closely tied to legal, given their complementary missions, we feel it makes most sense to place compliance and oversight and control under the same umbrella. This structure is consistent with the reporting within our lines of business, and we believe it is also consistent with regulatory expectations.
The company named Cynthia Armine, formerly a compliance chief at Citigroup Inc., to the new post in January. She replaced Martha Gallo, who had held the CCO job for two years.
Armine reports to the Chases co-chief operating officers rather than to general counsel Stephen Cutler. Gallo had reported to Cutler.
Gallo faced a bevy of compliance issues, ranging from the infamous London Whale trade debacle to enforcement actions over its anti-money laundering controls. She remains employed at the bank.
The compliance problems and their multibillion-dollar fallout were well documented earlier this year in Chases report of a review committee of the board, report of a management task force, in its January 8-K filing with the Securities and Exchange Commission, as well as its 10-K annual filing with the SEC.
CorpCounsel.com columnist Donna Boehme hailed the reporting switch in her article JPMorgan Chase Takes a Giant Step on CCO Independence shortly after the announcement.
And this website has carried a robust debate in recent months about the pros and cons of having compliance officers be accountable to the general counsel, including: Making the CCO an Independent Voice in the C-Suite and The CCO as an Independent Voice: Another View.
Tod Reichert, general counsel and chief compliance officer at MCG Capital Corporation in Arlington, Virginia, has tried it both ways.
The spirit of the sentencing guidelines is to have an autonomous compliance function with as little conflict within the organization as possible, Reichert told CorpCounsel.com.
He noted that some smaller companies have economic restraints that force them to combine the roles of GC and CCO.
But his personal preference? My personal opinion is that all things being equal, it would be great to have the segregation of those duties in every organization. The compliance role requires an incredible amount of time, energy, and effort, and would benefit from a dedicated person in that job.
Chases changes come none too soon. On Thursday SEC Commissioner Luis Aguilar stressed renewed federal enforcement efforts in a speech to the Regulatory Compliance Association.
The SEC efforts are on multiple fronts, Aguilar said. One such effort has resulted in enhanced coordination between the SECs division of risk, strategy, and financial innovation to provide support and data analytics to various segments of the SEC, including the enforcement division.
The commissioner concluded, In the end, its important to do whats right according to the letter of the law, but its better to think in terms of doing whats right because it is in the best interest of the clientand that is the real foundation of a culture of compliance.