The compliance department of a brokerage firm works to ensure that all of the employees and officers in the firm comply with Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) rules. Working as part of a compliance team is a challenging position that entails a great deal of responsibility. If working to keep a brokerage firm in good standing sounds interesting to you, read on to learn more about what the job entails and what qualifications you'll need to enter this field.
What Is Compliance?
Before drilling down into how to become a compliance officer or a member of a compliance team, it is important to first understand what that job entails. To be clear, the duties of compliance personnel vary by firm and job description; however, the following are tasks that are typically accomplished by compliance departments:
- Ensuring that the company adheres to minimum net capital rules
- Making certain that employees are following internal compliance guidelines
- Fielding and addressing customer complaints
- Maintaining a dialogue with regulatory bodies such as FINRA and the SEC
- Reviewing sales activities and discretionary accounts and making certain that other principals within the firm are obeying securities laws
- Making sure that the firm is in compliance with state securities laws
- Ensuring that all employees are property registered and have taken continuing education classes as required
- Making sure that the company is in compliance with regard to all trading and market making rules
- Representing the firm or preparing documentation for arbitration cases that may be pending
In the 1980s, a four-year bachelor's degree was less frequently required to get work in a compliance department. In fact, a good number of people back then simply had high school diplomas, and even if they did graduate from college it often wasn't with a finance degree. At that time, the idea was that employees would learn on the job.
Since the 1980s, all of that has changed. A degree in finance, management, accounting, economics or law is a must if you would like to get hired at any one of the bulge bracket firms. Additionally, although a master's degree is not mandatory, a master's degree in finance, accounting or economics can help to set an individual apart from the countless other candidates that have bachelor's degrees. Finally, those with a law degree often have a leg up on the competition as they already have a feel for the way the law works, and this often makes them top candidates for many brokerage houses.
What About Securities Licenses?
A firm may require its compliance personnel to become licensed. It is common for firms to require their compliance personnel to sit for the Series 7 and Series 63 licenses. The curriculum for these licensing exams allows compliance officers to obtain a good foundation and understanding of the securities industry.
Other licenses that a firm may sponsor an individual (in compliance) for may include the Series 14, Series 26, Series 27 and Series 39. Why? These exams require an understanding of net capital rules, Municipal Securities Rulemaking Board (MSRB) rules, rules for maintaining customer accounts, sales (and other) supervisory roles and record keeping.
Compliance teams will occasionally hire those who have worked in other fields or aspects of the industry, such as (brokerage) sales and trading. However, a large number of those who work their way up the compliance ranks seem to have extensive back office experience in trade settlement or operations. A fair amount also have a background in accounting or have worked for the major stock exchanges or FINRA as field auditors or examiners.
Beyond that, many companies will also look to see whether the candidate has had prior experience at a firm of similar size and stature. This experience ensures that the individual will be able to handle the often frantic pace of a typical compliance department. Also keep in mind that the duties of a compliance officer at a very large firm are often much more involved than those of a compliance officer at a smaller, regional firm.
Even if an individual meets all of the above requirements and looks good on paper, there are certain skill sets that he or she must also have in order to be successful in the field of compliance. For example:
- Individuals should be detail-oriented and have the ability to review and analyze large data sets in short order.
- Remember that compliance personnel are charged with making sure that the company adheres to all FINRA rules. To that end, not only must those who work in compliance be well versed in those rules, but they must also be able to decipher information (such as detailed trade activity) and be able to determine whether the individual and/or firm is in compliance.
- Compliance personnel must have intimate knowledge of other jobs and functions, such as sales and trading (and the rules associated with them).
The Bottom Line
All individuals in compliance should be beyond reproach. That is, in order to do this job correctly they must maintain a high level of integrity and serve as an example for other employees of the company. If you're a person for whom this is a priority, you might be a good fit for a career in compliance.