Line of Defense Model: Impact on Compliance Programs

A thoughtful approach to risk management has been the expectation of financial services industry regulators, including the SEC, for quite some time. In 2014, the Office of the Comptroller of the Currency (“OCC”) adopted guidelines applicable to certain banks which established standards for a risk governance framework commonly referred to as the “lines of defense” model. The line of defense risk management model has been implemented by those banks and bank affiliates to which the OCC guidelines apply. It has also been viewed as a best practice and implemented by many other financial services firms, including traditional asset managers, insurance companies, and private fund managers.
 
Firms that have implemented or are contemplating implementation of the line of defense model typically have a number of questions related to the responsibilities of each of the three “lines,” the appropriateness of shifting of compliance responsibilities into the “business,” and the views and expectations of the SEC.      
 
Please join ACA, John Oliva, Global Head of Alternatives Compliance at J.P. Morgan Asset Management and Managing Director and Chief Compliance Officer of Highbridge Capital Management, LLC,Margaret Richardson,  Senior Vice President and Chief Operations Officer at PNC Investments, and Marty Breheny, Managing Director and Head of Internal Audit for Investments at Guggenheim Partners as we discuss the impact of the line of defense risk management model on compliance programs. 

Discussion topics will include:

• How OCC regulated and non-OCC regulated firms have structured risk management programs
• Roles of each of the three lines of defense, including compliance and internal audit
• Shifting responsibilities between compliance and the “business” (or first line)
• Perceived positive and negative impacts
• Potential conflicts with expectations under the SEC’s Compliance Program Rule
• Regulatory views on the implementation of line of defense risk management models