Conflicts of Interests You Avoid By Hiring Staff through Compliance Recruiting Services

You, of course, cannot run a successful securities firm without a competent compliance officer. There are, after all, so many regulations you should comply with, and keeping up might be a challenge. Most people will opt for standard recruiting agencies rather than firms exclusively offering compliance recruiting services to find the best candidates for their opening. This, in most cases, only leaves you with a compliance officer with a conflict of interest. The following are the common forms of conflict of interest in which a rogue compliance officer might be engaged.

Compensation-Related Issues

Your clients' interests might, at times, take a back seat to the financial incentives a compliance officer stands to gain. The officer might, for instance, aggressively push certain investments without due diligence on their profits. Compensation-related conflict also includes the placement of investments in accounts with relatively higher fees than the services provided.

Portfolio Management Conflicts

Some rogue compliance officers might prefer a client over another when dealing with multiple accounts because of personal relationships or financial incentives. They might also engage in activities with risks beyond the stated objectives or tolerance levels of a portfolio. Over concentration in a single sector or issuer and mismatching fund liquidity to the fund redemption expectation are also forms of portfolio management conflicts.

Valuation Issues

Some of the compliance officers hired through firms other than those dedicated to compliance recruiting services inflate commodity valuations. This is in a bid to charge higher fees and attract investors. Valuation conflicts also include the provision of high pricing marks for relatively illiquid positions.

The above and other forms of conflicts of interest are the most commonly handled by compliance commissions. You cannot risk incurring hefty fines and losing investors' confidence by hiring a compliance officer that opens your firm to the same. Opting for firms well-versed in compliance recruiting services is the best way to protect your firm from conflicts of interest among your staff.