Three words keep cropping up in the financial reform package passed by the Senate on May 20: Chief Compliance Officer.

Since 2004, when the SEC amended the Investment Advisers Act of 1940, each investment adviser registered with the Commission must designate a CCO to be responsible for administering policies and procedures. In the case of an investment company, the chief compliance officer reports directly to the fund board.

In an April report in Corporate Compliance Insights, an online news source, author Chris DePippo, a compliance and risk management expert, noted that in heavily regulated industries such as financial services, “the Chief Compliance Officer may be the most important figure aside from the CEO.”

The CCO “will collaborate closely with the business to recommend new [risk] mitigation strategies,” he said. Among them, he added, could be new or enhanced controls that include review and authorization protocols, policies, procedures and standards, reengineered workflow, employee training, management training, and system controls.

When it comes to the CCO’s impact on a hedge fund adviser’s systems and technology, Ron Suber, senior partner and head of global sales and marketing at Merlin Securities, says it is considerable: “The CCO is going to be integral to a fund’s ability to articulate its edge, its compliance, its risk and much more than alpha, going forward,” he says. “The need to aggregate your assets at all your custodians for your flagship fund and all your managed accounts and then to articulate full compliance with your policies to the CCO will require no more spreadsheets.”

Despite the difficulties they face, Suber foresees a large increase in the demand for these newly-empowered executives. “The CCO is a dramatically growing business,” he says. “Recruiters are scrambling to line up a deep supply of qualified candidates.”

This story is available in full at information-management.com.