Introduction: Why Broker-Dealer Compliance?

Abstract

This is the first chapter of a book published by Edward Elgar entitled Broker-Dealer Compliance: A Case-based Guide to Compliance Program Elements and Practices (2023) and is made publicly available by the publisher, https://www.e-elgar.com/shop/usd/broker-dealer-compliance-9781800889583.html. This chapter both provides a background to broker-dealer compliance and introduces several important issues that later chapters develop. It first presents a brief history of the origins of broker-dealer compliance, explaining how it emerged from the legal department into a stand-alone function. It next discusses the organizational structure of the compliance function in a broker-dealer. It suggests different ways that compliance officers may work within a firm and emphasizes the position and role of the CCO who oversees the operation of the compliance program. It then introduces the special relationship between compliance officers and regulators, who consider the officers their representatives in their firms, and the problems posed by this relationship, particularly compliance officer liability — an issue to which the book returns in other chapters. It concludes with an initial look at the future of compliance in broker-dealers where it identifies current pressures on compliance, such as its use of technology, that may transform compliance practice.

Keywords: broker-dealer, compliance, investment firms

JEL Classification: K22