Comey and Compliance

The firing of FBI Director has set off a firestorm. Obviously, there is a great deal of partisan tilt to the action. I wanted to focus on the lesson we can see from a compliance perspective. It is an example of the need for independence of compliance and investigations.

President Trump fired someone who was investigating him or his circle of supporters for violations. The Attorney General recused himself from probe into Russia and President Trump because he was potentially involved. But the Attorney General recommended firing the person leading the probe into Russia and President Trump.

Perhaps, Director Comey was issuing subpoenas and continuing an investigation that would have been adverse to President Trump. That would be a problem, a cover-up.

Perhaps, President Trump legitimately thought Director Comey was unfit for his job. It would not be the first time a President has fired the FBI Director. President (Bill) Clinton fired  FBI Director William Sessions for serious ethical lapses.

The problem is that it looks like a cover-up. Without independence, the motives for firing or disciplining an employee for investigating his boss is always going to look suspicious. If it looks like a cover-up, many people are going to assume there is a cover-up.

It’s better to structure a compliance program so that it has some independence operationally. For a firm with a board of directors, the compliance program should have a way to report to the board of directors. Compliance officers should have alternative reporting structures in case they have to investigate a boss.

For an private fund adviser, there should be mechanisms for the CCO to report to a compliance committee instead of a single individual.

What you want to avoid is having to investigate your boss. That is an irreconcilable conflict. People are always going to question the end result. People are especially going to question why the investigator was fired in the middle of an investigation.