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Top 5 Ways to Build A Culture of Compliance

Post on: May 28, 2015 | Fred Bryant | 0



When reading Inc. Magazine, Fast Company, TechCrunch or any other startup-related news sources out there, you’ll notice a common theme among the stories of the few people that actually experience overnight success —failure can happen fast. It is rare to find startups thinking about both controlling growth and managing risk; it’s supposedly against their nature.

Thinking of starting a business in a regulated industry such as Fintech? The most important advice of which you’re probably unaware is that compliance will drive your success or failure. This is probably a result of most people considering Fintech to be more about “tech” than financial services. Failure in a regulated industry is a much different experience from failure building an app company that ends up running out of cash. Understanding this before you take the plunge into a Fintech company is vital.

If you have anything to do with loans, securities, handling money, moving money, or banking, you should be familiar with terms like SEC, CFTC, NASAA, the Fed, OCC, FDIC, FINRA, etc.—and whether or not they will be partners in your business. Right now, we are in the midst of a Fintech revolution, with the financial services industry undergoing rapid changes and challenging the way business has always been done. If Fintech companies follow typical startup advice, they are certainly set to fail fast, and recovery will be difficult, if not impossible. When you operate in a regulated industry, building a culture of compliance should be one of the first things on your list.

Not only is there personal risk, but you can cause real damage to real people, including customers, employees, or shareholders. In a regulated industry, you have to proceed with much more caution than if you were simply a technology company. Here are five ways we’ve worked to build “A Culture of Compliance” within WealthForge.

  • Accept that you operate in a regulated industry
    When I returned to WealthForge after 3 ½ years as an Active Duty Army Officer, we were focused on just being a technology company. It took some time and a lot of effort but our CCO, Jim Raper, was able to educate us about the importance of compliance. Many companies in the Fintech space avoid dealing with these issues. Let’s face it, compliance is hard, but you cannot hide from the consequences of ignoring it.
  • Educate your team
    Education is crucial; many of the things required of regulated companies are not intuitive sometimes seem to introduce friction into a process. Your team needs to understand that managing risk is as important if not more so than efforts to grow your business. Once your team learns that there is a method to the madness, they begin to respect the method
  • Lead by example
    The leadership of any organization needs to do everything they expect of their team, and then some. Some of the policies and procedures may be painful, but if don’t adhere to them yourself, your team won’t either.
  • Involve the entire team in developing policies and procedures
    Everyone in a company, not just those in a compliance function, own the responsibility of developing and enforcing policies and procedures. If it’s a priority for your organization, set the tone and put compliance on everyone’s to-do list. Everyone from sales and marketing to your engineering team should have a say in your organization’s compliance functions.
  • Engage your regulatory body
    In this world, there is no shortage of regulators looking to poke holes in whatever you’re doing. Regulators are trained to aggressively pursue anything that is out of the ordinary, because that is generally how to find bad actors. If you proactively engage regulators and are open, honest and transparent, they are more likely to help you rather than shut you down. No matter how compliant you think you are, there are always things you can do better, and in a changing industry, it’s even harder to fit into the traditional compliance box.

Make sure that you really know the environment—and do your own research. Just because a lawyer or consultant said you could do something does not make it true, no matter how much you trust their advice. Telling a regulator that “My lawyer told me I could do that” is akin to telling your teacher “The dog ate my homework.” The bottom line is that running a Fintech startup is hard. My Co-Founder and I joke that there are days we feel like it would be much easier to go run a shoe store. However, if you can operate in a regulated environment, you have already built a significant moat around your business. If you can effectively build a culture of compliance and empower your team to help you both create and enforce policies, you have set yourself up for success.


Securities offered through WealthForge, LLC. Member FINRA/SIPC. This post is an industry update from WealthForge. The message does not constitute a research report or recommendation and does not take into account the specific investment objectives, financial situation or particular needs of the recipient. This message is not an offer to sell or the solicitation of an offer to buy any security or interest in any fund, which only can be made through a private placement memorandum that contains important information about the risks, fees and expenses of a fund.

Disclaimer: WealthForge provides this information to our clients and other friends for educational purposes only. It should not be construed or relied upon as legal advice.

Disclaimer: Altigo provides this information for educational purposes only. It should not be construed or relied upon as legal or tax advice.

About author

Fred Bryant

Fred founded WealthForge based upon a vision of bringing greater efficiency to private capital markets. A University of Richmond graduate, he also served in the US Army receiving the Bronze Star Medal. Throughout his military tour in Afghanistan, he continued to steer WealthForge forward. Fred provides strategic leadership for the company and holds 6 securities licenses.
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