Geoffrey Miller and panelists reveal why compliance is booming

At the January 22 Milbank Tweed forum entitled, “Suddenly Sexy: How Compliance Went From Ho-Hum to Hot,” a panel of three accomplished legal professionals took noticeable pride in proclaiming that their specialty was finally getting the respect it deserved. Not only that, they agreed, it was also the one hot area in the current legal job market.

Professor Geoffrey MillerThe panel was moderated by Stuyvesant P. Comfort Professor of Law, Geoffrey Miller who read aloud from a story that had run just a few days earlier in the Wall Street Journal under the headline, “U.S. Firms Hire to Meet Compliance Demands.”

“‘In an economy struggling to create jobs,’” Miller read, “‘one field is booming: compliance. Hefty fines and other penalties have jolted companies, especially banks, into a compliance hiring spree as governments at home and abroad tighten business laws and regulations and ramp their compliance efforts.’”

Pamela Root '80Pamela Root ’80, managing director of Citigroup Global Markets, agreed that compliance was “a hot, hot, hot area right now” but cautioned that it was probably not for those drawn to the more cerebral aspects of legal practice. “Lawyers interpret law,” she said, “compliance builds systems…. Don’t go into compliance if you don’t want to get your hands dirty. You’ve got to be in the trenches.”

Andrew Donohue '75Andrew Donohue ’75, managing director and deputy general counsel of Goldman Sachs Asset Management, stressed that compliance officers really need to understand how a firm works in the real world in order to be effective. He told a story about dealing with a portfolio manager whose trading was “always near the edge.” Donohue met not with the portfolio manager but with his boss, the firm’s chief investment officer, and impressed upon him that failing to keep his portfolio manager in line put his own career at risk. “‘So I’m betting my career on this guy?’” Donohue recalls the CIO asking. “You always were,” Donohue said he replied. The portfolio manager with the risky habits, Donohue added, “never ever traded personally after that.”

Boyd M. Johnson IIIBoyd M. Johnson III, a partner at WilmerHale and former deputy US attorney for the Southern District of New York, where he supervised prosecutors bringing financial cases, says part of his job now is to strike terror into the hearts of his clients’ employees.

“I talk to all the analysts and all the portfolio managers and I start with the statistics,” Johnson said. “There are 75 folks just like you who have been arrested by the FBI with handcuffs at 6 a.m. at their house…. Then I explain, ‘Here is the one thing you need to take a way from this…the single most important thing you can do to protect yourself and this firm is to go to compliance when you have a concern.’”

The role of the compliance officer in financial firms nowadays, Johnson said, was to provide a form of “insurance” to traders and other professionals whose moves were being closely scrutinized by aggressive regulators and prosecutors. As more regulation continues to be added to the books, these experts in the field all agree, the demand for that kind of insurance seems likely only to grow.

Watch the Milbank Tweed Forum: “Suddenly Sexy: How Compliance Went from Ho-Hum to Hot” (1 hr, 15 min) below:

Posted on February 4, 2014