Brooklyn Journal of Corporate, Financial & Commercial Law


James Fanto


This Article poses the basic question that is reflected in its title and that was the subject of the conference where the Article was initially presented: whether technology poses any threats to the mission of compliance and the position of compliance officers, whether it is just another useful tool for them, or whether it is something of both. It begins by explaining the origin of compliance in broker-dealers and investment advisers and its important current position in those firms. It then discusses why compliance officers have always been drawn to technology, particularly to keep up with the business sides of the firms for which they work—a need made more acute because of technological developments in the securities industry. After setting forth the question inspiring the conference, chiefly, what will be the effect of the use of new technology on compliance, the Article next articulates the following hypothesis: that more use of this technology in compliance—termed “dashboard compliance”—will increase the productivity of compliance officers, decrease their numbers, emphasize “legal” compliance, which is designed to ensure that the firm and its employees comply with the law, and diminish “values” compliance, which encourages conduct in line with firm and industry values. It then looks at the preliminary evidence, drawn from industry reports and enforcement actions of the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), as to whether this hypothesis is supported. It observes that compliance officers are finding it necessary to use dashboard compliance, and that the SEC and FINRA are encouraging this use. It also finds that dashboard compliance is making compliance officers more productive and suggests, albeit weakly, that this enhanced productivity might result in a loss of compliance officer positions, as firms make investments in technology at the expense of hiring or retaining human compliance officers. Finally, the Article observes that there is little evidence so far about a negative effect on “values” compliance from the use of dashboard compliance. Indeed, other outcomes are possible, such as dashboard compliance liberating compliance officers from many mundane tasks of legal compliance and giving them more time for values compliance. The Article concludes by recommending that, while the final outcome for dashboard compliance is unclear, in coming years compliance practitioners should remain alert to its possible effects to ensure that they try to maintain all that is valuable about compliance.