TABLE OF CONTENTS
Project Status at a Glance xiii
Foreword xv
Reporters’ Memorandum xxi
CHAPTER 1
DEFINITIONS
§ 1.01. Definitions 1
CHAPTER 2
SUBJECT MATTER, OBJECTIVES, AND INTERPRETATION
§ 2.01. Subject Matter 5
§ 2.02. Objectives 8
§ 2.03. Characteristics of the Organization 10
§ 2.04. Interpretation 14
§ 2.05. Nonliability 15
CHAPTER 3
GOVERNANCE
TOPIC 1. GOVERNANCE IN COMPLIANCE AND
RISK MANAGEMENT – GENERAL
§ 3.01. Governance in Compliance and Risk Management 17
§ 3.02. Governance Actors 18
§ 3.03. Governance Map for Compliance and Risk Management 20
§ 3.04. Coordination of Compliance and Risk Management in Affiliated Organizations 20
§ 3.05. Governance Accommodations for Organizational Circumstances 22
§ 3.06. Qualifications of Primary Governance Actors for Compliance and
Risk Management 23
§ 3.07. The Role of the Board of Directors and Executive Management in
Promoting an Organizational Culture of Compliance and Risk Management 29
TOPIC 2. THE BOARD OF DIRECTORS – GENERAL
§ 3.08. Board of Directors’ Oversight of Compliance, Risk Management, and Internal Audit 36
TOPIC 3. THE BOARD OF DIRECTORS – COMMITTEES
§ 3.09. Delegation of Oversight Responsibilities by the Board of Directors to a
Committee or Group of its Members 52
§ 3.10. Compliance and Ethics Committee 58
§ 3.11. Risk Committee 68
§ 3.12. Role of the Audit Committee in Compliance and Risk Management 76
§ 3.13. The Role of the Compensation Committee in Compliance and Risk Management 84
TOPIC 4. EXECUTIVE MANAGEMENT
§ 3.14. Executive Management of Compliance and Risk Management 88
TOPIC 5. INTERNAL-CONTROL OFFICERS
§ 3.15. Chief Compliance Officer 101
§ 3.16. Chief Risk Officer 116
§ 3.17. Chief Audit Officer 129
§ 3.18. Compliance and Risk-Management Responsibilities of Chief Legal Officer 140
§ 3.19. Compliance and Risk-Management Responsibilities of the
Human-Resources Officer 147
§ 3.20. Multiple Responsibilities of Internal-Control Officers 151
§ 3.21. Outsourcing, Use of Technology, and Engagement of Third-Party
Service Providers 154
CHAPTER 5. COMPLIANCE
TOPIC 1. THE COMPLIANCE FUNCTION
§ 5.01. Nature of the Compliance Function 161
§ 5.02. Goals of the Compliance Function 162
§ 5.03. General Compliance Activities of Organizations 166
§ 5.04. Enterprise Compliance 169
TOPIC 2. EFFECTIVE COMPLIANCE
§ 5.05. Elements of an Effective Compliance Function 171
§ 5.06. Compliance Program 178
TOPIC 3. SPECIFIC COMPLIANCE ACTIVITIES
§ 5.07. Compliance Risk Assessment 188
§ 5.08. Compliance Advice 192
§ 5.09. Compliance Monitoring [Reserved] 194
§ 5.10. Training and Education 194
§ 5.11. Red Flags 196
§ 5.12. Escalation Within the Organization 199
§ 5.13. Compliance Under Legal Uncertainty 201
TOPIC 4. EMPLOYEES, AGENTS, AND COUNTERPARTIES
§ 5.14. Hiring of Employees, Retention of Agents, and Selection of Counterparties 202
§ 5.15. Background Checks 203
§ 5.16. Compensation 205
§ 5.17. Discipline 207
TOPIC 5. INTERNAL REPORTING
§ 5.18. Procedures for Internal Reporting [Reserved] 211
§ 5.19. Protecting Confidentiality of Internal Reporting [Reserved] 211
§ 5.20. Nonretaliation [Reserved] 211
TOPIC 6. THIRD-PARTY SERVICE PROVIDERS
§ 5.21. The Role of Third-Party Service Providers [Reserved] 211
§ 5.22. Attorneys [Reserved] 211
§ 5.23. External Auditors [Reserved] 211
TOPIC 7. INVESTIGATIONS
§ 5.24. The Decision to Investigate [Reserved] 211
§ 5.25. Scope of Internal Investigations [Reserved] 211
§ 5.26. The Investigator [Reserved] 211
§ 5.27. Privilege in Investigations [Reserved] 211
§ 5.28. Responding to Government Investigations [Reserved] 211
§ 5.29. Fairness to Employees During Investigations [Reserved] 211
§ 5.30. Responding to the Investigator’s Report [Reserved] 211
§ 5.31. Lessons Learned [Reserved] 211
TOPIC 8. COMPLIANCE BEYOND THE ORGANIZATION
§ 5.32. Responsibility of Parent Companies for Compliance in Subsidiaries [Reserved] 211
§ 5.33. Supply-Chain Due Diligence [Reserved] 211
§ 5.34. Vendor and Business-Partner Due Diligence [Reserved] 211
§ 5.35. Customer Due Diligence [Reserved] 211
TOPIC 9. ETHICS AND SOCIAL RESPONSIBILITY
§ 5.36. Commitment to Ethical Behavior [Reserved] 211
§ 5.37. Codes of Ethics [Reserved] 211
TOPIC 10. SPECIAL CONSIDERATIONS FOR NONPROFITS AND INTERNATIONAL FIRMS
§ 5.38. Special Considerations for International Firms [Reserved] 211
§ 5.39. Special Considerations for Nonprofit Organizations [Reserved] 211
Appendix. Black Letter of Tentative Draft No. 1 213