When properly implemented, a governance operating model defines the mechanisms and interaction points by which oversight will be implemented across a firm; the aim is proactive protection.
Best practices in governance and oversight include proper trading, staffing, compliance, and vendor due diligence, but CIG Capital Advisors has found that an effective governance operating model also includes some broader components:
Enables the behaviors and activities needed for effective governance by establishing: core values, continuous improvement, and business operating principles, performance measurement and management, leadership and employee talent development programs.
Defines specific oversight activities and obligations: compliance department, investment management committee, risk management committee, leadership and employees.
Provides a governance framework for consistent scalable day-to-day operations: policies and procedures, measures and metrics, IT and communications support, reporting structure, committee structure, and control.
The function of the Compliance Department is to monitor the day to-day sales functions of the firm and routinely test compliance procedures, so as to help avoid the risk associated with violations of securities regulations and state laws. CIG Compliance Department members seek to identify areas of risk, document such findings, implement effective written procedures, and resolve issues that are uncovered as part of a comprehensive program. They also strive to instill a “culture of compliance” throughout the firm by offering continuous training and communications with staff.
The Investment Committee meets bi-weekly and is made up of the firm’s Managing Principal and members of the Asset and Wealth Management departments. Its primary objective is to establish and maintain the firm’s overall investment policy and to carry out the firm’s investment management process.
The Committee is also designed to approve and manage the firm’s investment decision making process. It provides an open forum for the free exchange of ideas and suggestions and has been empowered to establish a formal process which is used for the ongoing management of the firm’s investment strategy.
The Risk Management Committee meets quarterly and is made up of the members of CIG Capital Advisor’s Investment Committee in addition to the firm’s Chief Compliance Officer. Its primary objective is to provide oversight to the firm’s investment management process and to verify that its processes and controls are effective in protecting clients as well as the firm. The Committee brings an additional level of surveillance to the firm’s management of its client’s assets and is designed to provide various oversight to ensure that the investment methodology is being carried out as prescribed by the Investment Committee. Any potential areas of risk are identified, assessed, and reported in an open, transparent, and object manner.
One way the committee may identify potential risk to the firm’s client portfolios is by performing periodic portfolio reviews. Prior to each quarterly meeting, members of the committee perform a comprehensive review of various client holdings, allocation, and performance reports to try and identify any possible anomalies which may exist for any client portfolio. If any potential issues are identified by these reviews, they are presented and reviewed by the committee and an appropriate response plan is implemented as necessary.
