How to Best Leverage and Utilize Outsourced Compliance
Vigilant Insights
Introduction
Outsourced Compliance is most effective when it is treated as a strategic extension of a Firm’s operations, not simply a task-based service or regulatory backstop. As regulatory expectations continue to rise and examinations focus on execution and governance, Firms that thoughtfully integrate Outsourced Compliance into their business are better positioned to manage risk, scale efficiently, and respond to regulatory change.
The key to success lies in understanding how Outsourced Compliance can be deployed, where it adds the most value, and how to align it with internal leadership and decision-making.
Core Ways to Leverage Outsourced Compliance
1. As an Extension of the CCO Function
- Outsourced Compliance works well when it supports, rather than replaces, internal accountability. Many Firms retain internal compliance leadership while leveraging Outsourced Support for execution, testing, documentation, and regulatory monitoring. This model provides depth, redundancy, and specialized expertise while preserving internal oversight.
- Use Case Example: A mid-sized RIA has an internal CCO who also serves in an operational role. An Outsourced Compliance Provider handles annual reviews, marketing rule testing, trade surveillance support, and regulatory updates, allowing the CCO to focus on higher-level oversight and strategic decisions.
2. For Scalable Support During Growth
- As Firms grow adding assets, strategies, clients, or Fund structures, compliance obligations increase. Outsourced Compliance allows Firms to scale support without immediately committing to permanent hires.
- Use Case Example: A Private Fund Manager launches additional Funds and begins offering Co-Investment opportunities. Outsourced Compliance Support is used to update disclosures, review side letters, implement new policies, and enhance reporting controls during expansion.
3. To Strengthen Exam Readiness and Response
- Outsourced Compliance Providers are often deeply familiar with SEC Exam trends and expectations. Firms can leverage this experience to proactively prepare for Examinations and respond efficiently once an Exam begins.
- Use Case Example: An SEC RIA receives notice of an upcoming Examination. The Outsourced Compliance Team prepares a Day 1 Presentation, organizes document production, conducts interview prep with key personnel, supports management during regulator interactions, and more.
4. For Specialized Regulatory or Technical Areas
- Certain compliance areas require deep subject-matter expertise, such as Marketing Rule Compliance, Cybersecurity and Regulation S-P, Valuation Oversight, or Registered Fund requirements. Outsourcing provides access to specialists without requiring in-house expertise in every area.
- Use Case Example: A Firm engages a firm like Vigilant to assist with implementing the amended Regulation S-P requirements, including updating privacy policies, enhancing incident response procedures, and overseeing service provider data-protection controls, allowing internal teams to remain focused on portfolio management and day-to-day operations.
5. As Independent Oversight and Risk Assessment
- Outsourced Compliance can provide objective, independent assessments of a Firm’s compliance program, helping identify risks that may be difficult to see internally.
- Use Case Example: A long-standing RIA engages an Outsourced Provider to conduct an independent compliance risk assessment (i.e., Mock Exam). The review identifies disclosure inconsistencies and testing gaps, which are remediated before an SEC exam.
Best Practices for Maximizing Value
To fully leverage Outsourced Compliance, Firms should:
- Clearly define roles and responsibilities between Internal Teams and the Provider.
- Maintain regular communication and scheduled check-ins.
- Ensure Outsourced Compliance is integrated into business decisions, not consulted after the fact.
- Treat compliance as an on-going process, not an annual exercise.
Outsourcing is most effective when it is proactive, collaborative, and aligned with the Firm’s business model.
Conclusion
When used strategically, Outsourced Compliance can enhance a Firm’s compliance framework. By leveraging a firm like Vigilant for execution, expertise, scalability, and independent oversight, Firms can better manage regulatory risk while allowing Internal Teams to focus on core business objectives.
Firms that leverage Outsourced Compliance should treat their Provider as a Trusted Partner integrated into the Firm’s compliance culture to help make sure programs are practical, resilient, and designed to withstand regulatory scrutiny.