Preparing for Growth: Building a Unified Compliance Program Through Mergers and Acquisitions
- Coulter Strategic Services
- 1 day ago
- 6 min read
Growth through acquisition can bring exciting opportunities new clients, expanded resources, and greater scale—but it also introduces one of the most complex challenges a firm can face: merging two compliance programs into one. Whether your firm is acquiring another practice or integrating into a new organization, compliance should be part of the process from the very beginning, not after the documents are signed.
Engage Compliance Early in the Process
Compliance should play a central role during pre-acquisition due diligence, alongside financial, operational, and legal reviews. The acquiring firm should evaluate the other firm’s compliance history, including prior regulatory exams, deficiency letters, complaint logs, internal testing results, and any unresolved findings. Each of these materials can reveal potential risks that may not appear in financial statements but could create regulatory issues after the transaction closes.
The firm should also request and review the most recent annual compliance review, which is required under Rule 206(4)-7. If the firm being acquired cannot produce a written annual review, that is an immediate red flag. A review that simply concludes “everything is in compliance” without documentation of testing, findings, or follow-up steps should also raise concern. Strong annual reviews typically include testing results, identification of issues, and evidence that any deficiencies were addressed within a reasonable period. Similarly, any past regulatory exams should be reviewed not only to identify the deficiencies cited, but also to confirm whether those issues were resolved or appear as recurring problems. A pattern of unresolved or repeated deficiencies often indicates weaknesses in supervision, documentation, or overall compliance culture.
Firms should also assess how the compliance program of the firm being acquired is structured, including how policies are written, who performs reviews, how documentation is maintained, and what technology systems are used. Gaps or inconsistencies identified during this process can influence both valuation discussions and post-closing priorities. Failing to perform this analysis before closing is one of the most common and easily avoidable mistakes made during mergers and acquisitions.
Firms that anticipate being acquired should also engage compliance early in the preparation process. A proactive review by internal compliance staff or an independent third-party consultant can identify issues that need to be addressed before due diligence begins. This type of assessment allows the firm to resolve outstanding deficiencies, strengthen documentation, and demonstrate that the compliance program is active and effective. It also highlights areas that are working well and where better practices could be implemented to show a stronger compliance culture. A firm that enters acquisition discussions with a well-documented, fully functioning compliance program positions itself as more attractive to a potential buyer and better prepared to integrate into a larger organization.
Post-Closing Integration: Training and Transitional Oversight
Once the deal closes, both firms’ employees need clear direction on which policies apply and how oversight will be handled. Initial training should explain the combined firm’s supervisory expectations, Code of Ethics, and reporting lines. In some cases, keeping each firm’s existing structure in place initially may help maintain continuity during the transition. However, the long-term objective should be to establish a unified compliance program that requires all employees to follow a single, consistent framework.
Compliance teams must have sufficient resources to manage this process. If the department is already operating at capacity, leadership should consider adding support or engaging an outside consultant to help align procedures, manage filings, and conduct training. Without adequate resources, staff may continue following prior policies, resulting in inconsistent practices and potential deficiencies.
Common Integration Pitfalls
A recurring issue during M&A integrations is that one firm’s procedures are not followed simply because the acquiring firm’s staff was unaware of them. Employees may rely on outdated forms, use legacy approval processes, or store records in multiple systems. Meanwhile, the acquiring firm assumes its own procedures are being followed. The result is inconsistent documentation, missed reviews, or conflicting supervisory expectations.
These inconsistencies are particularly visible during an examination. Examiners can easily identify discrepancies in client files, trading approvals, electronic communication retention, marketing disclosures, personal trading records, and other operational controls that reflect two sets of standards. Firms may also encounter deficiencies in billing accuracy, advertising review documentation, cybersecurity oversight, or books and records maintenance. Having multiple compliance manuals or uncoordinated procedures is difficult to manage and can signal that compliance has not kept pace with the firm’s growth. These are only some of the issues that may arise when policies are not fully integrated, and examiners often uncover additional deficiencies once testing begins. Firms that engage in frequent acquisitions without increasing compliance resources or clearly defining integration timelines are especially at risk.
Cultural integration is another area often underestimated. Each firm has its own approach to supervision, documentation, and communication. Bringing those compliance cultures together takes deliberate effort and leadership support. Without it, staff may cling to legacy habits or resist procedural changes, undermining consistency across the organization.
Building a Plan for Integration
Compliance integration should be treated with the same rigor as a technology or operational merger. The Chief Compliance Officer can act as project manager, establishing timelines, assigning responsibilities, and coordinating across departments. A written integration plan helps keep the process structured and measurable.
Key steps include:
Conduct a compliance mapping exercise: Compare both firms’ policies and identify areas that overlap, conflict, or need consolidation.
Prioritize high-risk functions: Focus first on marketing, client communications, fee billing, trading, and cybersecurity.
Review regulatory documents: Update Form ADV, notice filings, and disclosure materials to reflect the combined firm’s structure and services.
Unify supervisory systems: Align review processes, approval workflows, and recordkeeping.
Consolidate manuals and codes: Merge the Compliance Manual and Code of Ethics into a single version; retire outdated documents to prevent confusion.
Provide clear guidance and training: Communicate which policies apply immediately and set dates for full transition.
The CCO should maintain a checklist or project tracker documenting progress. Treating the process like any other firmwide project ensures accountability and helps leadership allocate resources appropriately.
Supporting the Compliance Team
Compliance integration requires time, planning, and cooperation across departments. Leadership should recognize that combining firms means combining obligations, including policies, testing cycles, recordkeeping, and training. If compliance professionals are expected to manage integration alongside daily responsibilities, the process will likely stall. Providing additional resources, temporary staff, or consultant assistance is not just helpful; it demonstrates management’s commitment to a strong compliance culture.
The Chief Compliance Officer and their team should serve as the project managers for the integration of the compliance programs effort. They are best positioned to coordinate the process, identify overlapping requirements, and ensure that critical compliance elements are not overlooked. The CCO should establish a defined integration plan with timelines, milestones, and documentation requirements, engaging the heads of operations, trading, technology, finance, and human resources as active participants. Each functional leader should understand their role in updating or merging processes that have compliance implications, such as client onboarding, advertising review, trade supervision, or vendor oversight.
Regular progress meetings and documented status reports can help ensure accountability and transparency throughout the transition. When each area of the firm understands how its responsibilities connect to the overall compliance program, integration becomes more efficient and effective. Clear ownership, structured coordination, and active communication help prevent overlapping, reduce errors, and demonstrate that compliance remains central to the firm’s governance as it grows.
Building a Unified Culture of Compliance
Merging firms successfully means merging people, systems, and values. A unified compliance culture should be part of the broader integration plan, just like technology and operations. Transparency, communication, and training help ensure everyone understands expectations and feels part of the same organization.
Firms that approach acquisitions with thoughtful compliance planning avoid the confusion and exam findings that often follow poorly executed integrations. Compliance teams managing multiple acquisitions deserve recognition for balancing competing demands while maintaining regulatory integrity. Engaging experienced third-party consultants can also be a valuable part of this process, providing objective insight, additional capacity, and specialized knowledge when internal resources are limited.
Through careful planning, coordinated execution, committed leadership, and appropriate external support, compliance integration can enhance rather than burden a growing organization.
Coulter Strategic Services provides customized compliance and regulatory consulting designed to meet the specific needs of each investment advisory firm. Services are tailored to the firm’s structure, business model, and regulatory obligations to help maintain an effective and sustainable compliance program aligned with current expectations. Contact us today to discuss your firm’s compliance program needs. Learn more at https://www.coulterstrategicservices.com/
All information provided is for educational purposes and should not be construed as specific advice. The information does not reflect the view of any regulatory body, State or Federal Agency or Association. All efforts have been made to report true and accurate information. However, the information could become materially inaccurate without warning. Not all information from third-party sources can be thoroughly vetted. Coulter Strategic Services and its staff do NOT provide legal opinions or legal recommendations. Nothing in this material shall be considered as legal advice or opinion.