Bob's Blog

Living up to expectations

15 Nov 2013

In all our jobs we hold responsibilities and must ensure we meet the standards that are expected of us from both our employers and the regulator. However, it is the compliance officer(s) within each firm that perhaps hold the pivotal position and are able to determine not just whether a firm is meeting the rules but also shape the prevailing culture.

Increasingly, and understandably, the Financial Conduct Authority (FCA) is pressing upon firms the need to ensure strong compliance across the piece but also to make sure all compliance officers operate to the highest standards and have the requisite skills to fulfil the job correctly. After all, it could be said that these individuals have the strongest influence in the business – for example, if they provide a ‘nod and a wink’ to let poor quality business through the system this will set the entire tone of the firm.

The regulator has recently publicly stated that it is looking far more closely on those in place of influence within a firm. It wants to make sure these employees have the skills, knowledge and time to undertake their duties and therefore firms have to get their recruitment and ongoing training right. We have seen cases where the Compliance Officer has been removed after the regulator wasn’t assured they were up to the task – it won’t take much to imagine the disruption this caused to the firm.

Overall it is up to the management of the firm to deliver in the compliance area. The FCA wants to see firms well run with strong management leading from the front; TCF, for example, needs to be driven downwards into the business and not just be allowed to grow organically upwards. It is therefore up to the business owners to make sure they appoint people who will lead and manage the firm.

As stated, recruitment is vitally important and when looking for compliance officers firms should be asking themselves a number of important questions not just about the individual themselves but the environment they will be asked to work within. Questions such as:

• Will the individual have the knowledge, skills and time to complete the tasks they are set?
• Is there a sound job description in place to follow?
• Are there processes in place to make things run smoothly, for example, is there a system to regularly check that disclosure documents meet requirements, is there a business plan in place to monitor cash flow and solvency, etc?
• Does the person have the skills knowledge and time to operate the case-checking system, the cases introduced, financial promotions made, etc?
• Finally is there a system in place to check the checker by way of an audit each year?

Ultimately, there needs to be systems and controls in place to make sure everything is running well and, importantly, there must also be a business continuity plan which allows the work to continue in the absence of key staff. Having a risk plan will help show the regulator the firm has a robust attitude towards identifying and monitoring the risk within a business. The regulator will want to see a compliance officer reporting on the firms’ KPIs, highlighting risk and making adjustments, for example, to the advice process where failings are found. It is also their role to ensure any required remedial action is taken and to instil the subsequent changes in behaviour, culture, processes or training skills/knowledge.

This focus on compliance offices is a key strand of the regulator’s work with firms. At this very moment the FCA is holding a Business Risk process interaction with firms around the country which allows it to see how the business is being run. Firms that are eligible in Scotland and Northern Ireland have already completed their assessment online and the regulator is working its way across the rest of the country. No region will be left untouched and therefore we would urge all firms to engage with their own compliance staff and standards, and make sure you are living up to all the regulator’s expectations in this area.

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