Chambers Dictionary definition
a yielding / agreement to assent.
Compliance: Everyone's Responsibility
During the 1980's a great deal of emphasis was placed on Financial Services institutions to comply with best practice principles when dealing with customers' requirements, either in a direct selling environment or an advisory capacity - the latter was the subject of much debate and steps were taken to legislate (The Financial Services Act 1986) and grant powers to regulatory bodies to oversee business practice in the Financial Services Sector.
This direction moved companies in that sector of business to issue prescriptive guidelines to staff in order that the organisation was seen to 'comply' with the regulations; this piece is a reflection of what was considered to be a normal approach to these matters at that time.
Compliance Policy Statement
By and large most companies in the Financial Services Sector would issue a Compliance Policy Statement which would be couched in the following fairly broad terms:
- Everyone in the organisation has a responsibility for complying with the Financial Services Act 1986 and other legislation, including the rules of the regulatory bodies. However, the ultimate responsibility for compliance rests with the Managing Executive and The Board
- Compliance would be reported upon as a separate discipline at each Board meeting
- Compliance is mandatory, not optional. In practical terms this would mean:
- adopting the highest ethical standards in all aspects of business activity
- following the written procedures laid down by the specific work area, which set out local responsibilities and obligations as to how particular roles should be carried out in that aspect of business
- It would be the duty of each employee to report any matter which is believed to pose a threat to compliance - including breaches of procedure
- Business tasks, activities and procedures that are a pre-requisite of business compliance are the responsibility of line managers to both implement and enforce
- All compliance requirements must be adhered to both in the spirit of and in the letter to their intention
- Liaison with the regulatory authorities will normally be undertaken by the Chief Executive or the Director of Compliance
- All compliance matters will be discussed openly and frankly with the regulators
- All customer complaints should be handled in accord with the published complaints procedure and they should be handled in a way which demonstrates a commitment to customer care and a desire to provide a quality service in the business
- Any financial loss suffered by the customer due to compliance or other procedural errors would be compensated in full
- Any single event, including a complaint, which gives rise to reasonable suspicion that other customers may have been affected will always be investigated with the broader implications in mind
- Any established 'Compliance Group' will provide advice and support to line managers to assist in the fulfilment of compliance responsibilities and will also be responsible for explaining any new or revised rules introduced by the regulatory bodies; this is taken to imply that the Compliance Group would be responsible for ensuring that revised procedures to meet any change are deemed satisfactory.
Following the establishment of policy, an organisation would normally 'follow up' with an explanatory leaflet to all members of staff which would notionally include remarks about good business practice, compliance arrangements and the key principles involved.
Good Business Practice
Complying with the spirit and the letter of financial services legislation is a major part of the quality of service that the business offers its customers; to this end the business is committed to:
- ensuring compliance arrangements are kept on track
- ensuring that periodic reviews of business performance reflect a commitment to and respect of compliance requirements
- incorporation of compliance into induction training of the business
- maintaining a team of specialists (The Compliance Group) to monitor compliance and provide constructive guidance
- developing and updating operating procedures manuals in all business disciplines that are required to be compliant.
Compliance Arrangements
These would normally set out the chain of responsibility in compliance matters detailing the prime responsibility held by the Chief Executive through the day to day management of the compliance discipline through a Compliance Director.
As part of such arrangements, written procedures would be adopted in each business area to govern the way in which business was to be conducted; the inference was that if all these procedures were followed then all activities carried out would be 'compliant'.
Key Principles
There are a number of key principles which. If followed, with commitment and common sense, would help to ensure that good business practices would pertain to demonstrate a business compliant with regulatory requirements - these were:
- Always deal fairly with customers and treat them with respect and courtesy
- Ensure all administration with customers is dealt with efficiently and competently and that errors once identified are remedied without delay
- Always adhere to the business documented procedures in the activities undertaken
- Reporting of any suspected breaches of procedure, however small, at the earliest opportunity
- Familiarisation with all the compliance implications at the workplace
- If authorised to give advice on company products, then a 'know your customer' principle must be adopted to ensure 'best advice' is given commensurate with a proper analysis of customer needs.
The guidelines to organisations emanating from the Financial Services Act 1986 were the fore-runner of an industry wide soul searching exercise which, sadly, did nothing to mitigate against the extraordinary poor practices which led to the financial services meltdown that unfolded in the early 21st century, which in turn spawned a proliferation of further legislation and regulation of the Financial Services industry.
