Is Now The Time To Consider A Job In Regulatory Compliance (banking & Finance)?

PRLog (Press Release) - Mar 04, 2010 -
Before you begin your job search you need to decide if a job in compliance is right for you.  We will approach this subject considering the pressures that compliance professional face from the regulator.  After all, the Financial Services Authority (FSA) has a very large part to play in the way the compliance profession conducts its day-to-day business.

Compliance professionals within financial organisations have a very challenging time ahead of them.  These challenges include interpreting the regulatory rules in an ever-changing financial landscape, particularly after the financial downturn in late 2008.  This downturn has provoked a strong regulatory response from the FSA; and understandably so.  The financial system must maintain its integrity.

What does that mean?  Put simply, the rules set out by the FSA appear to cycle between a principles-based approach and a prescribed approach.  The distinct difference between the two approaches is that the principles-based approach allows Compliance Officers to decide on the best method of complying with FSA rules.  Compliance Officers are given a broad set of principles that they can fit around their business objectives.  These 11 principles are outlined below:

1. A firm must conduct its business with integrity.
2. A firm must conduct its business with due skill, care and diligence.
3. A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.
4. A firm must maintain adequate financial resources.
5. A firm must observe proper standards of market conduct.
6. A firm must pay due regard to the interests of its customers and treat them fairly.
7. A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading.
8. A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.
9. A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgement.
10. A firm must arrange adequate protection for clients’ assets when it is responsible for them.
11. A firm must deal with its regulators in an open co-operative way, and must disclose to the FSA appropriately anything relating to the firm of which the FSA would reasonably expect notice.
(From ‘Principles-based regulation’, April 2007, published by the FSA)

The purpose of this approach was to facilitate a more innovative and competitive financial system by allowing each organisation to apply the principles in an effective way for their own unique business.  Unfortunately, this approach only works when those within the financial system have principles themselves.  It has been argued that this form of ‘light-touch’ regulation could have led to the financial downturn and could be evidence of the principles-based approach failing.  Indeed the first of the 11 principles states, “1. A firm must conduct its business with integrity.”  This is a very noble principle but in practice, in a system driven by profit-maximisation, it may not always be adhered to.  

The prescribed approach offers more detailed rules and supervisory actions that are ‘dictated’ to each financial organisation.  We say ‘dictated’ but the process is still somewhat consultative.  A fair and tailored approach must be taken with each financial organisation.  The FSA does not want to enact a set of rules that is going to harm the overall competitiveness of the UK financial system.  Although many Compliance Officers may argue that despite their best attempts, the FSA, can and do issue rules that damage overall competitiveness… a topic for another time.  Under a prescribed approach Compliance Officers will face great scrutiny and perhaps more severe penalties for non-compliance.  This could make the job far more stressful, however it may also be the case that Compliance Officers will know what they are doing right and what they are doing wrong in more detail.  So in this respect it will depend on the severity of scrutiny and the assistance offered by the FSA should a financial organisation not be achieving the rules set out.

We have only really scratched the surface of this debate.  An excellent approach to deciding on whether or not to enter the profession of regulatory compliance would be to speak to the Compliance Officer in your own organisation.  If you do not already work in banking or finance then seek advice from someone like the International Compliance Association (http://www.int-comp.org).  They may be able to put you in contact with someone relevant.

So if you are pondering over the decision to enter compliance as a career, you have the broad outline of the challenges you could face.  Remember, you are effectively policing your own organisation.  This does not always make you popular.

On the very positive side, the decisions you make will help to protect the clients you serve and create a fairer financial system, and that is a just cause.

For more visit http://www.mycompliancejobs.com

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