Compliance: The dangers of DIY

Debra Gill, Compliance Officer at Compli-Serve SA.

Financial advisory practices face a myriad of compliance requirements in terms of the various financial legislation governing their businesses. Confronted with a list of different deadlines, reporting requirements, as well as a host of administrative obligations can be overwhelming to manage.

For the small advisory business, or those comprising of a single key individual, staying compliant can be very challenging. On any given day, it is already demanding to make time to see numerous clients, run the business operationally, and make enough money to keep the doors open, let alone tackle reams of compliance issues.

Thinking of DIY?

The danger of trying to do compliance yourself could be high. In the event of something slipping through the cracks, the financial impact on your business could be detrimental, with costly fines, which the Financial Services Board could levy on your business for non-fulfilment of an obligation imposed by law.

To keep abreast of new and ever changing legislation is onerous on a small business as well as understanding the impact of any changes. Missing any new amendments or board notices places a business at risk, where worst case scenario, your license could be lost. In the event of receiving penalties, your reputation would also be impacted through negative publicity, all of which could easily be avoided by seeking professional compliance support.

Hire a professional

Making use of an external compliance officer could address these responsibilities facing the business. Compliance officers are of course equipped to focus on what needs to be done to stay compliant; they are aware of all the pertinent requirements, reporting obligations, due dates and endeavour to ensure they, and their clients, are informed of relevant industry and legislative changes.

There are so many elements to consider in financial services regulation and the constantly changing landscape of legislation does create the need for financial businesses to have professional assistance when it comes to remaining compliant.

Avoid costly mistakes

Listed below are some of the more typical compliance issues that could result in serious consequence to your business.

• Failure to submit reports information, which can result in fines of R1000 per day until the required information is provided.
• Failure to display license at the business premises.
• Failure to ensure a reference to your license is featured across all business documents and marketing material.
• Failure to maintain client records for the prescribed time (five years).
• Failure to have financials audited and reported on.

Some of the above failures could lead to fines of up to R1 million or imprisonment of up to ten years, or both.

Keep your business running effectively

There are numerous aspects to running a business successfully over and above staying compliant. These would include IT systems, storage and filing solutions for client data, adequate insurance cover, capital adequacy and financial requirements that need to be met. Having a strong compliance resource and support in place would certainly remove one vital element of business risk and stress.

Delegating complex administrative, legal and compliance tasks to a professional can be an additional expense some advisers do not wish to take on, but avoiding the risk of falling out of favour with the regulator is priceless.