Compliance tips for 2014
15 January 2014
Richard Rattue, Compli-Serve
Richard Rattue, managing director, Compli-Serve SA
In Western cultures, brides are supposed to wear or carry something old, something new, something borrowed and something blue. I couldn’t think of a better way to characterise my Top Compliance Tips for 2014 – some are old, but bear repeating, some are new, some are borrowed, and some will surely give you the blues! Here they are.
Prepare for a principles-based approach to compliance
The Compliance Institute (CISA) has been beating this drum for several years now. In an increasingly complex regulatory environment, regulators are turning their attention to principles-based as opposed to rules-based compliance. Trying to find loopholes is much harder when you’re being asked to live up to a set of principles.
TCF
An excellent example of principles-based regulation is Treating Customers Fairly. Many advisors think they’re ‘doing’ TCF automatically – that is, they’ve been doing things the TCF way forever, and don’t see why they need to pay particular attention to TCF or set up special processes and procedures. Unfortunately, if you fall into this camp you could find yourself at loggerheads with the FSB, which will be rolling out its TCF framework in 2014. Despite its apparent simplicity, TCF is no paper tiger. Ignore it at your peril!
Disclosure
We all know the three key rules of buying property – location, location, location. In the same way, the three key rules for dealing with clients are disclosure, disclosure, disclosure. Whether it’s fees, product features, commissions, whatever. Be sure you’re disclosing everything a client needs to know to make an informed decision, and then record your recommendations diligently, with reasons. If the Ombud comes knocking, they’ll want all your documentation and will take a dim view if it’s lacking.
Never ignore letters from the Financial Services Board
If you’re smart enough to give financial advice to your customers, you’re smart enough to find out when compliance reports, financial statements or levy payments are due and then meet those deadlines. Yet many key individuals fail to arm themselves with this knowledge and find them being fined by the Regulator.
Keep enough cash in the bank
Some FSPs are required to keep a minimum amount of operating expenses in the bank, from 4 weeks to 13 weeks at all times, in terms of their Fit and Proper requirements. If you don’t, realise that what you save in cash will certainly cost you a lot more in reputation.
Check your licence product scope
Product suppliers are checking to ensure that contracts with advisors are licensed correctly and their underlying product categories reflect correctly. Don’t be ignorant about product categories. If you lack the correct categories the product supplier will cease business and new business acceptances and commission flows until you have rectified the situation.
Keep your representative registers up-to-date
We receive a stream of emails from FSPs wanting to know why they are being billed levies for representatives who no longer work with them. Meanwhile, they haven’t removed these representatives by the end of August in time for the levy cut-off.