Top compliance tips for a winning 2018
Richard Rattue, Managing Director, Compli-Serve SA.
As compliance becomes more onerous, below are eight pointers to keep in mind this year that could help steer you away from compliance risk in your business.
- Seek professional support
It never ceases to amaze me that financial services providers pay good money for lawyers and accountants and then head for the bargain basement for a compliance officer to guide them on regulatory compliance. Compliance is a profession and you should seek out a professional for advice. Most are members of the Compliance Institute of South Africa (www.compliancesa.org) and this should be one of your first ports of call when you are looking for compliance assistance. Additionally, check the FSB website to ensure that compliance officers or compliance firms are indeed licensed by the FSB to provide services that they may describe in their marketing literature.
- Re-cap RDR
While the RDR may certainly appear intimidating at first glance, it is important that all stakeholders in the financial services industry find time to understand and stay up-to-date with developments. As I write this tip (early December 2017), we are expecting a further updated roadmap to the RDR process, which will hopefully address the meatier issues.
- Conditional love
All FSB licences are issued with a number of conditions. One of the more important is Condition 1, which requires licensed entities to keep their details up-to-date. The Regulator has in effect lost patience with firms that are seemingly lax in keeping details up-to-date and could receive some form of administrative penalty.
- Familiarity with foreign funds
Section 65 of the Collective Investment Schemes Act clearly states unless an offshore fund is approved by the FSB, it cannot be solicited to local South African investors. There appears to be some confusion on this point, and I would urge you to enquire as to the regulatory status of any fund that you are presented with for your clients' consumption.
- Keep on trend
It is important that we all try and stay up-to-date with the developments of technology and how it is impacting financial services. We have all heard of cryptocurrencies such as Bitcoin. I have no doubt that in times to come, the Regulators will create rules and regulations around these and we will probably see central banks supporting a particular cryptocurrency, ensuring that they stay in the loop. Cryptocurrencies may well not be a passing fad.
- Tickbox out - risk-based approach in
If you still believe that regulatory compliance involves ticking boxes and not much else, you are in for a rude awakening. Principles- and outcomes-based theory kick tickbox into touch as we move to a conduct-based regulatory regime, and this will likely translate into major changes in the way that we are required to report to the Regulator. Conduct of business reports, which are already a reality for insurers, are likely to come out into the wider community from 2019. Watch this space.
- Google “market conduct risk”
You are advised to ensure that you understand the meaning of market conduct risk and how it affects your business. This will certainly be an area the Regulator continues to spend more time on going forward. I expect to see it fairly near the top, if not at the top, of any risk management plan in 2018.
- Don't try and be clever with numbers
A number of FSPs have attempted to be clever insofar as the solvency calculations are concerned, and the FSB has indicated that it intends to take stern action against miscreants in this regard. You are therefore advised to avoid massaging financial statements to meet solvency requirements, as this will certainly lead you into conflict with the Regulator. And, on the same topic, some of the creative reasons for requesting an extension to the deadline that we have been asked to submit, are fantasy in the extreme, and no doubt will be recognised as such by the Regulator. In the event that you wish to apply for an extension to a regulatory deadline, please ensure that a bona fide case is built and submitted to back up your request.
Finally, the first month of the year is just about over indicating that 2018 could be a busy year – stay compliant to make it a good one.
