Saturday 27 September 2008

Testing results of jComply beta 1.0

Over the past two months, jComply Beta 1.0 has undergone some rigorous testing schedule. Apart from our ongoing in-house testing, we have worked with industry professionals, consultants, compliance and risk managers from the financial, healthcare and pharmaceutical sectors to carry out detailed functionality testing of our policies and procedures management system. These efforts have resulted in bringing out issues/bugs and a number of recommendations to further improve our product. The issues were logged in our issue management system and are being traced to resolution. The recommendations on the other hand have been absorbed in our development roadmap.

I am therefore thankful to all those who have participated in our testing so far and can’t wait to work with individuals who are scheduled to test our releases in the coming months.

jComply, a policy and procedure management system is expected to be released next month. To learn more about jComply, visit www.tabaqsoftware.com/jcomply

or

to register for a free no-obligation demo, fill up the form at http://www.tabaqsoftware.com/registration.html.

Tuesday 16 September 2008

Collapse of Lehman Brothers - Is the worse yet to come?

The collapse of Lehman Brothers is so huge that I feel compelled to write my two bits. The financial markets have suddenly plummeted overnight and most of the positive thinkers like me are hoping that this is the deep end of it and it will not get any worse. Will it get better from here onwards or is the worse yet to come?

Fingers are pointing at US with concern and some people on this side of the Atlantic are probably worrying what this situation has to do with them. In simple terms, companies like Lehman Brothers used to lend money to high street banks. High street banks then had the liquidity or cash to lend to mere mortals like us. Now, if the high street banks are not going to raise money easily, they will have difficulty lending it to us. In UK, the situation is already bad and the property market is infected with high interest rates and negative equity which is deterring people from buying.

Well, the outlook is certainly not good. There are rumors that the insurance giant AIG could be next in the financial crisis. Banks are anticipating the next two weeks to be volatile, lets see what happens. Investors who have the holding capacity are advised to not panic and think long term. Stay away from high risk investments! You are better off leaving your savings in fixed deposits.

Tabaq Software Ltd is a developer of enterprise compliance solution, jComply which can help heavily regulated sectors like finance, pharmaceuticals, healthcare, airline, etc. to comply with regulations and their internal policies and procedures. The first release of jComply is expected in October 2008. To learn more about jComply, visit http://www.tabaqsoftware.com/jcomply.

FSA's Regulatory Timeline

I have endeavored to put together a regulatory timeline for FSA. I thought this will be useful for those who want to know when FSA was formed and the important milestones and events that have occured since its inception in 1997.

Please do let me know if I have missed an important date...

FSA’s Regulatory Timeline

· October 1997 - In 1997 Securities and Investment Board along with its self-regulatory organisations were consolidated under one roof and re-named as the Financial Services Authority.

· June 1998 (N1) - Major change occurred in 1998 when the responsibility for banking supervision was transferred from the Bank of England to the FSA. This date is generally known as N1.

· 1 December 2001 (N2) - FSA received statutory and regulatory powers under the Financial Services and Markets Act 2000 (FSMA) on 1st of December 2001. This date is known as N2.

· 26 October 2001 - The Patriot Act signed by President George W Bush as a result of event of 11 September 2001. Covering 900 pages of legislation, the Act provides legislation on international money laundering and terrorist financing for financial institutions based in United States and abroad.

· October 2001 - In response to 11 September 2001 events in US, FATF expanded the international anti money laundering standards to include Eight Special Recommendations on Terrorist Financing

· October 2004 - FATF expanded its comprehensive framework for anti-money laundering and terrorist financing, making its overall standards to 40 plus 9 recommendations

· 2004 - Basel II, the Capital Requirements Directive is introduced by Basel Committee to promote the adoption of stronger risk management practices by the banking industry especially covering operational and credit risk.

· 31 December 2004 – The Transparency Directive was published on 31 December 2004 which updates parts of the existing EU Consolidated Admissions and Reporting Directive (CARD). The Transparency Directive sets minimum requirements for financial reporting and disclosure of major shareholdings for issuers hence enhancing transparency in EU capital markets.

· January 2005 – Insurance Mediation Directive is implemented by FSA by accepting the general insurance business under its wing.

· 18 June 2004 – FSA implements the EU Market Abuse Directive which is a framework of regulations on insider dealings, market manipulation in the EU and proper disclosure of information to the market.

· 2007 – FSA’s approach to regulation has shifted to principles-based and outcomes focused. The plan is to be more principles-based by 2008 than rules based.

· 2007 - Treating customers fairly (TCF) is an initiative launched by FSA as part of its drive on principles-based regulation for the financial firms in the retail sector. TCF provides six outcomes to the firms to gauge their progress on how to treat their customers. TCF marks a shift from rules specific regulation to principles-based regulation.

· July 2007 – EU published its draft proposal for Solvency 2 framework which replaces the existing Solvency 1 requirements. Solvency 2 defines EU wide capital requirements and risk management standards for the EU insurance industry.

· July 2007 - As a result of the Northern Rock crisis, some of the important recommendation made by the FSA Internal Audit Report included FSA senior management to have increased engagement with high impact firms; FSA to increase the rigor of its day to day supervision and FSA to increase its focus on prudential supervision, including liquidity and stress testing.

· September 2007 - FSA published its framework for recognizing industry guidance. While industry guidance or best practices are not made mandatory by FSA, if a breach of FSA principles is established, non-compliance to industry guidance can lead to an enforcement case.

· 1 November 2007 - Markets in Financial Instruments Directive (MiFID) was introduced which replaces the Investment Services Directive (ISD). MiFID extends the scope of ISD for financial institutions by including requirements covering conduct of business and internal organisation.

· 15 December 2007 - 3rd EU Money Laundering Directive replaces previous two directives and covers due diligence and PEP

Thursday 17 January 2008

Clamp down by FSA

The Financial Services Authority (FSA) is setting an example by clamping down on financial institutions found in breach of their regulatory requirements. FSA has started the year by issuing huge fines to two financial institutions; £1.085 million to HFC Bank (part of HSBC Group) for PPI failings and £250,000 to Square Mile Securities Limited (a stock brokerage company) for high pressure sales tactics.

The big question is, is FSA setting the tone for 2008? Are we going to see more fines issued for negligence or lack of having customer due diligence policies in place?

What puzzles me is that the average John is so naive enough to buy into the pressure sales tactics used by companies like Square Mile. We are not really talking about a door to door sales man trying to con innocent housewives. Surely, the customer also needs to take some responsibility, step back, educate oneself and then take a calculated risk. As they say, ignorance of law is no excuse. I feel, while FSA is clamping down on financial institutions to comply with its regulations, efforts ought to be made to educate the customer on making sound financial decisions based on calculated risk.

Note:
PPI covers repayments on loans, mortgages and credit cards if the borrower is unable to make them because of loss of earnings as a result of accident, sickness, unemployment or death.

News Links:
http://www.fsa.gov.uk/Pages/Library/Communication/PR/index.shtml
http://news.bbc.co.uk/1/hi/business/7191506.stm