Do US Compliance regulations play a part in the UK ?

As a UK vendor of compliance software I get increasingly annoyed at how most news worthy articles I read on the web referring to compliance and regulations constantly refer back to US legislation.

Its almost as if the UK does not have to comply to legislation. Certainly the "does not live here" attitude from many UK Compliance Managers I meet should consider the more subtle British way of introducing change.

I wrote in my blog of 30th September that the onus of responsibility has changed in the UK for Health and Safety issues. Indeed, not only are line managers more accountable for health and safety issues, the concept of innocent until proven guilty in a legal situation appears to have shifted to that of prove you have complied.

Irrespective of the lack of legislation within the UK towards Corporate and Information Governance the trend is toward individual responsibility,but when does responsibility become culpability.

Back in the early 1970's VAT was introduced to the UK. Suddenly, all those business owners who traded over the stated threshold became instant tax collectors and responsible for completing quarterly returns and submitting these along with the tax collected. Anyone to this day who does not carry out this function is liable to receive fines and possibly a custodial sentence if deemed appropriate. Is this a responsibility or culpability?

Fast forward to the changes in the UK licencing regulations in the middle of this decade. Each licensed establishment is now required to assign a designated premises supervisor who holds ultimate responsibility for the running of that premises. This includes health and safety, enforcing anti social behaviour laws and bye laws both within and immediately outside of the designated premises, non smoking rules, stopping under age drinking, stamping out drug abuse, etc.

These are not bad things to try to address but when does the responsible bar owner go from being responsible to culpable.

More importantly for this article when does the law support those responsible rather than use them to apportion blame and liability when it comes to issues involving legislation and Corporate Governance.

How can an organisation and individuals working within those entities ensure they are acting responsibly and endorsing policies and procedures rather than appearing culpable to a wider audience.

The answer lies within the such legislation as Sarbanes Oxley, Basell II, HIPAA and the like all be them US law. All these acts were delivered to help support the use of properly managed processes, probably utilising technology to show good corporate practice within each Acts specified area.

Rather than review such news items that quote US legislation with an attitude of "it does not fit here", personnel operating within UK organisations should consider the shift of emphasis in this country from "innocent until proven guilty" to "proof of compliance".

The use of technology really can make a difference and I am particularly proud to sell jComply our policy and procedure management solution. This application is designed to support all people within an organisation understand, meet and then deliver responsibility be it in health and safety, information security, corporate governance or best practice.

Visit http://www.jcomply.com/

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.

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

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