Regulatory compliance can seem like a complex web of ever-changing rules and regulations – and in many ways, it is. But compliance has evolved to cover much more ground for the modern firm: protecting client interests, safeguarding against misconduct and more.
As you build out your firm’s compliance systems and processes, it’s important to keep in mind that they serve these larger purposes – and to equip them with the tools and resources they need to fulfill those expansive duties.
Related: How your institutional firm can address these six regulatory compliance program challenges
In today’s blog, we’re exploring the top three core functions your regulatory compliance program – and the team responsible for it – should cover (beyond just staying within legal boundaries).
Three core functions of regulatory compliance programs
Compliance regulations are in place to ensure your firm is operating with your clients’ best interests in mind, and within the laws set forth by the U.S. or U.K. government, or whomever is the governing body for your firm. It’s a broad category – with a set of rules long enough to keep any Chief Compliance Officer (CCO) busy.
1. Regulatory compliance enables the business
Sometimes it can feel like your role as a compliance team member is to just be the red tape – telling people what they can’t post and can’t say.
But in reality, compliance enables your business to do the most possible without crossing any regulatory barriers. Eye-catching social media posts are great, but they simply aren’t worth it if they get flagged in an audit and lose you trust with your client base. At the end of the day, compliance is the bridge your firm uses to build trust with prospects and clients alike.
Build trust with your clients, employees and prospects
A strong compliance program helps you to build trust with everyone within your organization, as well as the individuals you serve. It shows them that responsibilities like data privacy and cybersecurity are taken seriously within your business.
Related: How to find the best-fit compliance management technology for your firm
Tip: To further those relationships, it’s important to have the right compliance mindset. Rather than thinking of your role on the compliance team as law enforcement searching for wrongdoing, position yourself as a trusted business partner for your team by finding ways to work with people rather than simply saying “no.”
2. Regulatory compliance protects your firm and its (hard-earned) reputation
One of the key responsibilities of the compliance department is to safeguard the firm and its reputation by:
- Keeping up with legislation
- Developing and maintaining policies and procedure
- Conducting annual compliance reviews
To effectively accomplish these tasks, compliance officers must possess the ability to communicate internally, establishing effective dialogue across all organizational levels. While compliance holds the ultimate responsibility for shielding the firm from risks, every member of the organization must play their part – it’s about teamwork.
Keeping up with legislation
The compliance team should keep your business aware of any changes to rules and regulations set forth by regulatory bodies. That’s a big undertaking when you consider just how many rules there are – the Securities and Exchange Commission (SEC) alone has 30 rule proposals on the book as of May 2023!
When it comes to fines or penalties from government agencies, “I didn’t know about that rule” isn’t a valid excuse – your firm must have the resources and time to not only learn about changing legislation, but also to enact policies and procedures that reflect those laws. A strong compliance department can help you do so, enabling your firm to continue delivering top-notch service to your clients while operating within federal and state laws.
Developing and maintaining compliance policies and procedures
Another core function for your compliance team is the development of policies and procedures specific to your firm.
Your policies and procedures should explore:
- Archival methods
- Supervisors (specifically those with the ability to view, monitor or change data)
- Data reviewal processes
- How to address issues
- Security measures in place
If your business is chosen for an audit, you will need to successfully prove that your policies and procedures are updated and enforced at all times.
Conducting annual compliance reviews
Every firm is required to conduct an annual compliance review, which serves as an opportunity to look back at compliance successes and failures, identify areas of improvement and make a plan to move forward. The compliance team plays a key role in making sure everyone participates and understands the role they play in keeping your firm compliant.
Related: The ultimate annual compliance review checklist: Dos and don’ts for 2023
3. Regulatory compliance puts a focus on ethics and integrity
Modern compliance goes beyond just legalities – it’s about putting ethics and integrity front and center for your firm’s employees, clients and third-party vendors. By fostering awareness and understanding of compliance requirements among employees, compliance teams empower individuals to make informed decisions and act responsibly within a set regulatory framework.
A culture of compliance can look like:
- Developing and implementing a supervisory policies and procedures manual and a code of ethics that is communicated and understood by all staff members.
- Providing initial and ongoing training for all staff members, including compliance.
- Having staff members attest to having reviewed the firm’s unique policies and procedures, code of ethics and any other appropriate documents.
- Establishing employee communication procedures such as how to communicate when there are relevant regulatory changes, in the event of a pending regulatory exam or when deficiencies are found during an exam.
Related: Developing your culture of compliance for 2023 and beyond
With that foundation in place, your staff are better equipped to properly respond in the event of a compliance breach.
Tip: A culture of compliance is more than just enforcement of rules and regulations – it’s also about shining a spotlight on successes. Something as simple as a thank-you email sent to staff after a successful audit can make a huge difference and show your employees that you appreciate all their efforts.
Compliance is a loaded word for many financial professionals, but at its core, compliance functions to enable your business processes, protect your firm and build a stronger culture of regulatory compliance.
Foster a culture of compliance with ComplySci
Our proprietary software can help your firm keep compliant all year round and enable your business to operate successfully. Click here to learn more or connect with a member of the ComplySci team today.