Recent Regulatory Developments in EU and the Roles and Responsibilities of Compliance Officers

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Recent Regulatory Developments in EU and the
Roles and Responsibilities of Compliance Officers
TBB - TÜRKIYE BANKALAR BIRLIGI

• Presentation at the Banks Association of Turkey

Andrew Procter 13 June 2006
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Hot Topics

• Market Abuse
• Reputational Risk
• Conflicts of Interest
• MiFID
• The role of Compliance
• Conflicts
• Best execution
• The Role of Compliance

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The Market Abuse Directive

• Single set of rules for market conduct but
• Some inconsistency in application eg block trades
  2006 program
• New CESR Surveillance Intelligence WG
• CESR Urgent Issues Group to co-ordinate
  investigations
• CESR Urgent Issues Group to co-ordinate
  investigations

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MiFID

• Preparing for implementation on 1 Nov 2007
• Business led implementation
• Many challenges but many opportunities
• Likely to see some major changes in the market
  landscape
• Major implications for relationships with clients
  and for trading

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MiFID Clients Relations

• Client classification documentation
• Suitability
• Client money custody
• Conflicts

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MiFID trading requirements

• Pre-trade transparency
• Post trade transparency
• Transaction reporting
• Order handling
• Best execution

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MiFID Operational Matters

• Compliance function
• Outsourcing
• Record keeping

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Regulatory Preoccupations

• Conflicts
• Mapping of conflicts
• Development of mitigation strategies
• Non-standard transactions
• Reputational Risk

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The Role of Compliance

• Need to demonstrate that you are worth the money!
  
• Need to meet MiFID requirements.
• Need to ensure that there is adequate protection
  for the Bank/Firm
• Three key roles
• Prevention
• Detection
• Advice

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Prevention The Cost of Failure

• Loss of clients/business Reputational Risk
• Financial penalties, prosecutions, litigation
• Restrictions on business activity
• Personal liability of executives

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A Culture of Compliance

• Reputational risk and other key messages from
  the top!
• Tone at the Top and Reputational Risk training
• Training for supervisors and managers
• Taking action when things go wrong

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Preventative MeasuresKnowledge, Processes
Systems

• Heat Maps and business self-assessments drive
  priorities
• Policies and procedures reviewed every 2 years
• NCA NPA
• Reputational Risk secretariat
• Comprehensive training program
• The Control Room
• PA dealing, wall crossing, conflict clearance and
  advice, research clearance, Restricted Watch
  Lists

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Detection - Focus

• Focus on risk areas identified by heat maps and
  self-assessments

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Detection What do we do?

• Electronic transaction portfolio monitoring
  market abuse, embargo breaches, restricted list
  breaches, money laundering, mandate breaches
• Desk reviews (compare Internal Audit)
• Monitoring Restricted List, Watch List
• Compliance on the floor identifying problems
  in real time
• Compliance led month end look back

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Excellence as Advisors

• Practical application of law and regulation
• On the floor, in the (NCA/NPA) process
• Support for business initiatives new products,
  new markets, growth due diligence, advice on
  regulation, advice of necessary compliance support

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Advocate to Regulators Industry

• Compliance the relationship manager for principal
  regulators more than 200 globally
• Requires
• Pro-active engagement
• Management of supervisory visits, ad hoc
  inquiries and investigations
• Co-ordination of responses to consultations
• Introduction of business to regulators
• Membership of industry consultative groups