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But many firms either have additional


help from a service company or a compliance consultancy or have developed a compliance department - or a combination. In these circumstances, consideration would have to be given to the additional work created by activities required of the director or partner who undertakes the function.


ConfliCt There is also the potential dilemma of a conflict between strategy and the oversight function. Would threats of resignations be required to drive controversial or unpopular changes through? Over the long term how much more destabilising could a potential short-term conflict be if an important strategist was lost? What could the consequences be if the conflict wasn’t resolved and the compliance function capitulated? I’ll come on to the consequences later.


Since the MMR started I have spoken and blogged in forums to many in this position who, at first, were welcoming the enforced additional responsibility on firms. It was seen as naturally extending the career path, developing status and influence and opened up a stance for negotiating increased rewards. As the MMR as progressed and the changes to the mortgage approved persons regime became more certain, some doubts started to enter in to the minds of some of these compliance managers.


to be oR not to be? Ultimately, the answer to this question comes down to the bottom line of risk and reward. And there may be an asymmetry between the potential rewards and the ultimate risk of getting it wrong, namely being banned from working in financial services.


This could put a compliance manager, fighting their corner over an unpopular policy or cost to the board, under intense strain. Elevating the manager to a director or partner could overcome this, but all the other arguments


However the FSA makes it very clear that firms cannot outsource the responsibility of the function: “ Although a firm may choose to use the services of an external compliance consultant, the responsibility for the compliance oversight function must, in accordance with SYSC 3.2.8R, rest with one or more directors or senior managers of the firm.” And ultimately the oversight responsibilities lie with the CEO.


What an external firm may be brought in to do is support a director in the day to day planning, reporting and documentation, making efficient use of the director’s time in discharging their responsibility. Alternatively, support can be given to a compliance manager, in terms of additional expertise, an external view and in challenging the board. The latter approach can be particularly potent if the board or CEO has made the decision to appoint and pay for external challenge, thereby tacitly giving the compliance oversight function the permission to challenge on equal terms. n


to monitor compliance risks and effectiveness of controls


by


Stephen Atkins, director SACM


mentioned earlier about appointing a director as CF10 still apply. Given the more intrusive stance of the


regulator post credit crunch, it would be understandable if many compliance managers, when asked what price they feel would be commensurate with the additional responsibilities, would push it higher and higher.


Some may even feel that no price is high enough for the risk. Clearly this will depend on the nature of their business and the fair treatment of customers. So on reflection the choice of who fulfils the compliance oversight function can be tough. The solution may be to look for support outside of the resources of the firm.


Controlled Function 10 does not bring any new surprises as it simply requires an individual to be named as responsible for a firm’s existing compliance function and any changes in the MMR. These are a few of the headline CF10 responsibilities – nothing new here, but check to see if you have these covered and importantly is your compliance process written down and recorded?  Implementation and maintenance of all compliance plans


 Controlled functions, board and committee communications


 Criteria for selection of indicators


 Establishing and improving the annual plan for compliance oversight


 Implement a risk-based approach to compliance monitoring and reporting and risk assessment


 Using compliance performance data to focus the compliance monitoring programme


 Compliance reports  Dispute resolution  Compliance risk and non-compliant behaviour


 Breaches of compliance controls, notification, and exposure to regulatory sanction


 Key indicators of compliance performance


 Interpret regulatory requirements and analyse the impact of regulatory change


 Changes in the firm’s strategy, plans and regulatory permissions  And so on…………………..


morTgage inTroduCer JULY 2010 33


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