The Model Office Blog

The FCA Accountability regime (Senior Managers and Certification Regime-SM&CR)brings a need for self-regulation. Senior Managers within Retail Investment Advisers (RIAs) and Wealth Management firms will need to ensure they can prove that they have their finger on the pulse for Governance, Risk and Compliance within their businesses.

The Challenges faced

This marks a profound change where the burden of proof under the Approved Persons Regime (APER) is with the regulator. This shift means the C-suite and Compliance officers face a greater range of challenges. These include:

• Ensuring the right people are in the right roles with the right responsibilities
• Financial promotions are kept within the FCA remits for misleading promotions, plus an increasing number of platforms (e.g. social media falling under the FCA’s financial promotion rules
• Avoiding group think and bring a culture of challenge to committees and boards
• Treating Customers Fairly, Know Your Client and Client complaints procedures follow due process and are ingrained within business good practice

How can automation help?

As we wrote in our recent professional Adviser column, with the FCA themselves running a Digital Regulatory Reporting project to make their rulebook machine readable and Gabriel reporting systembeing revamped this shows the industry now cannot afford to discount the role of RegTech. There are a number of areas that automation can help with streamlining compliance and business risk management:

1. Effective and efficient operations: The problem compliance professionals face is they tend to operate a ‘swivel chair’ compliance strategy, using multiple sources to manage regulatory risks. This can be a risk in itself as data could be duplicated, missed or dismissed. So technology can offer a ‘balanced scorecard’ approach piecing together the regulatory directives like a jigsaw and streaming data into one place where it can viewed across dashboards to ensure:
   1. A joined up approach is taken
   2. Time efficiency in assessing the relevant information and making evidence based judgments
   3. Minimise administration and encourage a paper-less approach
   4. Improve review and approvals processes
2. Cost benefits: By automating compliance and risk management, firms can ensure they;
   1. Automate workflows and deliver security that reduce regulatory breaches and penalties
   2. Gain data in real time so assessing data security, financial promotions or advice suitability can be completed cost effectively
3. Robust and secure systems and controls: Risk warnings, disclosures and disclaimers are sense checked in real time and are displayed correctly plus an online repository for compliance resource can be accessed quickly so evidence based practice prevails.

The FCA’s 5 Conduct Risk Questions programmefound that it was those firms who can prove they’re compliant that are the most profitable and attractive to clients. So it is clear by taking an automated approach to Risk and Compliance, RIAs and Wealth management firms will not only know and showcase they are compliant but also save time and money in the process.

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