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Compliance Becomes a Boardroom Issue

This is the title of an article by Tyler Nunnally and Paul Resnik of Finametrica which was published in the June newsletter of the National Society of Professional Compliance.

“Financial services firms face increased financial and reputational risks as regulators switch from prescribing rules to enforcing principles-based standards.”

“…a principles-based regulatory system changes the compliance burden on financial services firms. This change is profound. It changes the way compliance is implemented, from an operational level right through to the boardroom. Directors must be aware that “new-world” compliance places their businesses at heightened financial, legal and reputational risks.”

“In the new-world, proving suitability requires you to meet what we describe as the “Five Proofs”:

  • Prove that you know the client.
  • Prove that you have identified mismatches and examined alternatives.
  • Prove that you know the products being recommended.
  • Prove that you have explained the risks in your recommended plan and products.
  • Prove that the client has given their “informed consent” to accept the risks that you have explained.”

We are in the process of obtaining permission to reprint the full article, and will include a link as soon as we received such permission.

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