Minimising the cost of FSA supervision
| Date | 01 April 1999 |
| Pages | 353-360 |
| Published date | 01 April 1999 |
| DOI | https://doi.org/10.1108/eb025022 |
| Author | Roger Turner |
| Subject Matter | Accounting & finance |
Journal of Financial Regulation and Compliance Volume 7 Number 4
Minimising the cost of FSA supervision
Roger Turner
Received: (in revised form): 27th August, 1999
PricewaterhouseCoopers, Southwark Towers, 32 London Bridge Street, London SE1 9SY;
tel:
0171 804 3249; fax: 0171 804 2966
Roger Turner is director of the Investment
Management division within Pricewater-
houseCoopers' (PwC's) Regulatory Con-
sulting Group. Prior to joining PwC, he
was Assistant Director of IMRO's supervi-
sion department with primary responsibil-
ity for the operators of collective
investment schemes and prior to joining
IMRO he spent ten years as a market
maker in fixed income securities and their
derivatives.
ABSTRACT
This paper sets out some of the issues facing a
firm in attempting to
reduce
the costs of
compli-
ance and concentrates on the operations per-
formed by a firm's supervision teams and their
interaction with the supervisors from the Finan-
cial Services Authority (FSA). It
concentrates
on those areas in which evidence suggests that
the greatest opportunities for gain exist or
where in fact firms permit the most significant
inefficiencies
to remain.
The developments within compliance have
been considerable over the last few years and
while standards have risen so have the costs
associated with demonstrating compliance with
the relevant requirements. Firms must ensure
that their supervision departments are operating
efficiently and this means a return to basics.
The
compliance
plan is an essential requirement
but must be monitored and reviewed in order to
ensure that targets are being achieved and
resources concentrated
upon the higher areas of
risk.
The greatest potential for additional cost has
its origins in the visits undertaken by the
inspectors from the FSA. Without
careful
plan-
ning, adequate resourcing and presentation of
material it is very
easy
for the FSA to miscon-
strue the extent of
a
particular issue, or misun-
derstand the context in which the issue exists
within the business. The opportunity for mini-
mising additional costs arising from a routine
visit from the FSA lies in the hands of
the
firm
but many seemingly miss the warning signs.
When things go wrong, firms
often
feel that
they are at the mercy of
the
FSA. In fact there
are a number of steps that a firm can take to
either minimise the potential for
escalation
of an
issue and to mitigate the
costs
even if
a
transfer
to
enforcement
actually materialises.
INTRODUCTION
The introduction of the Financial Services
Act 1986 (the Act), required members of a
self-regulatory organisation (SRO) such as
Investment Management Regulatory
Organisation (IMRO) or Securities and
Futures Authority (SFA) to appoint a desig-
nated compliance officer. Initially, the role
was often seen as requiring minimal effort
and was frequently added to the existing
responsibilities of the chosen individual. In
the ten years or so since the Act has been
introduced the regulatory regime has chan-
ged markedly. Today's compliance officer
will be a highly visible member of the
senior management team directly involved
with all significant business initiatives and
Journal of Financial Regulation
and Compliance, Vol. 7, No. 4,
1999,
pp. 353-360
© Henry Stewart Publications,
1358-1983
Page 353
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