The interaction between FSA enforcement action and compliance culture: A help or a hindrance?
| DOI | https://doi.org/10.1108/13581980510621938 |
| Date | 01 June 2005 |
| Pages | 142-145 |
| Published date | 01 June 2005 |
| Author | Roger Turner |
| Subject Matter | Accounting & finance |
The interaction between FSA enforcement
action and compliance culture: A help
or a hindrance?
Roger Turner
Received: 11th November, 2004
PricewaterhouseCoopers, Southwark Towers, 32, London Bridge St, London SE1 9SY, UK;
tel: +44 (0)20 7804 3249; e-mail:roger.turner@uk.pwc.com
Roger Turner is a partner in Pricewater-
houseCoopers’ regulatory practice, specia-
lising in investment management issues
for UK and international clients. Formally
an assistant director in MRO’s monitoring
department, he also spent some ten years
as a fixed income and derivatives market
maker.
ABSTRACT
KEYWORDS: compliance culture, publicity,
compliance failure, expectations gap
The use of public discipline by the FSA,
usually accompanied by the imposition of a
fine, has become familiar to readers of the finan-
cial press. To date the assumption has been that
the use of publicity assists the FSA in achieving
its objective of encouraging the development of a
compliance culture. However, the time that
many cases take to reach a conclusion can signif-
icantly weaken the impact upon other firms’
behaviour and could deter people from making
investments. The FSA must ensure that its
public discipline is proportionate to the offence
and in order to have maximum effect should be
delivered quickly.
The Financial Services Authority (FSA), and
certain of its predecessor organisations, have
publicly censured organisations, and some
individuals, for breaches of principles and
rules. The public censure has usually incor-
porated the imposition of a fine and head-
lines in the press highlighting these
compliance failures have become familiar.
The question to be considered here is
whether this publicity encourages the devel-
opment of a compliance culture. The ques-
tion can be considered from two viewpoints.
First, whether the organisation in question
does, as a direct consequence of the publicity,
develop an enhanced compliance culture and
secondly whether the publicity serves to
embed a compliance culture more widely
within all regulated entities.
COMPLIANCE CULTURE
To begin with it is necessary to define a
compliance culture. At the most simplistic
level, an organisation with a good compli-
ance culture could be defined as one that
operates in accordance with the regulatory
standards that are imposed upon it. The
author would however argue that a com-
pliance culture is a wider concept of beha-
viour rather than mechanistic compliance
with a rule. An organisation that exhibits a
good compliance culture is one where all
personnel proactively consider whether the
standards expected by the FSA are being
met. From the FSA’s perspective this
would translate in broad terms to putting
the interests of the customer at the forefront
Page 142
Journal of Financial Regulation and Compliance Volume 13 Number 2
Journal of Financial Regulation
and Compliance, Vol. 13, No. 2,
2005, pp. 142–145
#Henry Stewart Publications,
1358–1988
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