Survey

Only 30% of compliance functions have a physical presence in the business

Just under a third of compliance functions in UK asset management firms have staff who sit with the rest of the business, PwC research has found. The remainder sit in a central team away from practice staff.

According to the survey, 40 per cent of firms consider that the compliance function’s roles and responsibilities are not fully understood by the rest of the business. 

Results also show that there remains a disconnect between the board and its compliance team, with over a third of boards not playing a role in the oversight or approval of their compliance function’s strategy and objectives.
 
Amanda Rowland, partner and head of asset management regulation, PwC, says: “The results are interesting – the physical presence of the compliance function within a business may not seem overly important, but if this isn’t handled well it runs the risk of a ‘them and us’ culture with the potential for unfortunate consequences.  It raises questions such as: does out of sight mean out of mind?  Do businesses need compliance close to them to advise and achieve compliant behaviours?  Or will being isolated maintain compliance teams’ independence and therefore make them more effective? As in all these areas it’s a question of achieving the right balance – being on hand to advise the business so it gets it right first time, but also being an effective and independent review function.
 
“It seems that roles and responsibilities are often documented but there is a lack of clarity as to whether the business really understands them. There should be a strong connection and understanding between the Board and the compliance teams demonstrated to the business through the tone and messaging in stated values and behaviours.  It is clear that not all firms consider themselves to be achieving this.”
 
The research, which forms part of an extended compliance function survey, polled heads of compliance in some of the largest UK asset management firms to give an indication of the underlying sentiment around their internal compliance function.
 
It also found that there is no clear reporting line for compliance teams, with about a third of firms reporting into the CEO, a quarter into the CRO, a quarter into legal counsel and the rest into the COO or CFO.
 
Rowland says: “It seems that reporting lines for compliance issues vary from firm to firm.  This is not necessarily a problem as each business must consider what is most appropriate for it.  However, some reporting lines will give rise to potential conflicts which need then to be managed by the business.  The right cultural approach will ensure that this is done or that the conflict does not arise at all.
 
“Firms should look at their compliance business model, and establish documented protocol which defines their role, responsibilities, reporting lines, and physical location. This needs to be communicated back to the business to ensure clarity and understanding, and not left to gather dust from lack of use.”

Further reading



Upcoming training

Tue, 14/10/2014 (All day) - London