Why outsource the compliance function?

The FSA is moving to ‘Principles-based supervision’. The regulator acknowledges that this may be more challenging for small firms, including investment managers which do not have dedicated compliance resources [1]. We are told that as regulated firms, we will “…be given greater flexibility to decide how best to meet regulatory responsibilities” [2]. So what does that mean for a small investment manager, either retail or wholesale, in terms of ensuring compliance with the FSA’s rules? Further, what risks does it pose to a broadly compliant firm endeavouring to operate with integrity and in the best interests of its customers? Tim Duck of CCL highlights some of the issues that small firms must address when deciding whether to employ the services of an independent compliance consultant.

Tim Duck, Senior Consultant, The CCL Partnership LLP, tel: +44 (0) 20 7626 2000; website: www.cclcompliance.com

Firms use independent compliance consultants for a number of reasons: it makes better sense financially for a small firm to ‘buy in’ compliance expertise and use the consultant as a seconded compliance officer; it is a requirement of becoming authorised that the firm submit to independent reviews of the firm’s compliance monitoring procedures on a quarterly basis; or the firm may use a compliance consultant to give it comfort that its compliance requirements are being met through monthly, quarterly or semi-annual monitoring.