Compliance Risk Management

Course background For several years, the financial press has accounted news items of considerable and repetitive interest concerning securities fraud, ethical lapses, money laundering, conflicts of interest, and insider trading. More often than not, these cases result in loss of business, reputation, revenue, and importantly, trust. Further, as regulatory authorities globally turn their attention to higher expectations in the control environment, the compliance function is quickly becoming an important driver in risk management strategies. From MiFID to Dodd Frank, financial services firms globally are strengthening their Compliance functions with stronger training, supervisory, advisory, reporting and surveillance, and control room resources to meet the intense regulatory scrutiny now expected. Participants will obtain a deep understanding of and appreciation for the necessity of a strong and well equipped compliance function within any financial services institution. Through lecture, class exercises, interactive participation, simulation, and case studies, participants will review the need for financial services regulation, the markets/participants/institutions/instruments over which regulation proceeds, the use of the compliance function as a risk mitigator, the various methods and approaches to compliance with regulatory requirements, establishment of a well-functioning compliance department, and the skills required to succeed as a compliance officer. Through intense analysis of specific cases concerning insider trading, compliance and ethical lapses, money laundering, rule violations (both inadvertent and purposeful), delegates will obtain keen insights to reduce the risk of regulatory and compliance problems and to foster a culture of compliance within their own firms. Attend this topical 3-day course and learn: How to successfully structure and manage an effective compliance function The immediate impact of an ineffective compliance program The comprehensive loss of revenue, trust, and reputation resulting from a weak compliance environment How regulatory changes can quickly impact your organization and bottom line How to prepare for intense regulatory scrutiny and examinations From multiple case studies that globally illustrate cultures of compliance and strong compliance departments This course has been specifically designed for the benefit of: New Compliance Officers Risk Managers Control Function Managers Legal Department Managers Management Consultants Equities Sales and Trading Desk Operations Managers Fixed Income Sales and Trading Desk Operations Managers Investment Banking Administrative Officers Treasurers Financial decision makers in corporations Strategists
Day 1 Setting the Stage: The Need for Compliance News Reviews: Compliance and Regulatory Cases Ethical lapses in the financial services industry (Ignorance, Accidents, or Purposeful?) Insider trading schemes Money laundering webs Supervisory lapses Reputational risk cases Failures in fiduciary responsibilities Cross border bookings Problem of cost cutting and compliance Regulatory scrutiny over outsourcing and smart sourcing Regulatory, Business and Market Expectations: the Bar is High Regulatory Intense regulatory scrutiny More comprehensive examinations Defined, verifiable and effective training programmes New legislation (MiFid, Dodd Frank) Attention to metrics Structural corporate entity changes Placing the customer first Policies, procedures, supervision, and governance Market and Business Loss of business Loss of reputation Loss of market share Loss of trust Loss in profit Approaches to Financial Services Regulation Define regulation Define compliance Historical, social, economic, political foundations for regulating financial services Case Study: Tear Down and Build up Exercise Delegates will dissect two case studies of Allied Irish Bank and Credit Suisse’s Delta One Desk to determine the essential elements of an effective compliance department Creating the Rubric: Structure and Functions of an Effective Compliance Department Delegates will reference this Compliance Rubric throughout the course. Daily, delegates will have the opportunity to apply the Rubric to each course topic, emphasizing the integrative nature of compliance into the business line. Introduction to the Rubric: Structure and Functions of an Effective Compliance Department Advisors and advisory services: providing regulatory advice Surveillance, reporting, and defined metrics Conflicts clearing: personal account dealing, political contributions, registrations and designations, outside business affiliations, gifts and entertainment Examinations and desk reviews Branch audits Supervision: setting the tone at the top Policy and procedures: development, distribution, enforcement Regulatory relations Training Position monitoring Control room: Chinese wall, chaperoning, watch list, restricted list Communications with the public and electronic communications review Affiliate transactions Anti-money laundering and embargoes Regulatory inquiries, complaints Relationship of compliance to regulators, audit, corporate governance, legal, risk management and controlling Testing, control and follow up Day 2 Continuation of the Rubric: Structure and Functions of an Effective Compliance Department Matching the Rubric to Firm Culture Firm mission statement Risk area mission statement Compliance mission statement Code of conduct Policies and procedures The Makings of an Effective Compliance Department Centralized vs decentralized structure Risks inherent in each type of structure What content knowledge should a compliance officer have? What are the competencies of a successful compliance officer? Integration of the various areas of compliance? Collaboration with other control areas of the firm Objective nature of the compliance department Compliance department: reducing regulatory risk or business stoppage department? A penny saved is a penny earned? The impact of regulatory fines Understanding the Business to Understand How to Comply Markets, instruments, participants, and institutions Primary vs secondary markets Sales vs trading vs corporate finance vs asset management vs banking vs operations vs private wealth vs research vs prime brokerage Market behaviour Technical vs fundamental analysis Risk Management and Compliance: a Partnership throughout the Firm For each risk, the instructor will: Define each risk Expand by example or case study Illustrate Impact of each risk to a financial services firm Provide insight into mitigating risk methodology strategies Show the connection between risks throughout the firm and the application to compliance Sample Risks Faced by Financial Services Firms: Business, environmental, compliance, regulatory, reputational, credit, market, investment, interest rate, maturity, counterparty, denominational, political, economic, social and financial risk Addressing Risk through Compliance Management Identify risk Determine impact Coordinate stakeholder needs Plan, control and manage Mitigate or eliminate Policies and procedures Training Supervision Metrics Testing Regulatory relations Implementation Case Studies: Sample Cases of Insider Trading – Galleon Group Case studies distributed to groups of 4-5 participants Day 3 Regulatory Framework - US and UK Financial Regulatory Regimes as Examples UK framework: Parliamentary Law vs Common Law/Case Law European Union Directives EU Financial Services Action Plan Lamfalussy process FSA and relationship to treasury Extraterritorial issues US framework: Congress and laws Regulatory bodies: Fed, SEC, FINRA, CFTC, State Commissions 33 ACT, 34 ACT and 40 ACT Self Regulatory Framework: FINRA Supplemental regulatory framework Corporate governance and oversight Internal supervision Internal risk functions (e.g. compliance, audit, ethics, controlling and legal) Capital Adequacy and Risk Limits Trigger points for risk and overloading on risk Basel III Value-At-Risk models Monte Carlo Simulation models Current Events/is it Working? Review of Dodd Frank Act (USA); EU Directives; MiFID/Market Conduct Global Round Robin on regulatory news Brazil: Banco Central Do Brasil, Comissao de Valores Mobiliarios, Superintendencia de Seguros Privados China: Chinese Securities Regulatory Commission, Chinese Banking Regulatory Commission Russia: Federal Financial Markets Service India: Reserve Bank of India, Securities and Exchange Board of India Course summary and close