Compliance Monitoring & Reporting: Evergreen integrates compliance activities with Compliance Track
Compliance Officer of Evergreen International, Mr. M. Sohal writes about the challenges in compliance management and his experience of implementing Compliance Track.
Compliance Track unifies compliance work into one powerful, feature rich, fully auditable application.
Evergreen International Advisors (EIA) manages more than $10 billion in assets and it is owned by The Wachovia Corporation which is the 4th largest US retail bank in asset size ($762Bn), employing over 100,000 staff worldwide, with operations in all major cities worldwide.
EIA is part of a boutique of specialist Wachovia fund mangers, providing clients a "best of breed" in fund management for the Bank and it’s clients. EIA is FSA regulated in the UK and SEC registered in the US, which allows EIA to take on both European and US clients.
EIA runs a small operation in the UK with 17 specialist staff. Compliance work is managed in-house and consists of day to day and ad hoc work, regular monitoring and reporting.
Compliance work is carried out and recorded using a combination of Microsft Excel and Word, and manual filing, albeit mostly now in electronic form. Although EIA is well covered in all relevant compliance areas, compliance work has many 'cogs' in the machinery which take time to turn and leave the potential for many things to go wrong.
An unlinked electronic system using Microsoft Excel and Word is inefficient and time consuming as a manual system.
- It takes time to update and maintain this system
- There is no backup of manual files
- There is no linked audit trail or immediate drill-down facility
- There is a higher risk of missing errors
- Searching for information can take time as manual records need to be searched
The FSA has firmly put the onus on senior management to demonstrate effective systems and controls under FSA rule SYSC 13.7. Senior management must be able to demonstrate a reasonable approach and process, and show adequate consideration for risk management.
During their Arrow visits, the FSA's focus has been on themes within the business and demonstrating effective systems and controls. Looking at SYSC files is an essential part of their work, and therefore having good effective, auditable SYSC files will give the FSA the information they need in a quick, concise and consistent form.
Under the FSA rules there are 5 elements that the FSA will look to be satisfied in it’s supervision of regulated firms (SUP 1.3.11) – 2 key areas in this are:
- Baseline monitoring; to demonstrate that you are regularly monitoring. This should be a formal auditable monitoring programme
- Risk mitigation programmes; to show how you have mitigated risks, such as above
Under FSA rule SUP 3.2, the firm’s auditors are required to comment on Firm’s business. This means that the firm needs to be able to demonstrate this through it’s compliance monitoring programme.
Under ICAAP & SREP the FSA will review the firm’s arrangements, strategies & processes to determine sound management of the business, and hence that risk is being reduced.
Under these rules, the FSA has strong legal powers to take punitive action against firms. Failure to satisfy the FSA can lead to heavy fines, closing down the firm, and even prison sentences for senior management including compliance officers. By having good, well documented systems, processes and procedures, and a strong compliance monitoring programme, these risks can be significantly reduced and leads to best practices in the industry.
Compliance Track has unified EIA’s compliance work into one fully auditable application. All the compliance data is now in one application.
Compliance Track allows EIA to be able to demonstrate effective and flexible compliance documentation, recording and monitoring system, helping it to comply more easily with the FSA rules.
It is an effective SYSC folder, thereby reducing the risk and helping senior management and the compliance officer with their legal obligations.
There is a full audit trail starting with the compliance manual, policies and procedures, these being linked to the compliance tests, the recording of compliance monitoring activities, and delivery and reporting of the relevant information.
For example, procedures & policies assigned to each member of staff are shown on their dashboard, any changes or new procedures are sent to them automatically for them to affirm, and their affirmations are recorded. This is especially useful for the approval and recording of annual declarations, PA Dealing, and Gifts & Entertainment to name a few applications.
Compliance Track also provides the functionality to conduct and record the internal compliance monitoring programme, with automatic reminders dependant on the frequency of the programme - monthly, quarterly, semi-annual or annual.
The key benefits of this system for EIA include:
- data is stored and retrieved from one place
- data is immediately accessible, with drill-down facilities
- the system provides a systemised & methodical approach
- there is easier / more visible compliance interaction with staff, again with full audit trail
- reminders of deadlines and tasks can be automated
- can use templates with accurate data for reports
- compliance can be paperless, as all the data, reports and evidences are stored within Compliance Track
EIA uses the following functionalities of Compliance Track;
- documenting the firm’s policies, procedures and compliance manual. Staff affirm they have read these. This is recorded electronically.
- carrying out a compliance risk assessment which is linked into the policies, procedures and compliance manuals.
- documenting EIA's in-house CMP - a lot of data will already be stored on the system and can be used to complete the CMP either automatically, or through a system generated report.
- can be used to record PA dealing, gifts & entertainment, client presentations, approved persons lists, T&C data, client categorisation data, quarterly / annual staff declarations, approved persons register, client register and other logs.
- creation of standard forms and submission documents for the FSA – QFR, ICAAP, financial resources etc, and for internal management such as the compliance report to the board of EIA, Variation of Permissions, Approved persons forms (Form A), staff declarations.
Compliance Track has made workflow far more efficient and is infinitely more scalable than the old manual system. Compliance Track has been easy for staff to learn and use.
About the Author
{mosimage}Mandip Singh Sohal BSC(Hons), is a qualified accountant, a fellow of the ACCA., graduated from Leicester where he studied Accounting and Mathematics. He has worked for 23 years in the City with both large and small financial institutions, such as Pearl, Prudential, Foreign and Colonial, Skandia Investment Management, and the Rothschild family investment office (regulated by the FSA).
He has been working in compliance the past 11 years with Skandia, the Rothschild family investment office and FIA. In common with many small to medium investment managers, Mandip is also the Finance Officer. His work in compliance has significant focus on clients through AML, client guidelines and best execution.
After managing an in house project to comply MiFID in house, he is now looking at TCF.