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Naming and Shaming - The Painful Cost of Regulatory Failures


Over the course of the last five years, largely as a result of the uncovering of high profile examples of wrongdoing in corporate organisations and partly as a result of public pressure, regulators have responded by turning the spotlight on company directors and senior officers to challenge the corporate decision making process and prevent criminal and civil misconduct.

The real shift came last year when the FSA, now the FCA, shifted the emphasis onto personal liability when it requested that banks identify key individuals if it was considered they were responsible for regulatory misdemeanours or concerns, particularly if they held a position that was considered to be ‘of significant influence’. As a result of what may appear to be a very draconian measure, directors and senior executives can now find themselves on the receiving end of lawsuits if there have been regulatory breaches, financial misconduct or a failure to notify the appropriate individuals of compliance failures. This is now the political climate in which directors and senior individuals operate and the regulators are not afraid to make examples of individuals who either flagrantly flout the rules or simply fail to comply with them. Ignorance is no defence and the rules of strict liability will apply- you have been warned!

A real difficulty arises however where there may be non executive directors of a company that spend very little time actually working within the business and may indeed sit on the boards of several companies. In this instance they are forced to rely on the information that the business provides them with which may be, at best, minimal! It may also not be relevant or critical to the workings of the business itself thereby making the process of compliance extremely challenging. Naturally the incentives for ‘whistleblowing’ and encouraging companies to approach the authorities if there is suspected wrongdoing makes individuals within senior positions even more vulnerable and exposed to even greater risks as they go about their daily roles.

However, with the introduction of Compliance Manager the process of extracting information, keeping matters under review and dealing with issues as they arise to avoid facing sanctions, is easy to manage and provides businesses with a cost effective solution without having to undertake the work yourself or engage third parties to do it for you, at a price. A firm that have already integrated the system has endorsed the product stating that  ‘One of the biggest advantages of Compliance Manager is that it provides clear evidence based audit trails of the compliance processes and procedures followed by staff working on each matter. The system allows us to prevent, and record, if necessary, any breaches of the Code but also helps with the discipline of financial management reporting that is essential to the business and its profitability’.

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