Compliance Study_complet - pwc

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© PricewaterhouseCoopers - Protecting the brand, May 2005 79 United States Investment Management Companies The Securities and Exchange Commission (SEC) has adopted rules under the Investment Company Act of 1940 and the Investment Advisers Act of 1940 which require each investment company and investment adviser registered with the SEC to adopt and implement written policies and procedures reasonably designed to: (i) prevent violation of the federal securities laws, (ii) review those policies and procedures annually for their adequacy and the effectiveness of their implementation, and (iii) designate a chief compliance officer to be responsible for administering the policies and procedures. In the case of an investment company, the chief compliance officer reports directly to the fund board. The rules are designed to protect investors by ensuring that all funds and advisers have internal programmes to enhance compliance with the federal securities laws. Legal basis: Investment Management: SEC Rule: Compliance Programs of Investment Companies and Investment Advisers Rule 38a-1 under the Investment Company Act, and related Rule 206(4)-7 under the Investment Advisers Act. Broker-Dealers: NASD Rules 3010, 3012 and 3013 and NYSE Rule 342. Broker-Dealers The National Association of Securities Dealers (NASD) and the New York Stock Exchange (NYSE) have rules regarding the supervisory system, supervisory control and certification procedures of their member firms which have been approved by the SEC. Rule 3010 requires the establishment of a supervisory system which includes policies and procedures reasonably designed to achieve compliance with rules and regulations. Rule 3012 specifically requires that firms identify principals who will be responsible for establishing, maintaining and enforcing a system of supervisory control policies and procedures which test and verify a firm’s supervisory procedures. Rule 3013 requires CEO certification that there exists a process to ensure the controls required by Rules 3010 and 3012 are in place. NYSE Rule 342 requires NYSE member firms to create verification procedures for supervisory procedures over specific areas and a method to test those procedures. Banks While banks, like other US financial institutions, must establish an anti money-laundering compliance programme, US banking law and regulation does not mandate general banking law compliance programme requirements for US banks. The US bank regulators, through regulation, supervision and on-site examinations, seek to ensure that US banks operate in a safe and sound manner. In this connection, US bank regulators expect banks to have a compliance risk management system that is designed to be effective within the context of the size, scope, complexity, and nature of a banking organisation’s business activities and legal structure. Compliance with these expectations is assessed and enforced largely through the bank examination and supervision process. Insurance Companies Under the McCarran-Ferguson Act, the regulation of the business of insurance in the US occurs at the State level. Insurance companies are regulated by State Insurance Commissioners, which coordinate their activities through the National Association of Insurance Commissioners. Any compliance programme requirements or expectations for insurance companies would thus be assessed and enforced by State Insurance Commissioners. It is beyond the scope of this survey to identify possible requirements at the State level.
80 © PricewaterhouseCoopers - Protecting the brand, May 2005 Annex II Current regulatory challenges Region/Country Asia & Australia Current Regulatory Challenges Region/Country North America Current Regulatory Challenges Australia Hong Kong /China • International Financial Reporting Standards (IFRS) • Sarbanes Oxley • Basel II • APRA licensing and Super Choice (Superannuation industry only) • Anti-Money Laundering (AML) • For Australian Financial Services Licensees: Conflict of interest management (PS 181) and disclosure (dollar and general disclosure) • For APRA regulated firms: fit and proper persons obligations • Draft standards on Unit Pricing. • IFRS/International Accounting Standards (IAS) • Basel II • Sarbanes Oxley for US listed companies • AML • Independent Financial Advisory (IFA) supervision in Hong Kong. Canada United States • New legislation: - AML - Privacy • Existing areas of current regulatory risk / concern: - Insider trading and Chinese walls - Mutual fund trading abuse. • Bank Secrecy Act/Anti-Money Laundering/OFAC (Office of Foreign Assets Control) • Fair and Accurate Credit Transactions Act (FACT ACT) (Identity Theft/Fair Credit Reporting) • Privacy/Information Security (Privacy is also affected by the FACT ACT) • Compliance Programme Requirements (Investment Management Companies) • Mutual Fund Trading Practices • Best execution (Broker-Dealers) • Insurance industry broker issues. Japan • Basel II • Protection for Privacy Act (starting April 2005) • SOA302-like regulation (possibly 404-like in the future) • Business Continuity Programme • Strengthening internal audit function (based upon Inspection Manual) • Stricter assessment of asset (loan) quality (based upon Inspection Manual) • IFRS. Europe Austria Belgium • IFRS and prudential filters • Basel II/Capital Requirements Directive (CRD) discussion is underway; regulators have already defined their expectations: - Minimum standards for measuring credit risk and conduct of financing business rules - Minimum standards for internal audit • Increased expectations of regulators on implementation of best practice solutions • Transposition of EU-Directives (e.g., Market Abuse Directive, Transparency Directive) • Company Law will be changed in 2005 to increase confidence in Austrian Capital market, new definition of the role of the supervisory board. • Circular on good practices for outsourcing (external but also intra-group) with deadline for compliance by end of 2005 (all outsourcing should be governed by SLAs, meeting principles outlined in the regulation) • New regulation (Royal Decree) on AML/KYC/Transaction Monitoring • Recommendations on Business Continuity Plan. Though not formally a regulation, this is a strong warning from the BFIC that compliance will be expected by 2007. This derives from the work performed at the level of the Financial Stability Working Committee being established at the Belgian National Bank (BNB) Belgium (cont’d) France • IFRS is very hot on the agenda as it will imply change in the monthly regulatory reporting to the BFIC which is processed via the BNB. IFRS is compulsory for all quoted banks or having to issue consolidated Financial Statements as from 2005. NSA (New Schema A) reporting under IFRS will start as from January 2006 • Basel II. • AML: although no change has occurred in the existing AML regulation in France, this is still a topic which sits high on the financial institutions’ agenda. Regulators’ tolerance is nil, as evidenced by recent sanctions • Basel II: as the date of application is looming, institutions are focusing on the implementation of Basel II arrangements. Some diagnostics are still underway but implementation is the key element and new issues are starting to emerge, such as the interaction with regulatory reporting • Compliance arrangements: it is the new key issue, in view of the recent consultation held by the Commission Bancaire on this topic. This is about to lead to a specific Compliance regulation and date of entry is expected to be end of June 2005 • IFRS: 2005 being the first year of application at consolidated level, not surprisingly, institutions are currently focusing on this intently.
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Compliance Study_complet - pwc

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