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COMPLIANCE OFFICERS’ WORKSHOP. MiFID – Systems and Controls. MiFID. Agenda Overview Areas Applicable: General Organisation including Business Continuity Employees including Senior Managers. MiFID. Agenda Compliance and Internal Audit Risk Controls Outsourcing Record Keeping

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compliance officers workshop

COMPLIANCE OFFICERS’ WORKSHOP

MiFID – Systems and Controls

Craigcrook Management Services

mifid
MiFID
  • Agenda
  • Overview
  • Areas Applicable:
  • General Organisation including Business Continuity
  • Employees including Senior Managers

Craigcrook Management Services

mifid1
MiFID
  • Agenda
  • Compliance and Internal Audit
  • Risk Controls
  • Outsourcing
  • Record Keeping
  • Conflicts of Interest
  • Deilverables included in your pack

Craigcrook Management Services

mifid2
MiFID
  • Overview
  • Common Platform
  • Super equivalence
  • Remember proportionality
  • New SYSC Rulebook
  • Commencement – 1st January 2007 for CRD firms and 1st November 2007 for MiFID firms

Craigcrook Management Services

mifid3
MiFID
  • General Organisation
  • Tightening of requirements and increased Senior Management responsibilities compared to SYSC 3
  • Requirements are:
  • Robust Governance;
  • Sound decision making;
  • Clear and effective Organisational structure;

Craigcrook Management Services

mifid4
MiFID
  • General Organisation
  • Adequate Internal Controls;
  • Effective Internal communication (MI);
  • Adequate safeguards for the security, integrity and confidentiality of information
  • Accounting – unified standard
  • Obligation of continuous Monitoring

Craigcrook Management Services

mifid5
MiFID
  • General Organisation
  • Formal Verification of Compliance with the Regulatory System -
  • Very much only under consideration at the moment
  • Retain guidance on the Audit Committee
  • Business Continuity

Craigcrook Management Services

mifid6
MiFID
  • General Organisation
  • MiFID requirements wider
  • Require planning for an “interruption” to business activities
  • FSA Policy on the responsibilities of Senior Managers under review
  • Likely to increase

Craigcrook Management Services

mifid7
MiFID
  • Employees
  • FSA will require:
  • Awareness of procedures;
  • Segregation of duties;
  • Employees to be competent and have the appropriate skills, knowledge and expertise;
  • Firms to monitor both their systems and individual employees on a ongoing basis

Craigcrook Management Services

mifid8
MiFID
  • Compliance
  • Creation of a good Compliance culture a priority
  • Compliance to be independent (unless disproportionate)
  • However, then a test of effectiveness applies

Craigcrook Management Services

mifid9
MiFID
  • Compliance
  • Regular Monitoring Programme
  • Effective Policies and procedures
  • Identification of Risks if non compliant
  • Compliance Officer to report to Board

Craigcrook Management Services

mifid10
MiFID
  • Internal Audit
  • Viewed as part of the Compliance arrangements
  • Must be separate from Compliance and/or Risk
  • Internal Auditor responsible for audit plan and verifying compliance with recommendations

Craigcrook Management Services

mifid11
MiFID
  • Internal Audit
  • Internal Audit review of Compliance?

Craigcrook Management Services

mifid12
MiFID
  • Risk
  • Guidance replaced with High Level Rules
  • Covers all employees
  • Risk Management Strategy covering:
  • Risk assessment;
  • Sets the level of Risk tolerance;
  • Risk management arrangements;

Craigcrook Management Services

mifid13
MiFID
  • Risk
  • Create Risk strategies and policies;
  • Regular Monitoring of compliance;
  • Provision of Reports to Board (MI)
  • Risk function to be independent of Compliance and Internal Audit
  • Internal Auditor to review Risk function

Craigcrook Management Services

mifid14
MiFID
  • Risk
  • For Firms also subject to the CRD the following will also be part of the Risk Management Strategy:
  • Credit and Counterparty Risk;
  • Residual Risk;
  • Market Risk;

Craigcrook Management Services

mifid15
MiFID
  • Risk
  • Operational Risk covering identification, management, monitoring and reporting of operating risks including low frequency high severity risks

Craigcrook Management Services

mifid16
MiFID
  • Outsourcing
  • MiFID requirements apply to outsourcing of critical or important functions
  • Will apply to all firms activities
  • Outsourcing must not:
  • Impair Internal Control;
  • Ability of FSA to supervise Firm;

Craigcrook Management Services

mifid17
MiFID
  • Outsourcing
  • Result in the delegation by Senior Managers of their responsibility;
  • Relationship with clients must not be altered;
  • A series of conditions set out in SYSC 8.1.8 must be fulfilled (see pack)

Craigcrook Management Services

mifid18
MiFID
  • Record Keeping
  • Documents to be retained for a minimum of 5 years
  • Little change here
  • Taped Telephone Conversations to be retained for 1 year

Craigcrook Management Services

mifid19
MiFID
  • Conflicts of Interest
  • A recurring theme in MiFID
  • Of huge interest to FSA
  • Refer to “Dear CEO” Letters of November 2005
  • Applies to all categories of clients
  • Disclosure is no longer the default position

Craigcrook Management Services

mifid20
MiFID
  • Conflicts of Interest
  • Firm must have a written Conflicts policy
  • Firms to identify potential conflicts and how these are to be managed
  • Also applies to Conflicts that employees might have or cause the firm to have
  • Firm should create appropriate procedures to manage Conflicts

Craigcrook Management Services

mifid21
MiFID
  • Conflicts of Interest
  • Examples when Disclosure not an appropriate measure:
  • Firms trades as a principal and has advisory or discretionary clients;
  • Firm is advising an issuer and has advisory or discretionary clients interested in investing in the offer;

Craigcrook Management Services

mifid22
MiFID
  • Conflicts of Interest
  • Firms clients have competing interests;
  • Conflicts affecting retail clients
  • Disclosure appropriate only in limited circumstances affecting professional clients
  • When a firm is a member of a Group the interests of other parts of the Group need to be considered

Craigcrook Management Services

mifid23
MiFID
  • Conclusion
  • Increased documentation and procedures
  • Greater responsibilities for Senior Managers
  • Greater Responsibility for Compliance Officer and Internal Auditor
  • Mostly revised policies but some IT implications
  • Especially the need for greater MI

Craigcrook Management Services

mifid24
MiFID

William Macdonald

Managing Director

Craigcrook Management Services

198 Craigcrook Road, Edinburgh

Tel: 0131-312-7501 Mobile:07889-534743

Email: [email protected]

Craigcrook Management Services

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