Final report on compliance function at market intermediaries published

The report is based on a survey of current regulatory requirements in the jurisdictions of standing committee three (SC3) members, supplemented by the comments received on the consultative version of this report. The report places the focus on the securities regulatory requirements of these intermediaries. However, Iosco expects market intermediaries to comply with all applicable regulatory requirements, stating that “it should also be noted that, to the greatest extent practicable, the principles set forth in this report are consistent with those developed by the Basel Committee, since banks are also involved in the securities markets and subject to securities regulation.”

Seeking flexibility, the principles in the report are intended to be adaptable to the nature, scale and complexity of a market intermediary’s business and operations, particulary according to the level of risk a firm’s activities entail, both for the financial system as a whole and for the firm’s clients: “Even where a market intermediary has a small operation with a simple business, it should consider the appropriateness of adopting the means for implementation outlined under each principle.”

The main issues outlined by the report include: establishing a compliance function; the role of senior management and governing authority; independence and ability to act; qualification of compliance personnel; assessment of the effectiveness of the compliance function; regulatory supervision and cross-border compliance arrangements.

Click here to see a full copy of the report.

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