No 'Rubber Stamp' On Compliance Officers

COMPLIANCE officers subject to new registration requirements with the Securities Commission of the Bahamas should expect a considered, rather than casual, approach to approvals given their critical oversight function.

Dave Smith, the Securities Commission's executive director, told the Bahamas Association of Compliance Officers' (BACO) annual general meeting that the compliance officer's function demanded the Securities Commission give their registration due attention.

Mr Smith said: "It is not envisioned that the registration process for compliance officers would be tantamount to a rubber stamping exercise. There is simply too much at risk."

All firms registered with the Securities Commission under the Securities Industry Act 2011 are required to designate and register their compliance officers with the regulator.

The Securities Industry Regulations 2012 make the compliance officer responsible for the supervision of the securities business their firm undertakes, ensuring it is carried out in compliance with the law.

As a result, compliance officers complemented the Securities Commission. Whereas the regulator often became aware of questionable activities after-the-fact, compliance officers were the gatekeepers positioned to stop breaches of securities laws, regulations or policies before they occurred.

Mr Smith citied several recent examples from leading financial services jurisdictions of fines levied against compliance officers directly for failing to adequately perform their function. One such fine levied in the UK earlier totalled nearly $200,000. Penalties were even stiffer for the firms involved in the breaches.

Mr Smith said: "It is preferred that prudent business persons would realise that the right compliance culture and personnel positions their businesses to avoid the expense of fines and damage to reputation."

To support the new registration requirement, the Securities Commission has released the document Proposed Guidelines for the Registration of Compliance Officers. The proposed guidelines are available on the Commission's website (www.scb.gov.bs), and open for consultation until June 28, 2012.

The guidelines address the required qualifications, skills, knowledge and experience the Securities Commission will consider in authorising the registration of compliance officers.

They also detail the compliance culture that should exist at registered firms, and the appropriate status and independence the Securities Commission expects for compliance officers.

The guidelines call for compliance officers to be key members of staff, with sufficient seniority to enable sound and independent judgment, and sufficient independence to perform their role objectively. The guidelines require registered firms to not engage in any activity that threatens this independence.

Mr Smith said the expectations set out in the guidelines were new to most compliance practitioners. He added, though, that firms subject to the compliance officer registration requirements under the Securities Industry Act 2011 could anticipate heightened scrutiny of the compliance function during on-site examinations. This will include a focus on the independence and status of the firm's compliance officer.

The previous Act governing the securities industry, the Securities Industry Act, 1999, accommodated registration of a principal designated as the compliance director of a registered firm. Provisions in the new Act and accompanying Regulations allow for such persons to be registered under the new compliance officer category, effective from December 30, 2011.

Entities registered under the new Act will be expected to appoint, and register, a compliance officer with the Securities Commission, and to conform with the finalised guidelines for the registration of compliance officers by December 30, 2012.

Mr Smith urged BACO members to provide feedback to the Securities Commission on the proposed guidelines and other documents released for consultation.


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