Spring is in the air, and the work never ends. But the key to a thorough and fail-safe annual compliance review is to ease into it — by spreading the work throughout the year rather than scrambling at year-end.
The following are the Top 10 Steps to assist you in conducting a detailed, risk-based annual compliance review that even the regulators will admire.
- Compliance Calendar Every firm should have some form of compliance calendar in place. In order to ensure that all regulatory and firm requirements are met, the calendar serves as your reference guide throughout the year.
- Frequent Review Firms should conduct frequent reviews of trading activity and other firm operations. Instead of waiting until the annual review, assess your operations on a periodic basis. Combining the documentation from these ongoing reviews will help you compile a comprehensive annual review at year-end.
- Quarterly Assessment Take time each quarter to assess your operations and compliance program formally. Are there areas that are outdated, or areas that need to be updated to reflect the current regulatory environment? Either way, a documented quarterly assessment demonstrates initiative and engagement with your program.
- Regulatory Updates Keeping your compliance manual or Written Supervisory Procedures (WSP) updated with required policies is always a sure way of showing that you are in tune with the ever-changing regulatory environment.
- Documentation Document all actions taken to address any issues, all reviews conducted, and any business decisions that could affect a standing policy. If it isn't written down, it didn't happen.
- Follow Up Always follow up on issues or concerns that don't pass the smell test. Remember: in our environment, we must trust — but verify.
- Training Attending training programs offered by regulators or industry conferences can provide valuable insight into what the rest of the industry is doing. Joining professional associations is also a strong way to stay current.
- Track Changes Tracking all revisions to policies presents an overview of how actively engaged you are with your compliance program. Regulators have been known to ask for the redline markup of your policies to identify the changes that have been made over time.
- Risk Matrix To avoid risk, you must first understand the types of risks your firm faces on a day-to-day basis. No two firms are alike, so developing a thorough risk matrix tailored to your firm is critical.
- Open Door Policy All staff should be encouraged to approach compliance at the onset of any issue. Compliance should be a resource — not a police force. In an era where a firm's brand is essential to its success, keeping compliance in the loop of daily business operations is not optional. Gone should be the days of compliance being the bad guy; we are part of the good guys, vital for the continuation of your business.
"The key to a thorough annual compliance review is to ease into it — spread it out throughout the year."