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Compliance Automation and the Risk of Avoidance

Posted by Andrew Rosenbaum on Feb 1, 2016

Since the financial crisis, a wave of legislation has hit the financial services industry. 

The demands for compliance have multiplied to the point where keeping track of required disclosures has become a major challenge to compliance teams.


To give an idea of the scale of the challenge: In 2015, the FCA collected £905,219,078 in fines for non-compliance from financial service organizations.[1]


The chances of missing out on required disclosure are vast and the penalties are considerable.

For example, a firm was fined more than £6 million in December 2015 for lack of compliance controls witihin the fixed-income desk and fund managers initiating, booking and executing their own trades, without making adequate disclosure after the FCA demanded information.


The world’s supervisors have made it very clear that robust adherence to policies must be embedded in the risk culture of financial services organisations.




Had the firm kept better track of current legislation it would have avoided the non-compliance that led to the fine.    


Firms are coming to the realisation that fragmented, project-based compliance initiatives are not sufficient to ensure that they can avoid fines. What they need are permanent, repeatable, reliable and demonstrable ways of ensuring that all relevant regulatory change is captured, mapped to internal policies, and actioned.


The benefits of holistic and comprehensive control of required disclosures are considerable. Companies that have successfully automated the disclosure process are able to focus on alternative challenges that may be bespoke to their business. They enjoy increased investor confidence, and less painful due diligence processes. They can trade and complete transactions with greater efficiency, secure in the knowledge that the required disclosures will be managed. And they can take advantage of coordination throughout the organisation, down from the board of directors, knowing that the company’s reputation is secure.


But developing procedures for comprehensive control of disclosure requirements is a complex and time-consuming process. Allowing a third-party specialist to manage the process frees up extensive resources in financial services firms.


Because the third-party specialist has an effective overview of disclosure requirements, it can mine vast amounts of data using new technology to isolate what is material. By focusing on material information, it can eliminate useless elaboration and repetition, avoiding unnecessary duplicative disclosure.


The automated specialist can also format disclosure, presenting it so the most important material information is most prominent, and providing tables and headings to help readers follow the flow of pertinent information.


Most important is the security that a third-party specialist can provide in terms of completeness. It is easy for a financial services provider to misfile, or simply not collect data that is required for disclosure in time. The third-party specialist acts as a controller of quality as well. There is no use in providing information if it does not fulfil what the regulator requires. Companies often attempt to make disclosures with vast amounts of information, not selecting what is pertinent and useful for the reader. And sufficient analysis of the material has to be provided to show what the company is trying to do.


 FundApps is a compliance automation company that prevents our clients from misfiling disclosures and lowering risk of fines and other compliance issues. In general, it is our belief that the compliance world is changing as utilizing technologies such as SaaS, big data, other services people are reducing costs and successfully performing compliance tasks.


FundApps is unique as it provides both technology and content. We make white-hot technology written by some of the best developers around. But we also partner with the most respected content providers in the industry to ensure that all disclosure requirements are taken into account.


The result is that we not only ensure that disclosure rules are met with the necessary information, but we also package that information so that it is most useful to the authorities which require it.

[1] FCA website, published Dec. 18, 2015