The Risks and Challenges of Regulatory Outreach
Vice President - Regulatory Outreach
Wednesday 9 October 2019
Regulatory Client Outreach is a result of having to conform to a new or enhanced rule or policy which is being applied by law to ensure that all necessary governance requirements are being met and to avoid any potential problems in the future. The amount of regulatory client data that needs to be collected and kept up to date is increasing and becoming more complex with each new regulation.
Our role is to:
Identify clients that are in scope for the regulation
Identify the outstanding data required in order to make the client compliant
Ensure the regulation is effectively communicated to the client
Promote an understanding of the rules and regulation
Track and report all incoming responses.
Regulatory Client Outreach has been a prevalent feature in many financial institutions since the introduction of Dodd-Frank and EMIR, both of which mandated the collection of additional data and documentation to comply with new OTC trade rules. Building an effective outreach program has become an operational challenge for most financial institutions.
What are the challenges?
1. Identifying the Client & Required Data / Documents:
Identifying the clients that are in scope must be determined first which involves collating a list of potential clients. Once these clients have been identified and approved, the next step is to identify the data / documentation that is required to ensure the client is compliant with the regulation.
Many financial institutions do not hold a central data system, and this puts increased pressure on the financial institution to reach out to the client who, in some cases, re-submit data which the firm may already hold. This can have a negative impact on the client’s experience and relationship with the bank.
2. Time & Resources of Client Correspondence & Outreach:
Financial Services firms will reach out to those clients for whom they have validated e-mail contact details in order to request the outstanding information.For those that the firm does not hold valid contact details, the outreach team would follow up with the sales team for those details.This can be quite a time consuming and often repetitive process.
3. Monitoring & Reporting Responses:
All client responses must be tracked and whilst this is completed manually using spreadsheets or trackers, this adds significantly to the operational challenges that go together with client outreach.This data needs to be reviewed by the project manager before it can be distributed to the Senior Management Team.
There are a few ways that Financial Institutions contribute to making the process an even more logistical problem:
Getting the Regulation Right
In order to get the implementation of the regulation right, it is important to:
Have a dedicated outreach team that looks at achieving compliance ahead of regulatory deadlines, internal or outsourced
Provide, ideally through the automated client outreach process, the ability to evidence every correspondence and interaction within the client outreach campaign
Continually review operational efficiencies which will in turn reduce operational costs in the long run
Be aware of the impact of the relationship with clients.
Principles of Good Regulation for Businesses
A firm must:
Conduct its business with integrity, due skill, care and diligence
Take reasonable care to organise and control its affairs responsibly and effectively with adequate risk management systems
Maintain adequate financial resources
Observe proper standards of market conduct
Pay due regard to the interests of its customers and treat them fairly
Pay due regard to the information needs of its clients and communicate information to them in a way which is clear, fair and not misleading
Manage any conflicts of interest fairly both between itself and its customers
Take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgement
Arrange adequate protection for clients’ assets when it is responsible for them
Deal with its regulators in an open and cooperative way and disclose to the relevant regulator, in an appropriate manner, anything relating to the firm about which that regulator would reasonably expect notice.
Given the increasing amount of regulations, where possible it makes sense to automate the Regulatory Client Outreach process which will assist Financial Institutions achieve compliance ahead of the regulatory deadlines and will also enhance the client relationship by minimising client impact.
Financial Institutions can transform operational challenges into an efficient, effective and positive process with the right approach and resources.
Engage with a professional firm who has expertise and a good track record in the regulatory outreach process!
Founded in December 2013, FinTrU is a multi-award winning Financial Services company that is committed to giving local talent the opportunity to work on a global stage with the largest international investment banks. FinTrU provides its clients with high quality, cost-effective, near-shore resourcing solutions. FinTrU’s products are: Legal, Risk, Compliance, KYC, Operations and Consultancy. Its clients are all Tier 1 Investment Banks based in London, New York, Tokyo, Frankfurt and Paris. FinTrU currently employs 400+ staff at its two Belfast city centre offices and Derry/Londonderry.