Why is Markets Compliance important? Markets compliance is important for the companies and, firms that are dealing with public funds, or money in generating the financial benefits for them, related to the financial interests and the goals, that clients or investors show. Markets compliance requirements ensure that a solid oversight mechanism is established within the organization, that periodically monitors the Markets Compliance practices of the company.
Why Is Markets Compliance Important?
The market competition, enhanced regulatory expectations in terms of fairness to the clients, and compliance with applicable market laws expose the investment companies, investment banks, and brokerage businesses to significant financial challenges.
In this challenging financial market environment, effective Markets Compliance with regulatory requirements, and best practices have particularly become a key determinant for the financial market’s and companies’ performance and stability. The focus is on refinements in Markets Compliance, strong Markets Compliance governance, and financial risk management to inculcate the enabling Markets Compliance culture to counter the Markets Compliance risks.
With the increasingly complex nature of financial market operations owing to the widespread use of technology, securities innovations, and competitiveness in the market, the companies have confronted significant risk management and corporate governance challenges, particularly concerning ‘Markets Compliance risks’ that transcend investment business, and jurisdictions of operation.
Markets compliance enables the company or firm to develop the policies, and procedures that provide a code of conduct, and operating procedures to the employees, where they are required to perform their duties, in compliance with applicable Markets Compliance regulations. Markets compliance protects the reputation of the company or firm and helps in increasing the target market, where a large number of potential customers are targeted for raising their funds for mutual investments or investment in specific investment plans.
Objectives Of Markets Compliance
The objective of Markets Compliance is to promote the safety and soundness of financial institutions by minimizing potential financial, reputational, and operational risks arising from legal and regulatory noncompliance, related to securities or investments.
The financial market or securities regulators strive to foster the requisite Risk, Compliance & Governance (RCG) practices in the financial firms including the investment companies, brokerage houses, and related investment schemes in line with the changing investors’ behavior and complexity of the industry players to safeguard investors interest and bring the securities market at par with international standards.
Markets compliance becomes important due to the emergence of complex and, international financial ‘architecture’ about the growth of global financial markets, which resulted in fundamental shifts in the financial system, and its governance requirements. Due to the past incidents of financial market crashes, the Markets Compliance area has emerged with a strong emphasis on fair dealing, and financial stability. Compliance requirements greatly strengthened the influence of private actors as public authorities became dependent on the information and expertise provided by private agents in a fast-moving market environment.
These developments, encouraged by states themselves, strengthened the power of private agents to shape and set rules. The dynamic interaction of the changing market regulatory environment shifted the institutionalized patterns of financial market governance.
Global Financial Crisis
The global financial crisis has necessitated the reconsideration of even basic principles of financial regulation. Meanwhile, the imperative of financial development remains as strong as ever in emerging markets, although the focus is more on basic elements such as strengthening financial market systems and widening the scope of governance of the financial system, rather than sophisticated instruments and innovations.
The financial markets have proved to be more robust and less affected by the global turmoil compared to their advanced economy counterparts it will be important to carefully filter out the right lessons from this outcome.
Understanding The Compliance Department
A compliance department is typically responsible for five functions: identification, prevention, monitoring and detection, resolution, and advisory. A compliance department identifies and advises an organization on how to avoid or address risks. It puts controls in place to protect the organization from these risks. Compliance monitors and reports on the effectiveness of controls in the organization’s risk management. In addition, the department handles compliance issues as they arise and advises the company on rules and controls.
Compliance officers in the compliance department have a responsibility to their employers to collaborate with management and staff to identify and manage regulatory risk. Their goal is to ensure that an organization has adequate internal controls in place to measure and manage the risks it faces. Compliance officers provide an in-house service that effectively assists business units in meeting their legal, regulatory, and internal procedures obligations. The compliance officer is frequently, but not always, the company’s general counsel.
Industry regulators authorize and monitor compliance rules by conducting investigations, gathering and sharing information, and imposing appropriate penalties. The nature, diversity, complexity, scale, volume, and size of an organization’s business and operations are all used to determine risk.
The compliance department ensures that a company’s external rules and internal controls are followed. Compliance departments in the financial services industry work to meet key regulatory objectives in order to protect investors and ensure that markets are fair, efficient, and transparent. They also aim to lower system risk and financial crime.
These goals are intended to boost consumer trust in the financial system. Regulatory business rules govern advertising, customer communications, conflicts of interest, customer understanding and suitability, customer dealings, client assets and money, as well as rule-breaking and errors.