Category: Compliance, Industry Trends

4 Things to Have on Your Compliance Radar in 2014


Stepped-Up Regulatory & Compliance OversightThis is the third of five blog posts in our industry trends series. In this series we will look at the top five key trends driving the fund industry in 2014.

At the start of each year, we often speculate about what the New Year will bring. Unfortunately, there’s no crystal ball when it comes to compliance. But there are some things we know.

We know the financial services industry will continue to operate in an environment of intense regulatory enforcement and policy making. We know we’ll still be contending with challenging and at times conflicting demands.

Digging a little deeper, what should we be on the lookout for? Where should we focus our attention in 2014? Four areas come to mind.

State Regulatory Enforcement: States are hungry for revenue. This is no surprise with so many states cash-strapped. However, what might come as a surprise is the effect it’s having on regulatory enforcement. States have sharpened their focus and scrutiny in the hopes of additional revenue.

This could lead to an increase in third-party audits, resulting in possible disciplinary actions and potential fines. If you’re already contending with limited resources, your firm could face additional demands, increasing the likelihood of non-compliance and penalties.

Board Education: Compliance programs now have a more enterprise-wide view. CCOs are engaging with senior executives and cultivating a practice of transparency across their organizations. These are all good things, but building a culture of compliance requires more.

Educating the board and helping the board set priorities should be a focus for CCOs and their firms. Moreover, the SEC is holding boards more accountable when it comes to compliance and risk management.

Intermediary Oversight: Intermediary oversight has ratcheted to the forefront. The regulators have not only increased its scrutiny, but they also expect asset managers to have a comprehensive oversight program in place. Boards also have become more focused on identifying gaps in their intermediary oversight program.

With these needs in mind, building flexibility and scale into your oversight program is critical. More scalable solutions and holistic programs that minimize the impact to intermediaries should be a priority.

Valuation Policies and Practices: In 2013, several value-related enforcement actions came to fruition coupled with the SEC citing valuation guidance as a top area of focus. New investment products and asset classes have also prompted fund companies and their boards to reevaluate their practices and policies. To stay ahead of these fronts, fund companies and their boards will need to ensure that valuation practices and processes evolve to meet the growth in new products and can withstand the SEC’s scrutiny.

Do these areas align with your firm’s priorities? Where are you planning to focus your compliance efforts in 2014? Let’s keep the discussion going. Weigh in with your comments.

Or if you’d like to continue the discussion in person, I’ll be at NICSA’s Strategic Leadership Forum tomorrow. Colleagues from PwC, Homestead Funds, and Putnam will join me to talk about some of the regulations most impacting the financial services industries today, what’s around the corner, and why partnering with the business is key to mitigating risk. I look forward to hearing your thoughts.

Craig Hollis

Craig Hollis

Craig joined Boston Financial in July of 2004. Craig has 32 years of mutual fund transfer agency experience in which time he has been responsible for managing numerous operational and support groups including: financial control, transfer agent and blue sky compliance, tax reporting and withholding, intermediary compensation, transaction processing and offshore distribution and servicing. Craig is currently responsible for the regulatory oversight of Boston Financial’s Transfer Agent activities as well as all operational aspects of Boston Financial’s compliance program including a 22c-2 full service solution and Blue Sky administrative services. Additionally, Craig represents Boston Financial in periodic Regulatory Compliance Advisory Group Sessions (RCAG) and is active in the industry, serving on the ICI Transfer Agent Advisory Committee, ICI Abandoned Property Task Force, ICI State Related Issues Working Group, ICI subcommittee on Money Market Reform (Institutional vs. Retail), NICSA Compliance Risk Committee, the Securities Transfer Association and has been a speaker at numerous industry events.


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