The Compliance Revolution. Jackman David

>

      David Jackman

      The Compliance Revolution

      The Wiley Finance series contains books written specifically for finance and investment professionals as well as sophisticated individual investors and their financial advisors. Book topics range from portfolio management to e-commerce, risk management, financial engineering, valuation, and financial instrument analysis, as well as much more. For a list of available titles, visit our Web site at www.WileyFinance.com.

      Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offices in North America, Europe, Australia, and Asia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers' professional and personal knowledge and understanding.

      The Compliance Revolution

       How Compliance Needs to Change to Survive

      DAVID JACKMAN

      Copyright © 2015 by John Wiley & Sons Singapore Pte. Ltd.

      Published by John Wiley & Sons Singapore Pte. Ltd.

      1 Fusionopolis Walk, #07-01, Solaris South Tower, Singapore 138628

      All rights reserved.

      No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as expressly permitted by law, without either the prior written permission of the Publisher, or authorization through payment of the appropriate photocopy fee to the Copyright Clearance Center. Requests for permission should be addressed to the Publisher, John Wiley & Sons Singapore Pte. Ltd., 1 Fusionopolis Walk, #07-01, Solaris South Tower, Singapore 138628, tel: [phone], fax: [phone], e-mail: [email protected].

      Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor the author shall be liable for any damages arising herefrom.

      Other Wiley Editorial Offices

      John Wiley & Sons, 111 River Street, Hoboken, NJ 07030, USA

      John Wiley & Sons, The Atrium, Southern Gate, Chichester, West Sussex, P019 8SQ, United Kingdom

      John Wiley& Sons (Canada) Ltd., 5353 Dundas Street West, Suite 400, Toronto, Ontario, M9B 6HB, Canada

      John Wiley& Sons Australia Ltd., 42 McDougall Street, Milton, Queensland 4064, Australia

      Wiley-VCH, Boschstrasse 12, D-69469 Weinheim, Germany

       Library of Congress Cataloging-in-Publication Data is available

      ISBN 9781119020592 (Hardcover)

      ISBN 9781119020608 (ePDF)

      ISBN 9781119020615 (ePub)

      Cover image: birch tree forest ©fet/Shutterstock

      Cover design: Wiley

To my family

      Preface

      This book is about maturity —corporate maturity– how businesses grow up and become more reasoned and responsible, and also more effective and better performing. It is also about the maturing of compliance into a profession, a critical function that sits at the interface between business and wider society. The quest is relevant to all forms of business and to many functions and the models presented here have general applicability.

      What maturity is and how to grow is subtle and complex. We contend that however you define or try to create maturity, it is recognizable to customers, employees, and investors – and to regulators, who are increasingly concerned with corporate culture, integrity, governance, and conduct risk.

      We use as our example financial services, a sector whose responsibility has been much challenged of late and where regulatory approaches and compliance practices are changing apace. Financial services also impacts many other areas of business that are dependent on its role while, as we have seen since the 2008 global financial crisis, its influence spreads out into the wider economy of Main Street and influences the opportunities and prosperity of many across our communities. Compliance has a key position, mediating between the powerful drivers in a highly competitive, complex, and internationalizing industry and the needs of the encircling realm of its multiple stakeholders. We will consider how compliance can use its pivotal role in strategically directing companies towards a more mature and responsible culture. In doing so, the function also transforms itself and demonstrates considerable value.

      The rate of change in regulation and compliance has hastened in recent years, partly reflecting the rapid development within the financial services industry and partly because of an internal momentum within regulation that seeks new methodologies and procedures in pursuit of the long-term goal of greater effectiveness and efficiency. This internal momentum generates layer-upon-layer of regulatory reform and consequent compliance evolution, but the processes underlying change have reached such a pitch that recent stages can only be described as requiring a “compliance revolution.” This revolution is just starting, and the most significant steps are still to come.

      However, few in compliance, regulation, or senior management are aware of this revolution, its implications for the wider business, and how compliance needs to prepare and lead. A primary purpose of this book is to make compliance practitioners aware of this revolution, how to manage change, and what is required of them. If compliance fails to step up, it is likely that the function will lose influence and become marginalized. The opportunity for professionalizing may not return.

      Part of the armory of any profession is a clear model and narrative of how it adds value to businesses and the wider economy. This is absent for compliance, which has been historically reactive, subject to fashion, and somewhat cyclical. Here we attempt to fulfill the urgent need for an overall development model for compliance and regulation. We also add a new suite of technologies and methodologies that give more meat to its practices and buttress a claim for professionalism.

      The book comprises three parts:

       Part I: Theory – a model of regulatory and compliance development

       Part II: Practice – tools and techniques to improve compliance performance

       Part III: Purpose – the overall aims and drivers of new compliance

      Compliance is at a fork in the road. If compliance steps up its value, its status will be enhanced; miss the opportunity, and other functions may well appropriate traditional territory. This book aims to help compliance, regulators, and businesses make wiser, more mature choices.

David JackmanEasedale2015

      Acknowledgments

      The concepts and tools here are the product of a long and almost continual internal conversation, informed by endless field testing on firms, sectors, and industries in different jurisdictions. The thesis does not draw heavily on any existing body of work or adopt a particular philosophic position, but picks, jackdaw-like, from a wide selection of relevant sources and examples – we hope constructed to form an elegant whole.

      Many say ethics and compliance are important but few wish to think very deeply, and would rather be told. This is, of course, part of the problem we address. Some elements are pioneering and ahead of