RSK4801 Handbook on compliance.
, SECTION 2
1. INTRODUCTION
1.1 Background to compliance in South Africa
1989 South African Futures Exchange Rules - requires member firms to
have appoint a registered compliance officer. The compliance officer
was responsible for ensuring that the member firm complied with the
SAFEX rules.
1994 King I — highlights the importance of governance and compliance
1995 Johannesburg Stock Exchange Rules - requires member firms to
employ the services of a registered compliance officer. The main
responsibility of the compliance officer, at this time, was to ensure
the member firm complied with the JSE rules.
1999 Strate Rules — requires the appointment of a registered compliance
officer.
2000 South African Rese rve Bank, B anking Supe rvision introduce s
Regulation 47 to the Banks Act. This regulation required all South
African banks and foreign banks with South African branches to
e s t a b l i s ha c o m p l i a n c ef u n c t i o n I. t d e t a i l st h e r o l e s a n d
responsibilities of this function, but leaves ultimate responsibility for
compliance in the hands of management.
2002 King II — again highlights the importance of governance and
compliance.
2004 Financial Advisory and Intermediary Services Act — requires all
licensed Financial Service Providers to appoint an approved
compliance officer. The compliance officer can either be an employee
or an outsourced compliance practitioner.
1©Compliance Institute of South Africa
Handbook for Members
March 2008
, SECTION 2
1.2 Benefits
The establishment of an independent Compliance Function holds, inter a/ia,
the following benefits for the entity:
(a) Lower impact of reputational risk due to, inter alia, a specific focus on:
- maintaining the highest personal standards of integrity at all levels;
- the importance of true and fair dealing with all clients;
- the provision of qualitative and competent services;
- putting the entity's interests above those of individual employees.
(b) Lower impact of regulatory risk due to a continuous focus
and/or awareness on compliance to all applicable laws, regulations
and supervisory requirements.
1.3 Conclusion
The implementation of an independent compliance function is a requirement of
new legislation and is in line with international developments. This will
definitely have a positive effect on the impact of compliance risk on an
organisation.
2©Compliance Institute of South Africa
Handbook for Members
March 2008
, SECTION 2
1.4
The need for compliance
The reasons for establishing an independent compliance function include the
following:
(a) To comply with relevant legislation
Regulation 47 of the Banks Act No 94 of 1990 and the Financial Advisory
and Intermediary Services Act No 37 of 2002 (FAIS) stipulate that an
independent compliance function must be established in banking and
financial services organisations respectively.
(b) To provide for a formal and structured monitoring of compliance A
compliance manual provides for a specific compliance monitoring
process that should not only be formal, but also structured and therefore
more visible to all the relevant stakeholders.
(c) To facilitate the establishment and enhancement of a compliance
culture
A compliance culture can only be established effectively if staff members
perceive compliance as being more than just manuals and checklists.
Staff members must realise that an effective compliance system depends
on a continuous awareness of compliance issues, which should be one of
the Compliance Function's main responsibilities.
(d) To co-ordinate all the relevant compliance functions within the
Group
The establishment of a central and independent Compliance Function at
Group level should enhance effective co-ordination of compliance
strategies throughout the business.
(e) To give specific focus to compliance risk within a broader risk
management framework
The Compliance Function is ideally positioned to deal with compliance
risk as part of operational risk that should fall within the scope of the
bigger risk management strategies.
(f) To be in line with international developments/trends
Compliance Functions have been established at most of South Africa's
international competitors and/or trading partners. Local business must
follow suite if they intend to retain, or improve, their international
competitive edge.
(g) Benefits
The establishment of an independent Compliance Function provides, inter
alia, the following benefits:
(i) Lower impact of reputational risk due to, a specific focus on: -
Maintaining the highest personal standards of integrity at all
levels;
The importance of honest and fair dealing with all clients;
The provision of qualitative and competent services;
Putting the business interests above those of individual
employees.
(ii) Lower impact of regulatory risk due to a continuous focus and/or
awareness on compliance to all applicable regulatory requirements.
(h) Conclusion
The implementation of an independent compliance function is a
requirement of new legislation and is in line with international
developments. This will definitely have a positive effect on the impact of
compliance risk on the business
3©Compliance Institute of South Africa
Handbook for Members
March 2008
, SECTION 2
1. INTRODUCTION
1.1 Background to compliance in South Africa
1989 South African Futures Exchange Rules - requires member firms to
have appoint a registered compliance officer. The compliance officer
was responsible for ensuring that the member firm complied with the
SAFEX rules.
1994 King I — highlights the importance of governance and compliance
1995 Johannesburg Stock Exchange Rules - requires member firms to
employ the services of a registered compliance officer. The main
responsibility of the compliance officer, at this time, was to ensure
the member firm complied with the JSE rules.
1999 Strate Rules — requires the appointment of a registered compliance
officer.
2000 South African Rese rve Bank, B anking Supe rvision introduce s
Regulation 47 to the Banks Act. This regulation required all South
African banks and foreign banks with South African branches to
e s t a b l i s ha c o m p l i a n c ef u n c t i o n I. t d e t a i l st h e r o l e s a n d
responsibilities of this function, but leaves ultimate responsibility for
compliance in the hands of management.
2002 King II — again highlights the importance of governance and
compliance.
2004 Financial Advisory and Intermediary Services Act — requires all
licensed Financial Service Providers to appoint an approved
compliance officer. The compliance officer can either be an employee
or an outsourced compliance practitioner.
1©Compliance Institute of South Africa
Handbook for Members
March 2008
, SECTION 2
1.2 Benefits
The establishment of an independent Compliance Function holds, inter a/ia,
the following benefits for the entity:
(a) Lower impact of reputational risk due to, inter alia, a specific focus on:
- maintaining the highest personal standards of integrity at all levels;
- the importance of true and fair dealing with all clients;
- the provision of qualitative and competent services;
- putting the entity's interests above those of individual employees.
(b) Lower impact of regulatory risk due to a continuous focus
and/or awareness on compliance to all applicable laws, regulations
and supervisory requirements.
1.3 Conclusion
The implementation of an independent compliance function is a requirement of
new legislation and is in line with international developments. This will
definitely have a positive effect on the impact of compliance risk on an
organisation.
2©Compliance Institute of South Africa
Handbook for Members
March 2008
, SECTION 2
1.4
The need for compliance
The reasons for establishing an independent compliance function include the
following:
(a) To comply with relevant legislation
Regulation 47 of the Banks Act No 94 of 1990 and the Financial Advisory
and Intermediary Services Act No 37 of 2002 (FAIS) stipulate that an
independent compliance function must be established in banking and
financial services organisations respectively.
(b) To provide for a formal and structured monitoring of compliance A
compliance manual provides for a specific compliance monitoring
process that should not only be formal, but also structured and therefore
more visible to all the relevant stakeholders.
(c) To facilitate the establishment and enhancement of a compliance
culture
A compliance culture can only be established effectively if staff members
perceive compliance as being more than just manuals and checklists.
Staff members must realise that an effective compliance system depends
on a continuous awareness of compliance issues, which should be one of
the Compliance Function's main responsibilities.
(d) To co-ordinate all the relevant compliance functions within the
Group
The establishment of a central and independent Compliance Function at
Group level should enhance effective co-ordination of compliance
strategies throughout the business.
(e) To give specific focus to compliance risk within a broader risk
management framework
The Compliance Function is ideally positioned to deal with compliance
risk as part of operational risk that should fall within the scope of the
bigger risk management strategies.
(f) To be in line with international developments/trends
Compliance Functions have been established at most of South Africa's
international competitors and/or trading partners. Local business must
follow suite if they intend to retain, or improve, their international
competitive edge.
(g) Benefits
The establishment of an independent Compliance Function provides, inter
alia, the following benefits:
(i) Lower impact of reputational risk due to, a specific focus on: -
Maintaining the highest personal standards of integrity at all
levels;
The importance of honest and fair dealing with all clients;
The provision of qualitative and competent services;
Putting the business interests above those of individual
employees.
(ii) Lower impact of regulatory risk due to a continuous focus and/or
awareness on compliance to all applicable regulatory requirements.
(h) Conclusion
The implementation of an independent compliance function is a
requirement of new legislation and is in line with international
developments. This will definitely have a positive effect on the impact of
compliance risk on the business
3©Compliance Institute of South Africa
Handbook for Members
March 2008
