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Recent Regulatory Developments in EU and the Roles and Responsibilities of Compliance Officers‘ Presentation at the Banks Association of Turkey TBB - TÜRKİYE BANKALAR BİRLİĞİ Andrew Procter 13 June 2006
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Andrew Procter · 13 June 2006 · page 2 Hot Topics Market Abuse Reputational Risk Conflicts of Interest MiFID –The role of Compliance –Conflicts –Best execution The Role of Compliance
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Andrew Procter · 13 June 2006 · page 3 The Market Abuse Directive Single set of rules for market conduct but… Some inconsistency in application eg block trades – 2006 program New CESR Surveillance & Intelligence WG CESR “Urgent Issues” Group to co-ordinate investigations
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Andrew Procter · 13 June 2006 · page 4 MiFID Preparing for implementation on 1 Nov 2007 Business led implementation Many challenges but many opportunities Likely to see some major changes in the market landscape Major implications for relationships with clients and for trading
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Andrew Procter · 13 June 2006 · page 5 MiFID – Clients Relations Client classification & documentation Suitability Client money & custody Conflicts
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Andrew Procter · 13 June 2006 · page 6 MiFID – trading requirements Pre-trade transparency Post trade transparency Transaction reporting Order handling Best execution
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Andrew Procter · 13 June 2006 · page 7 MiFID – Operational Matters Compliance function Outsourcing Record keeping
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Andrew Procter · 13 June 2006 · page 8 Regulatory Preoccupations Conflicts –Mapping of conflicts –Development of mitigation strategies Non-standard transactions –Reputational Risk
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Andrew Procter · 13 June 2006 · page 9 The Role of Compliance Need to demonstrate that you are worth the money! Need to meet MiFID requirements. Need to ensure that there is adequate protection for the Bank/Firm Three key roles: –Prevention –Detection –Advice
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Andrew Procter · 13 June 2006 · page 10 Prevention – The Cost of Failure Loss of clients/business – Reputational Risk Financial penalties, prosecutions, litigation Restrictions on business activity Personal liability of executives
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Andrew Procter · 13 June 2006 · page 11 A Culture of Compliance Reputational risk and other key messages – from the top! “Tone at the Top” and Reputational Risk training Training for supervisors and managers Taking action when things go wrong
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Andrew Procter · 13 June 2006 · page 12 Preventative Measures: Knowledge, Processes & Systems “Heat Maps” and business “self-assessments” drive priorities Policies and procedures – reviewed every 2 years –NCA & NPA –Reputational Risk – secretariat Comprehensive training program The Control Room –PA dealing, wall crossing, conflict clearance and advice, research clearance, Restricted & Watch Lists
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Andrew Procter · 13 June 2006 · page 13 Detection - Focus Focus on risk areas identified by heat maps and self-assessments
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Andrew Procter · 13 June 2006 · page 14 Detection – What do we do? Electronic transaction & portfolio monitoring – market abuse, embargo breaches, restricted list breaches, money laundering, mandate breaches Desk reviews (compare Internal Audit) Monitoring – Restricted List, Watch List Compliance “on the floor” – identifying problems in real time Compliance led month end look back
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Andrew Procter · 13 June 2006 · page 15 Excellence as Advisors Practical application of law and regulation On the floor, in the (NCA/NPA) process Support for business initiatives – new products, new markets, growth – due diligence, advice on regulation, advice of necessary compliance support
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Andrew Procter · 13 June 2006 · page 16 Advocate to Regulators & Industry Compliance the relationship manager for principal regulators – more than 200 globally Requires: –Pro-active engagement –Management of supervisory visits, ad hoc inquiries and investigations –Co-ordination of responses to consultations –Introduction of business to regulators –Membership of industry consultative groups
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