This post was originally published on fca.org.uk
Effective compliance arrangements matter in firms of every size
Most firms in the survey were small: 64% had 9 or fewer employees and 89% had fewer than 50.
63% of firms reported having a compliance function that is not dedicated solely to compliance activities and has other business responsibilities. This can create conflicts of interest, for example when the compliance function also plays a role in revenue generation.
We recognise that compliance arrangements will differ according to the nature, scale and complexity of the business. They should be proportionate to the risks involved. But arrangements are only proportionate if they allow good outcomes – high standards of conduct and effective conflicts management – to be delivered.
It is particularly important in small firms, where decision-making may be concentrated in a small number of people, that the compliance function has enough presence, authority and access to exert influence and provide meaningful challenge.
The second line of defence must also scale as a firm grows, or as its activities take on greater impact. 32 firms in our survey act as AIM nominated advisers, AQSE corporate advisers/brokers or listing sponsors. Where a firm has an important public markets role like these, strong and credible challenge is essential to maintaining market integrity and investor confidence.
All firms should have procedures and practices that meet the needs of the market they operate in.