for some companies it is a hassle they could do without, for many customers it is something which they don’t quite understand, but the truth is that compliance is the best thing to have ever happened in financial services. Experts like Scott Tominaga for example are always working with companies within finical services to ensure that their processes fit with what compliance expects from them, and this is a critical area of their operations. Scott also talks about the importance of compliance and we were lucky enough to spend some time with him in order to learn more about what compliance is and why it is important.
What is Compliance?
In a nutshell compliance is a set of rules which have to be followed for each sale of a financial product, and for each action which a company in financial services carries out. Let’s say for example that a trader is going to be looking after the assets of a client. Compliance in this situation would be that any trades which are made on behalf of the client, fall within the parameters which have already been discussed with the investor. Any extra moves which are made with that money which have not been agreed upon, would be going against the necessary compliance which should have been completed, and thus will be considered fraudulent and illegal.
Protecting The Customer
The main reason for compliance is to protect the interests of the customer. A perfect example of this can be see in the PPI debacle which came to light around a decade ago. What we saw here was that companies had been charging payment protection insurance on loans and finance agreements without asking for a signature from the customer as to whether or not they wanted it. This was eventually ruled as illegal in court and banks and financial services companies were forced to pay out millions to those customers who hadn’t chosen PPI. This is exactly why compliance exists and had it existed prior to that court ruling, then customers would have been fully protected. These kinds of processes have to be followed no matter what the product is that they are being sold.
Protection of Companies
Compliance not only sets out to protect customers, it is also in place so that it can give companies a good level of protection too. Whenever an audit comes around or if a claim is made against the business, they can quite easily and very quickly prove that they followed all guidelines and all levels of compliance which they were supposed to. Compliance is always documented and this is why they are able to squash any problems with speed. Compliance leaves no grey areas and no areas which are uncertain, and that is why it is able to give such good protection to those who work within this industry.
Compliance is improved all of the time, to continue offering both customer and business the best protection.
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