We are often asked about what personal liability a firm’s Compliance Officer might have. Firms are obliged to appoint an individual to undertake this role and that person will normally be a Director or Senior Manager in the firm. The role is a FCA Controlled Function (CF10), more formally called Compliance Oversight Function. The CF10 is charged with –
- responsibility for oversight of the firm’s compliance with relevant regulations; and
- reporting to the firm’s governing body in respect of that responsibility.
For evidence that the responsibility is real and needs to be taken seriously, we can look to two aspects.
- the regulations that protect the CF10;
- the consequences when it goes wrong.
Firms must demonstrably support the CF10 and compliance function. SYSC 6.1.4 states, “the compliance function must have the necessary authority, resources, expertise and access to all relevant information”.
Firms must also safeguard the objectivity and independence of the CF10. For example, the CF10’s remuneration must not be structured in such a way that might compromise that independence, or be likely to do so. And there are rules that constrain the ability of firms to remove, or apply disciplinary sanction against, the CF10.
When it goes wrong
The real proof of how seriously firms appointing, and individuals accepting, the CF10 role should treat the decision can be seen in cases where it has all gone wrong. The financial press frequently carries stories of large fines and/or bans being imposed on Compliance Officers. It is not appropriate to name names or list every single case here but the following is a representative and eye opening selection of some consequences for Compliance Officers.
£200,000 personal fine
… for failing to action professional advice that due diligence of products was inadequate, recklessly failing to ensure the risk of products’ non-performance was addressed, failing to notify the FCA of the actual non-performance of those products and misleading the FCA.
£105,000 personal fine – and banned
… for contributing to a culture that permitted LIBOR manipulation to take place and failing to recognise the risk of this culture or take steps to prevent it.
£75,000 personal fine
… for failing to exercise due skill, care and diligence in performing the CF10 role.
£33,800 personal fine
… for systematic weaknesses in the design and execution of compliance systems and controls.
£19,000 personal fine
… for failing to deal with the FCA in an open and cooperative manner.