Why Companies Should be Mindful of Their Compliance Unit

We often hear about compliance in context of business terminologies. But what does it really mean? There is usually always a unit or department in every single bank, financial institute, or brokerage firm specifically established for and dedicated to ensuring compliances with all the rules, regulations, and applicable laws. The compliance is a wide and encompassing term. It covers a huge range of responsibilities and roles within a functional establishment.

Depending on the nature of business of the financial institute, the compliance responsibilities in Hong Kong can range from monitoring trading activities, ensuring compliance with regulators, and preventing conflict of interest to avoid money laundering schemes, and possible tax evasion at large banks. It is not very likely that the compliance unit in an establishment is going to be a very popular one. Despite that, this department has a lot of importance and significance in securing and maintaining the overall reputation and integrity of any firm.

The credit crisis of 2008 made it all the most crucial for firms to increase regulatory oversight with the compliance responsibilities in Hong Kong. That crisis has led to great demand for companies to hire experienced compliance managers and staff. Some companies have an entire unit dedicated for it.

The cost of compliance is spiraling upwards; especially during the last few years. The cost of non-compliance can be huge for a financial institute as well. However, non compliance can lead to huge penalties and stiff monetary fines. Let's not forget it can also badly influence the reputation of a firm and may also result into regulatory and legal sanctions.

What is SFC and How it Came into Existence

The SFC or Securities and Futures Commission is an independent statutory body that is functional in Hong Kong. This particular government body is responsible for regulating and watching over the securities and futures market in this city. It is the SFC that is responsible for fostering orderliness and ensuring balance across these markets. It works to protect the interest of investors. It also regulates and implements various SFC compliance to help make sure that Hong Kong continues to grow financially.

It aims to transform this city into the leading international financial center of the world and make it emerge as the key financial market of China. Even though this body is said to be functional as a branch of government, it actually runs independently under law authorization related to the futures and securities.

History

This body was formed in the year 1989 in order to rectify the damage that occurred during the stock market crash of October 1987. After the Asian financial crisis that took place in 1997 the regulatory framework of SFC compliance was further improved. In 2003 SFO was implemented. It stands for Securities and Futures Ordinance (SFO). This framework further bettered and expanded the overall regulatory powers and functioning of this government body.

There are four main regulatory organizations functional in Hong Kong that work as financial regulators. SFC is one of them. This is one of the major financial centers of the world. The rest three are the Mandatory Provident Fund Schemes Authority, Office of the Commissioner of Insurance, and Hong Kong Monetary Authority. Securities and Futures Commissions oversees the activities of Hong Kong stock exchange.