Supervision – Stormy seas on the horizon?


Dodd Frank, Volcker, MiFID, Sponsor rules, Market Abuse Directives….and the list goes on.  All very complicated and no doubt taking up a lot of your time.  But the one storm on the horizon that really should be keeping you up at night?  Yep, it`s that regulatory staple, Supervision. 

I am sure you all think I am crazy!  After all, supervision as a concept has been around since regulatory time began so you have a handle on this, right? 

More to the point, supervision is not something Compliance officers are directly responsible for.  We have all had this drummed into our heads since our first day at our desks.

Then again maybe it’s time for a fresh look.

Being hit with failure to supervise by any of your regulators is like sounding the death knell across Wall Street as far as your reputation goes.  All those firms and people who you thought were your friends will quickly be navigating themselves far from your shores!

For sure, companies who find themselves up the supervisory creek without a paddle, can and do navigate themselves through such cases, trying to reinvent themselves to convince the world that all is good again onboard. But the fact of the matter is that a failure to supervise claim is arguably worse than having a bad apple or a rogue trader in your midst that you didn’t detect for a while. 

It’s a loud, clear signal to the world, bad employee in your crew or not, that your company including you, its compliance personnel, are quite simply, not in control of your affairs.  At the end of the day, who really wants to leave their money on a ship with a captain who isn’t in charge and doesn’t seem to know what’s going on?  Repairing the reputational damage from being hit by a supervisory failure is no small feat. 

As you stand in the wreckage of a supervisory failure, the law firm sharks still circling to see what scraps they can pick up in the mess, your integrity will be questioned and your hard work will be in tatters. It will take your firm years to repair the damage not to mention a lot of money.

So with the supervisory storm always peeping over the horizon, what can you do to protect your firm, your clients and yourselves from the storm so this need not capsize you when you least expect it?

In a world with increasing regulatory hoops to jump through, having a strong supervisory crew can mean the difference between a firm’s long term success and failure.  Supervision is also no longer someone else`s responsibility – let`s not forget that regulators are more and more putting you, the compliance officer, at the helm with your business supervisors.   

However don’t jump overboard just yet!  The difference between supervision and effective supervision may not be as complicated as you may expect.

I will provide some of my thoughts based on my experiences working in Compliance departments and leading supervisory program efforts.   My program provides simple steps to help you make sure that your supervisory programs are strong and able to weather any regulatory headwinds coming your way.