Compliance, monitoring, supervision and control functions within an FSP
The compliance function
An FSP must maintain a compliance function appropriate to its business. This includes a compliance officer or compliance function, depending on the licence and requirements, and systems to monitor compliance with FAIS, the Codes, licence conditions and internal policies. Compliance is not only about reporting; it includes risk identification, advice, training, monitoring, record keeping and remediation.
Supervision and monitoring
Supervision applies especially to representatives who are not yet fully competent or who are under supervision. It must be real: the supervisor must be competent, available and able to review and correct the representative’s work. Monitoring should cover client files, advice quality, disclosures, complaints, transactions and adherence to limits. Controls include segregation of duties, approvals, file reviews, call monitoring and management reporting.
Traps
A frequent trap is saying the compliance officer is personally responsible for every breach or makes business decisions for the FSP. Compliance supports and monitors; management remains responsible for the business. Another trap is treating supervision as a once-off induction. Supervision must be ongoing until the representative is competent and, even then, monitoring continues. A third trap is equating a compliance manual with an effective compliance function.
Worked rule
If a representative under supervision gives advice, the supervisor should review the client file and the suitability assessment before or shortly after the transaction, as required by the supervision arrangement. The review must be documented.
Rule of thumb: compliance is a control system, not a person or a manual - it must detect, correct and prevent recurrence.