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Governance comprises regulations and plans to ensure the smooth functioning of government agencies. Governance also combines activities to provide the right support to government bodies.
Regulatory compliance refers to the following rules and regulations connected to business procedures. When regulatory compliance is disregarded, then it leads to a lawful penalty. Some rules and regulations that government agencies must comply with include the Dodd-Frank-Act, the Payment Card Industry Data Security Standard (PCI-DSS),Health Insurance Portability and Accountability Act (HIPAA), and Federal Information Security Management Act (FISMA). Frameworks such as COBIT and NIST, a compliance standard, inform government bodies on how to keep pace with regulations.
Let's take a look at important regulations government agencies must comply with:
Payment Card Industry Data Security Standard is a standard for companies that manage registered credit cards fromlarge card schemes. The PCI Standard is commanded by the card brands, but it is supervised by the Payment Card Industry Security Standards Council.
This standard was built to develop security all around the cardholder data. Every company that acquires and progresses card payments should cooperate with the PCI-DSS. This includes all government agencies that take card payments for provisions.
The National Institute of Standards and Technology is a non-regulatory government company that improves technology, metrics, and standards to encourage creativeness and business competition among U.S. based companies.
NIST creates principles to support government agencies and help them reach the necessities of the Federal Information Security Management Act (FISMA). NIST also helps those agencies by safe guarding their data. It creates the Federal Information Processing Standards (FIPS) per FISMA. The Security Of Commerce accepts FIPS, with which the government agencies must cooperate.
The main challenge for government agencies to follow compliance rules has been an incapability to recognize and gather facts from across their company. The challenge is expanded because of mixed technologies being scattered across agencies, an absence of immediate observation across systems, and the incapability to modify and scale according to administrative requirements.
To efficiently establish compliance, knowledge exchange and involvement from various stakeholders are necessary to construct end-to-end opinions. This helps management monitor the status of compliance across different systems, confirm any non-compliance, and take required measures.
The governance challenges that a government agency faces are as follows:
1. There is a lack of an organized approach to manage compliance.
2. Compliance strategies are not followed through to the end to actually see benefits.
3. Junior-level employees are assigned to project management positions with limited help to be efficient and effective.
4. Agencies that work separately from each other keep introducing new rules and regulations, which further complicates governance.
Here are some of the costs of non-compliance that government agencies must consider:
Compliance errors can be a monetary cost, not just to an agency but also to individuals. Personal liability is an issue for compliance officers responsible for compliance at their agency. Honesty, integrity, and morals are a huge part of compliance, and individuals are held accountable for ignoring the regulations for their business.
When an agency fails to comply with the business executive necessities, it leads to a $5000 fine or imprisonment for the concerned officers.
Most of the time compliance is restricted to a small number of divisions or people, but obeying rules often demands information from more functions. Thus, it's important for everyone in a team to be informed about the meaning of compliance, how it can influence their part, and how it qualifies into the broad view.
Failure to follow compliance in an organization often points to deeper issues with communication and collaboration across an organization.
Time is another hidden cost of non-compliance. Some nations accept business filings online, but 44% of the nations need the filings to be presented personally.
The lack of a well-defined system to handle compliance procedures can cost hundreds of wasted hours to an organization. Thus, it's important for organizations to employ a specialist to arrange the filings in the domestic dialect and file the proper forms at the domestic jurisdictions office.
The best and efficient way to manage compliance advice is to adopt a system that meets present-day information gathering, observing, and circulating necessities across the organization and helps organize administrative procedures in a better way.
At its core, the best compliance management systems offer the following:
A tool should offer a system which can accommodate the company’s business procedure elements and also be flexible to modifications.
Your compliance solution should easily be able to include new users, procedures, and be used for several different compliance-related functions such as risk management and assessment.
It should immediately interact with all data sources needed to observe, evaluate, and reach compliance necessities.
With those pointers in mind, let's take a look at what good governance looks like at a government organization:
An agency must enforce sound administration obligations and liabilities, significant policies, and individual supervision.
Good governance relies on an administrative framework that assists the agency to attain the objectives.
Practical preparation helps to control and utilize resources efficiently, expand compliance capabilities, and develop asense of responsibility across an organization.
Here a few ways in which compliance management software helps government agencies better manage their governance requirements:
Timely adherence to social, legal, corporate, environmental, government, and financial compliance helps agencies avoid fines and penalties. Compliance management software helps automate these activities, so agencies never fall back on their responsibilities or miss important compliance deadlines.
Compliance management software makes sure there is an appropriate record of inspections, assessments, and developments. It also helps agencies develop reliable processes and procedures to ensure everyone in an organization is aware of their compliance duties and responsibilities.
Compliance management software helps government agencies collaborate more effectively and save time on compliance activities. These resources can then be allocated to other areas that need them.
While government agencies work to improve the social life of their citizens, they must also adhere to rules and regulations that help them meet these goals.
To efficiently manage compliance and governance needs, agencies must employ tools such as GRC software such as VComply and establish a compliance strategy that helps them stay ahead of the curve.
The purpose of compliance in banking is to detect and prevent any abnormality, criminality, and noncompliance in the bank’s functioning. Banks must operate with integrity and follow regulations, internal policies, and applicable laws.
Every bank should have a compliance division. The division will make sure that the bank cooperates with all the laws and helps in upholding the reputation of the bank. The division should begiven the duty to oversee the bank’s actions, recognize and examine the areas of risk, evaluate the bank’s plans and strategies' suitability, and provide the remedy to risks.
The compliance functions should ensure that the bank’s transactions are transparent and in conformance with the policies. They should have checks in place to prevent any non-compliant acts, especially legal issues, and identify compliance risks and ways to mitigate them.
The United States has a dual banking structure. Dual banking structure means that the United States banks can be regulated by one of the 50 states or by the federal government. Every bank must have a federal manager. The United States has a complex administrative system that has several federal administrative offices.
Here are two bank administrative offices:
The Board of Governors of the Federal Reserve System: This is the main banking structure of the United States and manages the U.S. pecuniary plan.
The Federal Deposit Insurance Corporation: This is the main administrator for those state-chartered banks who are not apart of the Federal Reserve System.
Here are some of the banking acts that were passed to manage regulatory aspects:
The board of directors of the bank is in charge of supervising the administration of compliance risk for the bank. When the board decides on a compliance plan, they must include a compliance function in the form of an official long-lasting and operative contract.
Every year the board of directors must check if the bank is supervising compliance risk diligently. The bank's compliance plan will not be operative if the board of directors does not encourage the principles of nobility and uprightness all over the company.
The senior management of the bank is in charge of administering the compliance risk of the bank. The management needs to set up and pass on a compliance plan, ensure it is obeyed, and report to the board of directors on the administration of the bank's compliance risk. The senior management is also in charge of setting up a lasting and operative compliance function in the bank as a section of the bank's compliance plan.
The compliance attempts of the bank are concentrated on an established governance, risk, and compliance (G.R.C.)function. Because of that, banks haven’t been able to construct modern capacities necessary for fighting back arising compliance risks.
The administration of compliance is not totally connected to the bank's policy-making procedure. Banks use a compliance sign-off method rather than using a preventive defense approach. G.R.C. programs are controlled in a clumsy way, which leads to irregular executions.
Compliance I.T. execution attempts focus only on the primary compliance instructions and don’t provide any focus towards the longevity features. This gives rise to unusual ‘quick fixes’ that enlarge the later complexity and decrease flexibility.
Compliance functions make sure that the banks work with honesty and follow the rules and regulations. A powerful compliance function reduces risks that are connected to wrongdoings, money manipulation, and other risks.
Here are some of the best practices for banking compliance:
1. Up-to-date technology
Upgrading banking technology can help not only the company but also the consumers. Procedure advancements can supply consumers with superior financial protections at the user level. The technology will have to develop if the consumer base becomes bigger.
2. Managing compliance
Banks must try and automate compliance processes, to ensure they don’t fall behind on their regulatory responsibilities. The compliance function in the bank is responsible for ensuring all employees are aware of their roles in maintaining compliance. There are also several tools such as VComply that provide banks with risk-based alerts, so they can deal with concerns before they become an issue.
3. Get all departments on the same page
When physical actions have been replaced with automation, then the banks should take a long term view and tackle exterior risks. It's essential for each member in a bank to be aware of all the rules and how they must be dealt with.
There are eight necessary components for an efficient compliance structure in banking:
1. Administrative Level Management
The Board must make sure that the bank has a Compliance Plan. The Senior Management should form and manage the Compliance Program and the Chief Compliance Officer (CCO) must be the Senior Officer of Compliance.
2. Compliance Framework
The compliance framework should be developed in three important zones: governance, committed capital, and imposition of schemes and strategies.
3. Schemes and Strategies
The bank must have up-to-date schemes and strategies which comply with the rules and regulations.
4. Observation and Evaluation
The compliance plan should be observed and evaluated all the time.
5. Management Information Systems and Accountability
Banks should account for everything to keep a tab on: crucial matters and administration problems, execution, and reliable deployment and exchange of data.
6. Coaching
A good compliance structure is only possible if the entire personnel is well-educated on how to sustain a strong compliance plan.
7. Compliance Analysis
An individualistic analysis must be done to ensure that the compliance-risk reduction instruments are working as expected.
8. Working Together with Supervisors
Banks should work together with the supervisors by providing them with regulatory documents and responses on draft plans.
Here's a quick checklist for banks to create their own compliance and regulatory framework:
1. Assign Responsibility of the Compliance Structure
Every division should take responsibility for the compliance structure and should be held responsible if something goes wrong. The division that produces the risk should deal with that risk as well.
2. Recognize and Deal with Risks
Even after a bank recognizes and provides controls to risks, there might be additional risks to consider. Banks can deal with these risks by avoiding them, accepting them, transferring them or mitigating them.
3. Use Integrated Risk Management
Integrated risk management helps banks set up schemes and strategies. These are backed by risk-aware ways to better policy-making and work.
4. Oversee Development
Schemes and strategies should not be deployed on a set-it-and-forget-it basis. Banks should regularly conduct audits and reviews to see if their compliance strategies are bringing the results expected.
As with any other business, banks have a set of rules and regulations to abide by too. The failure to keep up with the se can result in heavy penalties and increased risk for banks.
We hope this article provides you with enough information to set up your banking compliance policy.
If you're looking to manage banking compliance in a simple and efficient way, we'd recommend you checkout GRC software by VComply.
If the recent proposal for amending the RIA advertising rules becomes a reality, RIAs (Registered Investment Advisers) can start using testimonials and third-party ratings in their advertisements very soon! Just like how lawyers woo their prospects using their clients' stories of million-dollar settlements in their favor, investment advisers can soon advertise testimonials of how their clients have benefitted through their services.
Let's look at the background of the rule and the reforms proposed by the Securities and Exchange Commission.
The advertising rule was first adopted in 1961, and it has mostly been the same since then. The rule prohibits investment advisers from using testimonials or third-party endorsements. The rule also prohibits references to specific recommendations that the investment adviser has made in the past.
The SEC has recognized that technology advancements have changed how consumers interact with investment advisers and evaluate the financial products. Today's customers rely on information and reviews on the internet before buying any products. After analyzing the market changes, the SEC has proposed reforms and adopted a principle-based approach instead of prohibiting testimonials completely. In November 2019, the Securities Exchange Commission formally released a proposal for replacing it sage-old advertising rules.
In the new proposal, the SEC has suggested broadening the definition advertisement as "any communication" disseminated by or on behalf of investment advisers to obtain or retain clients. However, the definition does not include 1) live oral communication that is not broadcast, 2) responses to some unsolicited request for specific information 3) advertisements or sales literature about mutual funds covered by other SEC rules. 4) information to be contained in statutory or regulatory notice or filing.
The proposed rule would permit testimonials, endorsements, and third-party ratings subject to some restrictions and conditions in reverse from the current rule's restriction on testimonials in advertisements.
The restrictions include:
Regarding the advertisements showing retail and non-retail persons, SEC has distinguished between "retail" and "non-retail persons", and advertisements for "retail persons" will be subject to heightened requirements.
The new rule proposal was subject to the 60 days "comment" process where the public could register their comments about the proposed amendments. The public comment period ended on 03 January 2020; SEC is reviewing the comments. It is expected that SEC will announce the updated versions of the rule sometime before this year's end.
The proposed reforms are beneficial to investment advisers and customers alike. Using testimonials in advertisements can help future clients understand what type of clients the investment advisers have worked with and their experiences. The business becomes competitive, and both individual advisers and firms can leverage these reforms and advertise for growing their business. They might have to incur some additional costs and, chances are there that this can turn out to be more beneficial for big investment adviser firms.
Another perspective on there form is that the principle-based approach to advertising rule makes it open to more than one interpretation. If the rules are too broad, then the same standards may not be followed by all. The proposal's wordings and statements' ambiguity make it difficult for compliance officers and lawyers to make clear decisions and advise companies on any legal impact. And they hope that when rules become a reality, SEC comes up with more precise standards, definitions, and descriptions.
While the new rule might help clients pick up an investment adviser from a google search review result, it might create a new burden for compliance officers as they might need to review each advertisement for its due diligence. For more information on SEC's recent proposed changes, read the complete proposal here.
VComply is an intuitive and intelligent platform that empowers businesses to monitor and manage their compliance and risk initiatives. The team at VComply is dedicated to empowering customers to create and manage powerful, risk, compliance, and governance programs. Contact us to learn more about how VComply can help you meet your compliance and governance goals.
Governance comprises regulations and plans to ensure the smooth functioning of government agencies. Governance also combines activities to provide the right support to government bodies.
Regulatory compliance refers to the following rules and regulations connected to business procedures. When regulatory compliance is disregarded, then it leads to a lawful penalty. Some rules and regulations that government agencies must comply with include the Dodd-Frank-Act, the Payment Card Industry Data Security Standard (PCI-DSS),Health Insurance Portability and Accountability Act (HIPAA), and Federal Information Security Management Act (FISMA). Frameworks such as COBIT and NIST, a compliance standard, inform government bodies on how to keep pace with regulations.
Let's take a look at important regulations government agencies must comply with:
Payment Card Industry Data Security Standard is a standard for companies that manage registered credit cards fromlarge card schemes. The PCI Standard is commanded by the card brands, but it is supervised by the Payment Card Industry Security Standards Council.
This standard was built to develop security all around the cardholder data. Every company that acquires and progresses card payments should cooperate with the PCI-DSS. This includes all government agencies that take card payments for provisions.
The National Institute of Standards and Technology is a non-regulatory government company that improves technology, metrics, and standards to encourage creativeness and business competition among U.S. based companies.
NIST creates principles to support government agencies and help them reach the necessities of the Federal Information Security Management Act (FISMA). NIST also helps those agencies by safe guarding their data. It creates the Federal Information Processing Standards (FIPS) per FISMA. The Security Of Commerce accepts FIPS, with which the government agencies must cooperate.
The main challenge for government agencies to follow compliance rules has been an incapability to recognize and gather facts from across their company. The challenge is expanded because of mixed technologies being scattered across agencies, an absence of immediate observation across systems, and the incapability to modify and scale according to administrative requirements.
To efficiently establish compliance, knowledge exchange and involvement from various stakeholders are necessary to construct end-to-end opinions. This helps management monitor the status of compliance across different systems, confirm any non-compliance, and take required measures.
The governance challenges that a government agency faces are as follows:
1. There is a lack of an organized approach to manage compliance.
2. Compliance strategies are not followed through to the end to actually see benefits.
3. Junior-level employees are assigned to project management positions with limited help to be efficient and effective.
4. Agencies that work separately from each other keep introducing new rules and regulations, which further complicates governance.
Here are some of the costs of non-compliance that government agencies must consider:
Compliance errors can be a monetary cost, not just to an agency but also to individuals. Personal liability is an issue for compliance officers responsible for compliance at their agency. Honesty, integrity, and morals are a huge part of compliance, and individuals are held accountable for ignoring the regulations for their business.
When an agency fails to comply with the business executive necessities, it leads to a $5000 fine or imprisonment for the concerned officers.
Most of the time compliance is restricted to a small number of divisions or people, but obeying rules often demands information from more functions. Thus, it's important for everyone in a team to be informed about the meaning of compliance, how it can influence their part, and how it qualifies into the broad view.
Failure to follow compliance in an organization often points to deeper issues with communication and collaboration across an organization.
Time is another hidden cost of non-compliance. Some nations accept business filings online, but 44% of the nations need the filings to be presented personally.
The lack of a well-defined system to handle compliance procedures can cost hundreds of wasted hours to an organization. Thus, it's important for organizations to employ a specialist to arrange the filings in the domestic dialect and file the proper forms at the domestic jurisdictions office.
The best and efficient way to manage compliance advice is to adopt a system that meets present-day information gathering, observing, and circulating necessities across the organization and helps organize administrative procedures in a better way.
At its core, the best compliance management systems offer the following:
A tool should offer a system which can accommodate the company’s business procedure elements and also be flexible to modifications.
Your compliance solution should easily be able to include new users, procedures, and be used for several different compliance-related functions such as risk management and assessment.
It should immediately interact with all data sources needed to observe, evaluate, and reach compliance necessities.
With those pointers in mind, let's take a look at what good governance looks like at a government organization:
An agency must enforce sound administration obligations and liabilities, significant policies, and individual supervision.
Good governance relies on an administrative framework that assists the agency to attain the objectives.
Practical preparation helps to control and utilize resources efficiently, expand compliance capabilities, and develop asense of responsibility across an organization.
Here a few ways in which compliance management software helps government agencies better manage their governance requirements:
Timely adherence to social, legal, corporate, environmental, government, and financial compliance helps agencies avoid fines and penalties. Compliance management software helps automate these activities, so agencies never fall back on their responsibilities or miss important compliance deadlines.
Compliance management software makes sure there is an appropriate record of inspections, assessments, and developments. It also helps agencies develop reliable processes and procedures to ensure everyone in an organization is aware of their compliance duties and responsibilities.
Compliance management software helps government agencies collaborate more effectively and save time on compliance activities. These resources can then be allocated to other areas that need them.
While government agencies work to improve the social life of their citizens, they must also adhere to rules and regulations that help them meet these goals.
To efficiently manage compliance and governance needs, agencies must employ tools such as GRC software such as VComply and establish a compliance strategy that helps them stay ahead of the curve.
Covid 19 has upended normal life as we know it. Apart from a gigantic impact on the economy as a whole, the pandemic has also put the future of credit unions at risk. In this article, we'll be examining the impact of Covid 19 on credit unions, steps to manage the impact, and a quick checklist for credit unions to manage risk in uncertain times.
Stay at home orders have resulted in a disruption of local and international economies. Loss of assets, income, and unemployment in turn prevent people from being able to pay their loans. Decreased liquidity, increasing provision costs, and a decrease in loan portfolio income are just some of the negative impacts of the health crisis on credit unions. The resulting institutional stress has led to reduced capital reserves of credit unions.
Credit unions around the world are now talking about cash flow management, liquidity management, and spending considerable time restructuring loan implementation. Some other measures credit unions are taking include managing and analyzing non performing loans, dealing with regulatory constraints, and gradually moving towards collections at some point in the future. The best course of action for credit unions is to focus on asset recovery, building their reserves, and mitigating risks as far as possible.
Here are 7 common types of risks credit unions should consider managing during Covid-19
Credit unions may face potential legal consequences if employees working from home are not compliant with any of their policies, or they end up carrying non-compliant activities.
Owing to reduced income and increasing layoff during the pandemic, this is one of the major risks credit unions face.
An increasing demand in loans causes a shortage of funds and liquidity for credit unions.
Low interest rates put a pressure on interest rate margins, and consequently reduce earnings for credit unions.
An inability to communicate properly with employees and members result in negative comments on social media, leading to a damaged reputation.
A huge economic impact on industries such as travel and tourism, increasing healthcare expenses, and spikes in loans all lead to failure to meet strategic targets and plans.
Work from home orders and closure of schools leads to a decline in the workforce. It may also lead to frauds, decreased productivity, and an inability of vendors to provide services. All of this disrupts the functioning of a credit union.
Each credit union's strategy to manage risks will differ as per the restrictions laid down by their government and their state.
If a state allows workplaces to be open, then credit unions must take all measures to keep their members safe. This includes keeping their reading areas of their lobbies free of crowds, and implementing social distancing measures in earnest. They must also digitize any processes that do not require in-person meetings.
The next priority of credit unions should be protecting the interests of their members.
To provide monetary assistance to members, they should help members with restructuring loans, providing loans at low interest rates, helping members with deferred payments, and providing loan extensions. They must also communicate with their governmental institutions and get recognized as an essential service provider. They should also offer financial counseling to their members to help them get through this challenging phase.
It's imperative for credit unions to manage their liquidity during this period. Even though they must expect slow growth during the pandemic, they should use cash flow management tools to proactively make projections for the future and manage the flow of cash.
As credit unions make concessions and become more flexible in their loan services for members, they also have to identify its impact on portfolio performance and proactively plan their loan recovery strategy.
Governments across the globe are taking aggressive fiscal stimulus measures to reduce the impact of the recession. Credit unions must serve as educational institutions, helping their members and the public at large take advantage of these measures. They should also help members rebuild their savings. As the public starts to see a credit union as an ardent supporter of its members and their welfare, they will be more confident to bring their savings to credit unions. They will also likely be more loyal to credit unions.
It is quintessential for credit unions to keep a constant tab on the developments taking place in their state, with regards to Covid 19. This includes keeping an eye on stay at home orders, new regulations to control the spread of the virus, and expected developments in various industries. This is a critical component of risk management for credit unions.
Risk assessment helps credit unions identify and assess threats during Covid 19.
Here's a quick checklist to help credit unions identify and mitigate risk during the pandemic:
While Covid 19 has presented never-seen-before challenges for credit unions, by carefully assessing and considering all possible risks, it is possible for credit unions to sail through this difficult time with minimal damages. The first priority of credit unions should always be to safeguard their members’ interest. Without member support, credit unions cannot thrive.
If you’re a credit union looking to manage risk and governance in a hassle-free way, check out GRC software by VComply.
The Securities and Exchange Commission has laid down various rules and regulations for registered investment advisors (RIA.s), to prevent fraud and unlawful activities. One of the activities that a RIA must undertake to ensure that they comply with all of SEC's requirements is an internal risk assessment of their firm.
Risk assessment for R.I.As helps them identify the different types of risks based on their business model, conflicts of interests, and affiliations. While conducting a risk assessment, they might discover operational and compliance risks related to their firm, and thus be able to remedy it.
Investment advisory firms are prone to some common errors such as incorrect filing of form ADV, making wrong fee calculations, and also a lack of organization of records and books.
Let's take an in-depth look at the importance of risk assessment for RIAs and how firms can conduct it.
A registered investment advisor is a person or firm, that helps institutional investors and affluent individuals manage their wealth and investment portfolios.
All investment advisors must register either with the SEC (Securities and Exchange Commission) or state securities administrators. The latter is usually a government or regulatory agency, or official, overseeing and enforcing state-level regulations and rules regarding securities transactions.
Apart from managing assets for their clients, RIAs also create portfolios by using bonds, mutual funds, and individual stocks. They may also use a mix of individual issues and funds or only funds for streamlining asset allocation and cutting down on commission costs.
Registered investment advisors must follow the fiduciary standard. This means they must always keep the interest of their clients at the forefront. They receive compensation from their clients for their investment advice.
The purpose of risk assessment is twofold: to assess risks to the investment firm and assess potential risks to its clients. They must carefully assess and prioritize operational issues, procedure, and vulnerability in their organisation. Ultimately, they must try to mitigate and minimize risks.
The best way to detect and prevent regulatory violations is having written policies and procedures. This is usually the responsibility of the Chief Compliance Officer (CCO).
Firms should conduct an annual audit for all their processes. This helps them:
Risk assessment serves as a timely shot in the arm to help firms know if their organizational policies and procedures are sufficient to manage risks. Identifying potential compliance slip ups can help them avoid penalties in the future.
Risk assessment for RIAs begins with identifying all conflicts and compliance factors that may create risk exposure for the firm and its clients. Then, they must design policies and procedures that address those risks. It is expected that the policies and procedures should address the following (but not limited to) issues:
There are many types of risks that may harm the interests of a firm and its clients. Take a look:
An individual or a risk committee may identify these risks or any other risks by brainstorming about possible threats to the interests of the firm and its clients.
When identifying the risks, it is important for the advisers to think outside the box. After successfully identifying the risks, the individual or the risk committee should assign a person or team to examine a firm's policies, day-to-day business processes, procedures, and systems surrounding the risks. Then, they must ascertain the level of risk, and propose reasonable compliance solutions for eliminating or decreasing the risk.
Risk assessment is an essential responsibility for a registered investment advisor. It allows them to safeguard their clients against potential harm, and also ensures their firm complies with the necessary regulations and laws.
If you're an RIA looking for a better way to assess and manage risks, take a look at the governance and legal compliance solutions provided by VComply.
As financial planners and money managers for wealthy individuals and corporations, registered investment advisors or RIAs are required to comply with a set of rules and regulations laid down by the Securities and Exchange Commission (SEC).
First, some basic housekeeping: Advisers handling small-scale accounts must register with the state securities authorities, while those who handle more than $100 million worth of assets must register with the Securities and Exchange Commission (SEC).
According to the Investment Advisers Act of 1940, the Registered Investment Advisers (RIAs) have to set up plans and strategies that will comply with the rules established by the Securities and Exchange Commission (SEC). Note the Investment Advisers Act has been modified twice, once in 1996, and later in 2010. As per the new amendments, only advisers with at least $100 million under management must register with the SEC. Essentially, abiding by the rules and regulations put forth by the SEC is known as RIA compliance.
RIA Compliance has many different aspects such as the Investment Advisers Act, the Securities and Exchange Commission (SEC) Examination Priorities, Form ADV, Compliance Officers (CCOs), Funds & Assets, and Code of Ethics. The Advisers Act exists along with the SEC’s rules to prevent any breach of the law. The SEC’s rules are constantly changing in order to be up-to-date with evolving technology.
RIA compliance can present a few challenges to investment firms such as valuation, cybersecurity and theft, custody of assets, and foreign tax compliance which we’ll review in depth in this article.
Before we move on to discuss RIA compliance in detail, we’d also like to shine a light on the basic differences between RIAs and broker dealers. It's common for professionals to confuse the two. However, they vary not just in their scope of work, but also in the laws they must follow and the way they earn a living.
A broker dealer helps in carrying out investing deals. Think advisors that tell you which shares to buy and which ones to sell. Broker dealers collect a small percent of the transaction as commission. Unlike RIAs, they are not bound by fiduciary rules. What does this mean? They generally focus on the deals that are most beneficial to them, as opposed to those which are best for the client.
Registered brokers work for full-service broker dealers, where they have to follow a set of guidelines when it comes to recommending stocks, suggesting investments, and carrying out their business.
On the other hand, independent broker dealers have more legroom when it comes to suggesting investments. For instance, they can also advise clients to invest in hedge funds, IPOs, and nonqualified plans.
Here are some differences between broker dealers and RIAs:
On the contrary, RIA’s provide advice according to the fiduciary standard which means that they provide advice which is best for the customers needs. The fiduciary standard is stricter than the suitability standard.
RIA compliance has a lot of different aspects such as:
Here are some of the common challenges that registered investment advisors can face with compliance:
A better and faster way for RIAs to manage their compliance is using an automated system such as VComply, that helps them receive alerts, automate their calendar, and assign responsibilities.
In order to safeguard their organization from cybersecurity thefts, advisors must run their cybersecurity measures through framewowkrs such as CIS, PCI, NIST, and SOC 2, to deteremine if their security measures are appropriate.
Compliance for RIAs is not straightforward, and with ever changing regulations, CCOs are forced to balance budgets as well as ensure compliance. As the organization grows larger, it becomes even more cumbersome to track and map regulations.
The best option for RIAs to ensure compliance as well as data security is to opt for an automated system for compliance. To reduce the cost of noncompliance, streamline documentation, and keep risks at bay, RIAs can take a look at VComply, an automated governance and compliance software.
Compliance takes work. Surprise audits, producing relevant documentation, coordinating compliance needs across your organization, assigning responsibilities--the list is endless.
If you've been using spreadsheets, or worse, physical records to manage compliance, you know it's nothing less than a nightmare. Now imagine doing all of this virtually, without any of your key stakeholders in the same room. A few scenarios come to mind: chaos, miscommunication, and finally, penalties for noncompliance.
Covid 19 has forced all of our essential work to shift to the virtual world, and this includes compliance. Regulatory agencies are now conducting virtual audits, and nonprofits need to be prepared in case their facilities come under review. There is reprieve for nonprofits though: VComply offers simple, quick, and hassle-free compliance and regulation software, so nonprofits can manage their compliance needs smoothly.
In this post, we'll discuss key features that enable seamless compliance management and the transformation nonprofits can undergo when they adopt VComply's compliance solutions.
VComply is a cloud-based governance, regulation, and compliance software built especially for nonprofits and organizations such as credit unions. It allows companies to manage compliance virtually, making it ideal for remote teams.
Let's drill deeper into features that power VComply's compliance solution and make them unique:
Now we've gone over the key features that make VComply an indispensable tool for nonprofits, especially in a stressful time such as Covid 19.
Let's take a look at how exactly VComply can help you make compliance less of a headache, and more of a piece of cake.
Electronic or manual filing systems are not just difficult to scale, but also an administrative burden.
A lack of streamlined processes for managing compliance can quickly get overwhelming. For example, quality and compliance specialist at Center for Human Development, Dan Sadowski, told us about how they managed compliance before adopting VComply:
"Programs were managing their compliance requirements in a variety of ways. Often a series of emails were required just to confirm a simple obligation. The abundance of documents for policies and procedures can get overwhelming at times,”
On the other hand, a tool such as VComply provides you with an enterprise-level view of compliance activities and gaps, in real time. Track your progress, deadlines, and updates with a few clicks.
If your nonprofit is fairly old, you're aware of the dynamic nature of regulations and laws. Take a look at this: One of VComply's clients has over 8 different regulatory bodies, including eight that don't speak the same language. Combined, these bodies account for 1,000 regulations and over 400 standards to keep track of. Without a better system, managing compliance with such a high level complexity can often feel like a knee jerk, panicked reaction.
VComply allows nonprofits to build a strong culture of compliance in their organization. This involves tracking and monitoring areas for improvement, staying vigilant at all times, and benchmarking compliance performance against previous years. Our clients have reported higher levels of accountability and compliance success.
We'll let Michelle Cove, director of compliance at Center of Health Development explain,
"Confirming with programs that they all have inspections to complete took at least 4 hours. Now we can see all that on our dashboard and produce a report in seconds.” Naturally, all of these time savings result in reduced areas levels across an organization, better performance, and an increase in quality of work and life.
Surprise audra can often be a source of anxiety for nonprofits. When each department has a different location for storing documents and a different naming convention too, procuring all requested reports in one place can be cumbersome.
With VComply, nonprofits can instantly generate reports based on responsibility, person, facility location, and/or state or federal regulation (ex: HIPAA requirements).
During the pandemic, this can be especially helpful, as you're able to virtually access all information in one single place.
While compliance is an unavoidable part of running a nonprofit, it's only a means to an end, and not the reason why you exist. As a nonprofit, you likely have a long term goal in mind to serve your community and beneficiaries
Adopting a robust system of compliance such as VComply helps you save time, resources, and manpower, and focus solely on your mission and purpose.
Covid 19 has accelerated the adoption of cloud-based applications and software, and the effects can only be described as revolutionary.
Nonprofit companies looking to better manage their compliance needs and build a culture of accountability, should definitely seize the opportunity of virtual audits to give VComply a try!
As a healthcare nonprofit, you have the opportunity to impact thousands of lives. However, being a healthcare nonprofit comes with it's fair share of regulatory and organizational issues that can affect your long term future.
In this article, we’ll take a look at some common types of healthcare nonprofits, common compliance requirements for healthcare nonprofits, including HIPAA, and the best ways to manage healthcare nonprofit compliance.
As varied as healthcare issues can be, there are many different types of healthcare nonprofits too. Let's take a look at some of the most common ones below.
These are federally funded 501(c)(3) organizations that provide healthcare services to low income groups. They are generally located in areas where people do not have access to medical support. They serve people from diverse backgrounds and communities. Apart from basic healthcare, they often provide programs related to nutrition, exercise, and wellness. They form a critical component of the public healthcare system, ensuring people in both urban and rural areas benefit from healthcare innovations. Even though they’re nonprofits, they work with cutting edge technology, equipment, and systems to ensure the best care for patients.
Rehabilitation centers for drug addicts are another type of healthcare nonprofit. The cost of enrolling in a private de-addiction facility can be out of bounds for people from low income households. Unfortunately, such people are more likely to develop habits of drug abuse and dependency. Thus, they are more in need of such services. Nonprofit centers such as these help people cope with depression and anxiety, and ultimately, eliminate their dependence on drugs.
While physical health is important, mental wellbeing is also a crucial aspect of healthcare. Non profit mental health organizations help people recognize signs of mental distress and address them in a timely manner. Generally, mental health is considered a taboo topic and people refrain from talking too much about it. An important role of these nonprofits is also to raise awareness about mental health issues, and encourage people to come forward and seek help. Mental healthcare centers consist of professionals who help people cope with distress, both emotionally and psychologically.
Nonprofit healthcare organizations enjoy various benefits from the government, including a waiver of taxes. Hence, they are closely scrutinized by government bodies and must comply with certain rules and laws to maintain their nonprofit status. Organizations that fail to meet federal compliance guidelines face penalties and fines, and can also be barred from raising funds.
Some common compliance requirements for nonprofit healthcare organizations include:
The board of a healthcare non profit organization serves as the guiding light for its actions, helps ensure that it is legally compliant at all times, and manages and supervises it's activities. Each board member should have a specific role.
First and foremost, it is important for a board to ensure a healthcare nonprofit meets rules and regulations in the healthcare industry on an ongoing basis. Board members are also responsible for providing strategic leadership, financial stability, and executive support to a nonprofit organization.
The board must develop and communicate the organization's vision, mission, and goals. It must continually monitor the organization's progress and outcomes. Typically, a robust system for evaluating performance should include the budget, balance sheet, income statement, annual report, and financial reports. These are all critical documents when filing the 990 form.
In terms of legal compliance, the board must ensure all 990 filings are made on a regular basis. Finally, the board is also responsible for heading fundraising activities for a healthcare nonprofit. Successful healthcare nonprofits are generally managed by enthusiastic board members, who regularly attend meetings, actively participate in every aspect of the nonprofit's functioning, and represent the organization in a positive manner.
HIPAA stands for Health Insurance Portability and Accountability Act, implemented in 1996 to safeguard the privacy of healthcare information. The goal of HIPAA is to ensure that healthcare information of the public is not shared with any unauthorized parties, without an individual’s consent.
To maintain the security of patients’ health information under HIPAA, healthcare nonprofits are expected to do the following:
The HIPAA is enforced by the U.S Department of Health and Human Services. If an employee or consumer makes a complaint, it is investigated and corrective action is taken against non compliant organizations.
Often, HIPAA violations occur when healthcare information is stolen, sensitive data is copied, or information is disclosed verbally.
Violation of HIPAA can incur severe penalties for healthcare organizations. These include:
HIPAA violations have cost many hospitals and organizations hefty fines. St. Elizabeth’s Medical Center was charged a fine of $218,400 after they put the public health information of nearly 500 patients at risk. In another case, the Anchorage Community Medical Health Services had to pay a fine of $150,000 after a malware revealed the records of more than 2,700 patients. The center used outdated systems and software, and did not upgrade their technology. This case underlines the importance of processes and procedures, as well as regularly checking your software for malware.
It can be hard to detect security and compliance issues in growing and complex healthcare nonprofits. Moreover, compliance with HIPAA and other regulations often entails huge amounts of paperwork that healthcare organizations can find cumbersome.
A simple solution to their compliance needs is using an automated compliance software that extends across through their entire organization. This will help them maintain consistency and minimize human error.
An automated system for healthcare compliance such as VComply offers the following benefits to nonprofits:
We hope this article sets you up to successfully fulfill your legal compliance needs. Violations of laws such as HIPAA are often the result of technical oversight and not keeping pace with changing technology. With the right tools and software, they are completely avoidable, so you can focus on what matters most: providing world-class patient care.
Regulatory Technology or RegTech, as its name suggests, helps organizations achieve compliance. It is being hailed as the “the new FinTech” and rose to prominence in 2015, from total obscurity.
The coming together of regulation and technology is by no means a new concept. However, it is becoming increasingly valuable. As regulation becomes more widespread, complex organizations and individuals need to find efficient ways to comply. RegTech helps businesses to be organized with their compliance, keep current records and meet regulations efficiently. This is done by organizing data quickly and effectively, making it easy for organizations to maintain transparent records.
Regualtion Technology can be said to be the coming together of three main elements-regulation, people and data. This congregation enables firms to establish a culture of compliance. Technology brings these three factors together in a way to empower and enlighten both the institutions as well as their respective regulators.
The main objectives of RegTech include enhancing transparency and consistency and to standardize regulatory processes as well as to deliver concrete interpretations of ambiguous regulations. It aims to primarily provide higher levels of quality at relatively lower cost. It increases the speed with which reports can be developed, therefore, reducing the time required for compliance processes to be implemented.
RegTech differs from other methods by being cloud-based, meaning that organizations pay exclusively for what they use. Data-driven technologies are put to use along with algorithms and rule-based engines that do all the heavy lifting which was so far done by compliance and risk officers very manually in spreadsheets and legacy system.
The collaboration of existing data sets has been made simpler with the advent of RegTech. We lived in a world of complex interconnected regulations where datasets have to be reused between different regulations. Sometimes, outputs of one set of regulations may feed another. There is, therefore, an unprecedented level of granularity and transparency required which cannot be expected from manual methods. Hence, using spreadsheets and other manual methods of doing all of this is neither suitable nor viable any longer.
Since its characteristics include scalability and flexibility, organizations have the freedom to build their own system and customize it according to their needs. Being cloud-based, it provides security by encrypting the data in use and offers unlimited storage of data. This technology works best when any data needs to be reviewed- it helps in identifying risks and at the same time fulfils the compliance requirements.
Regtech is indeed winning the race to combat regulatory compliance exposure and mitigate conduct risk-especially in digital business environments. Factors which stress its need include-
The digital age has made work easier for a lot of us. Even in compliance sectors, with RegTech, compliance officers can now do their jobs better and in a collaborative way. The advent of RegTech has successfully put all our compliance hurdles out-of-the-way and with further advancement, human effort will be reduced exponentially.
