The Evolution of Compliance Function and Compliance Risk in Investment Services

Abstract

This research focuses on the advancement of the Compliance function within banks, investment and insurance companies and on the effect of applying Community regulations as called for by the MiFID Directive. Eighty four financial intermediaries: banks, investment companies and insurance companies took part in this research. Two criteria have been used to interpret the results: 1) the prevailing workability within international and domestic intermediaries; 2) the intermediary typology, creating a distinction between banks, and of these cooperative banks, other financial intermediaries (investment companies) and insurance companies. The research continues what was carried out during 2007, where thirty five intermediaries, namely banks and investment companies were appraised. The present research broadens the spectrum to also include insurance companies. The data was collected using a questionnaire created and analysed by a group of researchers of the Research Division of SDA Bocconi School of Management. The collection phase of the data began in January 2009 and ended in March 2009. The research activity was carried out with the support of SIA SSB Group and in collaboration with AICOM (Associazione Italiana Compliance). With reference to the contents within this study is divided into four research areas: 1) positioning of the Compliance function within the organization; 2) the roles attributed to the Compliance function; 3) the methods used to measure, transfer and mitigate Compliance risk within investment services; 4) how the Compliance function interacts within and outside its structure. A fifth section is included in this report which focuses on the methodology of the research. The research is divided into three parts: I) the main progression steps of the Compliance function within financial intermediaries; II) how the MiFID compliant rules of the game have evolved in the investment services; III) the aim, the sample under investigation and the research methodology.