“Compliance is just a subset of “governance” and not the other way around.” – Pearl Zhu, Digitizing Boardroom: The Multifaceted Aspects of Digital Ready Boards
To read or write something about Compliance, the first thing we must know What is Compliance!
A compliance program is a set of internal policies and procedures of a company to comply with laws, rules, and regulations or to uphold the business reputation. Many times, companies can put additional rules to differentiate with competitors and to provide outstanding client service. The compliance team in a company examines the rules set forth by regulators and internally, creates a compliance program, implements it throughout the company, and enforces adherence to the program.
For Mitraz, the regulator is Securities and Exchange Board of India (SEBI), who has set rules and regulations framework for Registered Investment Advisers (RIAs) to protect clients and to maintain their trust in the financial services and markets. The most fundamental premise is that the Advisers need to be fiduciary while dealing with the hard-earned money of the clients.
So now the questions are
1. How do we know if a company is adhering to these rules and regulations because SEBI will not be able to monitor all RIAs every time?
2. Who is responsible in a company to check for violations and to make amends for those?
To answer all the How(s) and Who, the regulators i.e. IRDA for Insurance, RBI for Banks, TRAI for Telecom and likewise SEBI for RIAs mandate a Compliance function in a company to be attended by a person (Compliance Officer) or a team (Compliance Department). The Compliance Officer or Department is required to set monitoring processes and tools to check established policies, rules and regulations. They conduct periodic audits (Internal & external) at multiple levels by involving in daily transactions. They check documents related to Compliance and conduct training or awareness sessions for the stakeholders. Compliance Department also keeps themselves updated on the new processes and regulations circulated by the Regulators.
It is important that the Compliance Officer or the Compliance Department has independence, cannot be influenced to make exceptions and has support at the highest level in the company to be effective.
Compliance in Mitraz :
Mitraz started operations in the December month of 2010 in Bangalore to provide fee-based financial advice that is transparent and holistic in nature. When we started, there were no specific regulations for Investment Advisers. However, we chose to be a Fiduciary to our clients and implemented robust compliance processes from the beginning. Whether it was client onboarding, risk profiling, risk management, client servicing, communication, suitability criteria and reporting we ensured there were mechanisms built-in to deliver rich customer experience. There was no requirement from any regulator, but we implemented central monitoring and conducted internal audits for adherence to the established processes. As our way of working was driven by strong governance principles, it was an easy process for us to apply for the Registered Investment Adviser (RIA) license when SEBI first unveiled the RIA regulations in 2013. Mitraz was one of the first firms in Bangalore to get SEBI's RIA license.
Since 2014, Mitraz formally created the Compliance Department and appointed a Compliance Manager to ensure that we are adhering to the monitoring processes set by SEBI. Our Compliance culture since the very beginning means that the team members are well aware of the regulations and policies that need to be followed. While SEBI RIA 2013 regulation has stipulations, Mitraz goes a step further to implement mechanisms that establish strict quality checks and enhance the customer experience. We have transparent conversations and take inputs from stakeholders on new processes before implementing them.
Our Advisers are not just in search of business at any cost. They take opportunities without violating governance and compliance principles. This ensures that our Advisers never mis-sell services or products and makes Mitraz as one of the most reliable ‘Financial Planning and Investment Advisory Company’ across the financial services industry.
As required by SEBI, we undergo an External Audit every year that is conducted by a certified Company Secretary or Chartered Accountant. Our audit findings are reported to Mitraz Board and corrective actions are tracked at the Managing Director level. Our audits whether external or internal are taken as very serious business in the Company and an opportunity to improve further. Our clients appreciate us for our robust governance and compliance procedures. Mitraz has built trust with clients over the years due to our non-negotiable approach towards compliance.
Since last year, the Mitraz engineering team has started incorporating preventive compliance and automated reporting in our technology platform. This has been reducing our cost of compliance. We have never believed that Compliance is a burden on the organization or like some people say a necessary evil. Our belief has always been that Compliance is a necessity for outstanding Client Service.