Sebi to bring compliance officers to book

A company’s compliance officer ensures that the institution he works for follows all the regulations that govern it.

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Compliance officials who had a childhood allergy to examinations may well begin to sneeze.

The Securities and Exchange Board of India (Sebi) plans to make it mandatory for compliance officers to pass a certification exam. Similar to the one for financial advisors, all compliance officers would have to gain this certification to ply their trade.

A company’s compliance officer ensures that the institution he works for follows all the regulations that govern it.

The guidelines for testing these officers are already in the works, according to V S Sundaresan, chief general manager at Sebi.
“The guidelines are being prepared and it will eventually become mandatory for compliance officers to pass an exam,” he said, speaking on the sidelines of an event organised by the National Institute of Securities Markets(NISM).

Sebi would notify the guidelines for testing of compliance officers soon and execution would be left to NISM which it established to act as an entity to aid market development through educational initiatives.

It already conducts certification examinations for functions such as depository operations, security operations and risk management.
The move comes after Sebi chairman UK Sinha’s statement about compliance standards not being up to the mark in many institutions. He asked companies to get their act together before Sebi does it for them.

The compliance modules are likely to be different depending on the nature of the financial institution for which the officers work, said B Renganathan, senior vice president in the investment banking compliance and legal department at Edelweiss Capital.

“The domain of knowledge for compliance requirements would be different in a brokerage and different for a mutual fund. So officers would likely have to give examinations specific to their institution,” he said.

Once certifications are gained, an exam would be conducted again in three years. Professionals could opt for initiatives such Continuing Professional Education or CPE, a kind of refresher course, instead of giving certification exams again; said V S Sundaresan.

He emphasized the need for investor education during his speech and also compared Sebi’s efforts at market regulation to cricketers poised for a run. Both must move in co-ordination for it to be complete.

Perhaps compliance officers will ask for a review.

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