Page 161 - CFPA-SCR-Award in General Insurance W01_2018-19_Neat

Chapter 10 Ethics, corporate governance and internal controls 10/9

C2A Compliance function
The compliance function generally includes the identification of compliance responsibilities, assessment
of risks, advice, monitoring, and reporting on the firm’s compliance with laws and codes of conduct, as
well as assisting in the prevention of company violations.
Compliance risks include the risk of legal and regulatory sanctions against the firm and firm personnel,
material financial loss, loss to reputation, and actual loss of the franchise. These potential losses are
incalculable. Therefore, unlike market and credit risks, compliance risks are not risks taken as part of the
firm’s business, so the compliance function should therefore be robust.
C2B Internal audit function

Internal audit conducts periodic, independent reviews of all control functions within a company. This
means auditing all risk control areas, including the compliance function.

The compliance function and the audit function should be separate, to ensure that the activities of the
compliance function are subject to independent review.
There should be a clearly documented understanding as to how risk assessment and testing activities
are divided between the two functions. These principles underlie the expectations of the regulator’s
examinations of a firm’s internal audit function.

C3 Complaints procedures

Complaints procedures have become compulsory in some countries and, where this is not so, voluntary
complaints procedures are regarded as good practice. It is not only ethical for a provider to be concerned
about customer grievances, it also makes commercial sense; a satisfied customer is a good customer.

A complaint is defined in the FCA Handbook as:

any oral or written expression of dissatisfaction, whether justified or not, from, or on behalf of, a person about the
provision of, or failure to provide, a financial service, which alleges that the complainant has suffered (or may suffer)
financial loss, material distress or material inconvenience.

A complaints department should have a set of formal procedures to be followed by every member of the
firm and breaches of these procedures should have disciplinary implications. The purpose of the
procedures should be to ensure all of the following:
• The proper handling of client complaints.
• Prompt and appropriate remedial action, where justified.
• Notification of any further course of action available to clients who are not satisfied with the firm’s
reaction or remedy.
In many countries, dissatisfied clients have access to official bodies beyond their adviser and product
provider. In some countries, there is a statutory body which has a supervisory responsibility over the
adviser and/or product provider. Additionally, in some countries, groups of companies in an industry
have collaborated to finance an industry ombudsman which will provide an impartial investigation into
the complaints against providers. In others, trade associations can exercise pressure on member firms
that are not behaving as they should. Where there is no such body, the law courts are open to those
clients who can afford to take legal action.

While the precise procedures followed by each complaints department will vary between organisations
the following stages are essential in the handling of each complaint:
• Complaints should be reported immediately to the complaints department of the product provider.
• Full details of the complaint and the source should be logged.
• A prompt written response should be made to the complainant.
• A full internal investigation into the complainant should be conducted immediately by the product Chapter
provider.
• The firm’s decision remedy or offer should be sent to the complainant without delay. 10
• Dissatisfied complainants should be advised if they have the right to pursue their grievance with
another external body.

All actions should be writing – even those where the original complaint or any dealings with the
complaint, were conducted orally. Copies of all correspondence and notes of conversations must be held
in the specified files.