1. Introduction
If you are looking towards the banking industry for a career path, it is apparent that there are many avenues that an investment bank can offer an individual.
One career path that you may not have considered is one function that no bank will be able to survive without. It is seen as one of the most important areas and is also one of the best paid.
This area is compliance. Perhaps not the first departments that springs to mind, but it is without exception an essential and crucial function, and one of the most interesting roles that you may wish to discover. It may not initially strike you as an area of interest but it is an integral part of a modern successful investment bank.
2. So what is Compliance?
Every employee of an investment bank is individually responsible for exercising good judgment and applying high ethical standards to his or her work, and acting within both the letter and the spirit of the laws and regulations that govern the business and the internal policies and procedures set down by the Bank. With the introduction of N2 (which is the amalgamation of the regulatory bodies under the umbrella of the FSA) financial service companies must adhere to the regulations stated.
Therefore safeguards are set up by law, which investment banks MUST abide by. Some examples follow.
3. Inside Information
"Inside information" is any non-public information about the securities, activities or financial condition of a corporation, public entity, governmental body or other issuer of securities, which, if made public, would be likely to have an effect on the price of that issuer's securities. An example; information about a take-over of a company may be price-sensitive in relation to other companies in the same sector. This leads onto:
Chinese Walls
Chinese Walls are barriers to the passing of information. They are designed to manage confidential information and prevent in inadvertent spread and misuse information. Many banks have set up certain Global Chinese Walls policies.
'Those areas that routinely have access to inside information (e.g. Corporate Finance), and which are considered "inside areas", must be physically separated from those areas that deal in or advise on a financial instruments (e.g. Treasury and Markets), which are considered "public areas"'.
Insider Dealing
Recognising Insider Dealing can be difficult; therefore certain rules are set up which are governed by Compliance experts. It is a pre-requisite that any member of staff will need to liaise with compliance if they, their spouse or immediate family are looking to trade. If there is a suspicion that any individual has prior knowledge regarding a deal (e.g. Corporate Finance) the bank could be exposed. This is another critical roll of compliance to ensure that this is not able to happen.
Wall Crossing on occasions happens to assist an 'inside area' on a transaction and thereby receive inside information. This is a procedure controlled by Compliance.
4. To Conclude
Other areas which compliance covers are Front Office deals including fixed income and Equity trading, Foreign Exchange and the Money Markets.
Anti-Money Laundering, Staff Registration, Restrictive list, Public Quiet Lists are just a few more examples of the areas Compliance is exposed to.
A specialist Compliance Manager in that field normally heads each area up, however some banks will get a multitude of exposure to a number of different departments.
As a result, as a Compliance Officer you are at times exposed to the most highly confidential information, which only certain senior executive management are privy to.
From Front office trading, to Staff registrations, from Chinese Wall Control to Anti Money Laundering, a career in compliance can open a whole new world of opportunities within Investment Banking.
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