Significant enforcement investigations concluded by the Guernsey Financial Services Commission (GFSC) over the past year have highlighted the importance of establishing and maintaining a healthy corporate culture, according to a local regulatory consultant.
Amanda de Carteret, advisory senior manager at BDO Cerberus in Guernsey, stated that the sanctions being imposed by the GFSC are significant both financially and reputationally and the stakes have never been higher when it comes to maintaining a healthy corporate culture.
This encompasses a firm’s broad identity and set of values and extends to factors such as business purpose, leadership and governance.
Recent sanctions have resulted in fines being imposed on licensed firms and directors, on one occasion totalling over £200,000 for a wide array of failures.
“Over the course of the last year, the GFSC has concluded several significant enforcement investigations which have resulted in sanctions being imposed on both licensed firms and directors. These fines are serious and have certainly damaged the reputations of the firms and individuals concerned,” said Amanda. “Being sanctioned can also result in the loss of business or personal livelihoods and can impact on Guernsey’s hard-won reputation.
“It is important for boards of licensed firms to be aware of the GFSC’s findings and relate them to the context of their own operating context to avoid potentially getting into similar situations. Often this begins by establishing a healthy corporate culture which seeks to reduce the potential for harm.”
These basic steps address some of the findings from the GFSC’s recent investigations, so are worth considering:
- Know what you are getting involved in – avoid taking on business which you do not understand and do not have the capacity or resources to handle
- Make informed decisions and seek the advice of others when you need to
- Understand the whole client structure, even if you only have a limited role to play
- Take decisive and timely action when things look like they might be going wrong and keep the regulator promptly informed
- Make sure you understand your contractual and regulatory obligations in relation to each client appointment and fulfil your obligations to the best of your ability
- Make sure you understand the nature and risk profile of each client structure/investment structure or product
“The standards of governance and conduct required by licensed firms are similar across many industries, so a strong corporate culture is a good foundation for any firm,” said Amanda. “Recent sanctions have demonstrated the consequences of not addressing these issues so businesses should act now to avoid problems in the future."
Effective governance is an important element of doing business. Governance arrangements evolve over time, usually for the better, but sometimes they can become dysfunctional. This dysfunction leads to inefficiencies and an unhealthy culture can develop. If left unresolved then a firm may find it is no longer complying with its regulatory obligations, which can have significant consequences.
BDO Cerberus Regulatory Consulting is experienced in conducting Governance Health Checks on behalf of licensed entities in Guernsey. A Governance Health Check can be tailored to your specific requirements, ranging from a full evaluation against the Principles within the Code of Corporate Governance to focussed reviews on specific aspects such as governance structure, business conduct or risk management. We also offer Health Checks on other aspects of your business such as AML/CFT frameworks, compliance functions, risk management frameworks and compliance monitoring programmes.