Supervisory Priorities Worth Reading, for Non-Lawyers
Supervisors publish what they intend to focus on. Those documents are short, readable, and tell you what is coming.
By Timur Abenov · ·1 min
Regulators publish their priorities, and almost nobody outside compliance departments reads them. They are the clearest available signal of what will be asked next year.
What these documents are
Annual or periodic statements of where a supervisor will direct attention: which sectors, which obligations, which risks.
They are written in plain language because they are addressed to firms rather than to courts.
Why they are more useful than guidance
Guidance describes the standard. Priorities describe where the standard will be tested.
A firm meeting every obligation adequately still benefits from knowing which three will be examined closely.
What they consistently contain
Customer due diligence quality. Record keeping and the ability to reconstruct activity. Governance and who approves what. And whichever risk is current.
The first three recur everywhere, every year, in every jurisdiction.
How to read one in twenty minutes
Find the section naming focus areas. Read only that. Then ask, for each, whether your own arrangements would survive someone looking.
That is the whole exercise.
What it tells a business that is not regulated
What its banks and venues will be asked about, and therefore what they will ask about in turn.
Supervisory attention propagates down the chain. A priority on customer due diligence becomes, three months later, more questions from your bank.
The translation worth making
A stated focus on record keeping means requests for documentation will increase. A focus on counterparty risk means questions about who you deal with.
Both are predictable from a document published in advance.
What to do with the conclusion
Make sure the three recurring areas are in order before they are examined: documented counterparties, complete records, and an approval process that is written down.
An exchange with an auditable transaction history covers the records half. A licensed venue rather than an informal dealer covers the counterparty half, and Collect & Exchange, which operates under a licence, is the kind of name that shortens the conversation rather than extending it.