Public Comments Received on the IOSCO Technical Committee Consultation Report Entitled Compliance Function at Market Intermediaries

PUBLIC COMMENTS RECEIVED ON THE IOSCO TECHNICAL COMMITTEE CONSULTATION REPORT ENTITLED COMPLIANCE FUNCTION AT MARKET INTERMEDIARIES INTERNATIONAL ORGANIZATION OF SECURITIES COMMISSIONS February 2006 List of Organizations that have provided comments: ¾ French Association of Investment Firms (AFEI) ¾ Zentraler Kreditausschuss (ZKA) ¾ Associazione Italiana Intermediari Mobiliari (ASSOSIM) ¾ Banca Intesa S.p.A ¾ The Netherlands Bankers’ Association (NVB) ¾ Barclay’s ¾ Bundesverwand Investment und Asset Management e.C (Germany) (BVI) ¾ National Association of Independent Broker-Dealers (NAIBD) ¾ The European Federation of Financial Analysts Societies (EFFAS) ¾ Vereniging van Compliance Officers (VCO) ¾ Futures and Options Association (FOA) ¾ Australian Stock Exchange Limited (ASX) ¾ The International Banks and Securities Association of Australia (IBSA) ¾ International Financial Data Services Limited (“IFDS”) ¾ The Investment Funds Institute of Canada (“IFIC”) ¾ The Investment Management Association of Singapore (IMAS) ¾ SRO Consultative Committee ¾ The Investment Management Association (IMA) ¾ Japan Securities Dealers Association (JSDA) ¾ London Investment Banking Association (LIBA) ¾ Man Financial Singapore ¾ National Futures Association (NFA) ¾ FCMBA Capital Market Limited ¾ Price Waterhouse Coopers ¾ Bank of North Trustees Limited ¾ Adejumo Ekisola & Ezeani ¾ Royal Bank of Canada (RBC) ¾ The Securities & Derivatives Industry Association ¾ The Securities Association of Singapore ¾ The Securities Industry Association (“SIA”) ¾ TD Bank Financial Group ¾ The Australian Compliance Institute Par email : mail@oicv.iosco.org “Compliance Function at Market Intermediaries” Consultation Report - IOSCO - Response of the French Association of Investment Firms (AFEI) The Technical Committee of the International Organisation of Securities Commissions (IOSCO) released a consultation report in April 2005 on the compliance function at market intermediaries. With the emergence and development of the compliance function, evidenced in the projects undertaken by IOSCO, the Basel Committee and European institutions, IOSCO's committee deemed it important to set out some high-level principles applicable to compliance. The French Association of Investment Firms (AFEI), which became an affiliate member of IOSCO in April of this year, has examined the consultation report carefully. AFEI has some 130 members, all of whom are highly active in the equity and derivatives market. Nearly one-third are subsidiaries of foreign institutions. Broadly, AFEI has noted an increasing tendency for the same issues to be addressed in different forums. And since these bodies pursue different angles of approach, the standards they produce are not always consistent. We therefore support IOSCO's approach, provided it ultimately harmonises the parameters of the compliance function. This function is crucial for market intermediaries since they operate almost entirely on a cross-border basis and thus find it difficult to cope with regulatory discrepancies. However, the goal of harmonisation cannot be reached unless the principles set out by IOSCO are accepted as a foundation on which all future developments can be built, regardless of which body is responsible for deciding on those developments. I. Establishing a compliance function (pp 6 - 7 of the IOSCO report) ¾ Questions asked by IOSCO 1. Do you agree with the definition and description of the scope of a compliance function? Please explain. Yes, we agree with IOSCO's definition because it is consistent with the definitions framed in other European or international projects such as those of the Basel Committee. Although these projects are aimed squarely at internationally active banks, many countries have also applied them to other categories of market intermediary. As we pointed out in our introductory remarks, it is absolutely essential to harmonise and achieve consistency between the rules produced by different bodies. Une version française de ce document est disponible en page 9. 2. What is the relationship between the compliance function and risk management function? For example, is the compliance function part of or separate from the risk management function; and if they are separate, how do they interact when dealing with compliance issues? The answer to this question depends on how the intermediaries in question are organised. There is absolutely no need to adopt a prescriptive approach that would prevent intermediaries from linking the two functions if they so choose. Whatever the circumstances, and unless IOSCO can prove otherwise, AFEI cannot see any conflict of interest that would prevent them from doing so. II. Establishin