Companies in the highly regulated sectors are prone to rigid compliances to be adhered to. Ensuring that you’re complying with an increasing number of government and industry regulations is burdensome for the company’s resources. Recent research studies have proved that the cost of not complying with the standards has only been more costly for the organisations, than following the compliances. Cutting it short, it makes sense for a business to ensure that they are compliant to any and every kind of regulation.
The cost of complying with regulations can differ from industry to industry. For example, media organizations have to pay less than one third annually to comply with regulation, while financial companies face crores annually in compliance costs. These costs vary mostly because of the intensity of sensitive or confidential information of a particular industry. Non-compliance costs almost two times the cost of meeting compliance requirements. The non-compliance costs are mostly fines, losses, settlement costs, etc.
Taking regulations casually is only going to burn a big hole not only to the company but to individuals as well. For instance, with SEBI regulating the intermediaries, non-compliance of any regulation by the intermediaries will be very costly for them. Registered Investment Advisory is the already existing advisory model however, RIA is not just a certification or title to get fee on advisory services but it comes with a lot of responsibility. A lot of compliances have to be adhered to.
Similarly, there are so many intermediaries who are regulated by SEBI and need to make sure that without compliance, their long term sustenance is at risk. There is an entire list of regulations and policies that SEBI expects you to comply with. Doing KYC of the clients or basic risk profiling is what most of the advisers forget to do.
Pay attention to your set of compliances now because a good foundation will help to lay a foundation for better and organized processes. This will only help to scale up the business and mutually grow with your clients. A strong compliant framework becomes a strong selling point with clients in the long run. The benefit of maintaining regulations and complying are not just limited to strong goodwill but also in terms of the escape from penalties from regulatory bodies or SEBI for intermediaries.
A very important fact to know is that although SEBI has a lot of power but the Finance Bill, 2018 has given more powers to SEBI to charge penalty for non-compliance. If we talk about the penalty that can be levied from Investment Advisers for non-compliance, then it can really go up to Rs. 1 crore!
If you think that you are not compliant with regulations, here is an opportunity to start, to know more about compliance of different regulatory bodies for different industries and for SEBI (Investment Advisers) Regulations, 2013.
Foregoing compliances is a very easy way to overcome all the hassle but these shortcuts will definitely have rigid and career changing consequences. Sticking to compliances is very cumbersome but the costs of not complying create a far wider discomfort for your entire life, financially and for your career. So, start complying.
- By Saloni Parakh