Working in nearly any aspect of banking, finance, or brokerage requires an understanding of regulatory compliance laws, including those in place to protect consumers and markets.
With a better understanding of what an M.L.S. program entails, plus the specific areas of regulatory compliance covered in an M.L.S. program for finance professionals, you can be prepared for career advancement.
What Is Regulatory Compliance in Financial Services?
So, what is regulatory compliance in financial services exactly? In finance, regulatory compliance refers to an important process that all banking and financial institutions must take to follow regulations, laws, and other guidelines set by regulatory authorities within the industry. While most industries have their own set of regulations in place, those specifically related to banking and finance often have to do with data protection, record-keeping, and transparency.
The Importance of Regulatory Compliance in Banking and Finance
Regulatory compliance in finance is crucial for a number of reasons. It beings with the fact that following industry regulations helps keep consumers' personal information, including sensitive data and financial information, safe and secure. This builds a greater sense of integrity for businesses in the financial industry while mitigating risks related to data breaches and other security issues.
Following regulatory compliance standards in banking and finance also helps banks and other institutions avoid costly fines, penalties, and lawsuits.
How Financial Regulations Protect Consumers and Markets
Financial regulations are specifically designed to protect both consumers and markets with strict laws and guidelines. For example, data protection laws prevent consumers' personal information from being sold to third parties, whereas anti-money laundering standards protect the market as a whole.
Major Financial Regulatory Bodies and Their Impact
There are several major financial regulatory bodies, each of them influencing compliance in the finance and banking industry in unique ways.
Federal Reserve System (FRS) and Its Influence on Banking Practices
Perhaps the most widely known regulatory body in finance is the Federal Reserve System (FRS), which is the central bank of the United States and regulates many of the country's largest banks.
Securities and Exchange Commission (SEC): Ensuring Market Integrity
Meanwhile, the Securities and Exchange Commission (SEC) is responsible for regulating the United States stock market. Established in 1934, the SEC aims to protect investors while maintaining fair markets.
The Role of a Master of Legal Studies in Navigating Financial Regulations
Understanding the ins and outs of compliance in the banking and finance industries requires a great deal of focus and experience, which is why professionals invest in a Master of Legal Studies degree. These programs typically cover everything from legal frameworks for regulations to compliance risks, ethical principles, and best practices for compliance.
Plus, some M.L.S. degree programs are offered with specific tracks in finance, banking, or similar fields.
Understanding the Legal Framework of Financial Regulations
An M.L.S. program will cover the legal framework of financial regulations in-depth, helping professionals in the financial services industry better understand how these regulations came to be and who they are designed to protect. All of this provides an essential foundational understanding for other topics.
Identifying Potential Compliance Risks and Violations
An M.L.S. program in finance will also help professionals better identify potential compliance risks and violations within their own organizations or businesses. This can help them take measures to mitigate risk and potentially protect their institutions from costly non-compliance fines, penalties, and legal issues down the road.
Using Ethical and Legal Principles to Guide Decision-Making in Compliance Matters
Making compliance decisions is not always as simple and straight-forward as it seems, and finance professionals must often follow ethical and legal principles to make the right choices. A comprehensive M.L.S. program will cover these guiding principles, helping finance professionals become more confident and capable decision-makers.
Implementing Effective Compliance Strategies and Procedures
Ultimately, those who complete M.L.S. degree programs often go on to become the professionals responsible for designing and implementing compliance strategies and procedures within their own institutions. These strategies are then relied upon to stay within compliance standards, maintain transparency, and build a stronger reputation among consumers and investors.
Critical Financial Regulations to Know
There are several key financial regulations that M.L.S. students will learn about in their programs, but perhaps two of the most critical are the Dodd-Frank Act and the Sarbanes-Oxley Act.
Dodd-Frank Act: Response to the Financial Crisis
The Dodd-Frank Act, which was enacted in 2010 in the aftermath of the 2008 financial crisis, refers to a series of regulations designed to reduce systemic risk by enforcing consistent and clear rules within the market. This act is important to understand because it comes with several laws and nuances that institutions must follow to mitigate risk and maintain high standards.
Sarbanes-Oxley Act (SOX): Corporate Accountability on Another Level
The Sarbanes-Oxley Act (SOX) refers specifically to two regulations that were passed in 2002 as a means of improving transparency and overall accountability within the financial sector. These laws were passed in response to financial scandals in the United States and relate specifically to such issues as whistleblower protections, auditing, executive responsibility, and financial reporting.
Technological Innovations in Managing Compliance
While nothing is a replacement for genuine knowledge and understanding of compliance laws and regulations within the finance sector, there are numerous technological innovations making it easier for finance professionals to follow and leverage compliance efficiency within their own institutions.
Leveraging FinTech for Compliance Efficiency
Using financial services technology, it is possible to follow compliance regulations while streamlining operations and saving time more readily. For instance, fintech software can be used to generate risk assessments, pinpoint potential compliance issues, and even automate some compliance procedures. This allows finance professionals to focus on other paramount areas of their work while enjoying added peace of mind.
The Role of Artificial Intelligence in Predictive Compliance
Artificial intelligence (AI) is making its way into every imaginable industry, and the finance/banking sector is no exception. AI and machine learning software is now being used to automatically detect potential compliance issues and resolve them before they turn into more serious problems. This sense of predictive compliance can help banks and other financial institutions mitigate risks while optimizing consumer protection.
Challenges in Financial Regulatory Compliance
Although regulatory compliance and understanding it has come a long way, challenges can still occur. That said, it is important for professionals in this field to remain aware of these challenges to be proactive in the future.
Navigating Global Compliance Requirements
While most countries have their own specific laws and regulations regarding financial compliance, things get a little more complicated when it comes to global finance and banking. In an increasingly connected world and market, global compliance requirements must be navigated with special care. These include laws related to equal opportunity, financial reporting requirements, and more.
Specifically, finance professionals must be knowledgeable of these global compliance requirements and how to follow them. Generally, this means following the specific rules and laws for the country in which you are doing business.
Addressing the Complexity of Multiple Regulatory Bodies
Within the United States alone, there are several regulatory bodies that can pass and enforce finance and banking regulations. This can also get complicated, as each regulatory body will have its own way of doing things. Meanwhile, these regulatory bodies may handle different areas of finance, such as the stock market or the Federal Reserve, so knowing which regulatory body controls which area is critical.
Fortunately, professionals in an M.L.S. degree program with a focus on finance/banking will have the opportunity to learn about the main regulatory bodies in-depth, gaining a solid understanding of the differences between each and their overall role within the system.
Best Practices for Effective Compliance Management
Ultimately, there are some best practices that finance professionals can follow for effective compliance management. The right M.L.S. program will help professionals learn how to implement these within their own roles and institutions.
Developing a Culture of Compliance within Organizations
Perhaps the best way to avoid regulatory compliance issues is to simply make compliance a part of the culture at your bank or financial institution. When following compliance laws is a primary focus and consideration in every decision your employees make, you are more likely to stay in compliance and avoid risk. To add, when your employees see first-hand that you are putting compliance first, they are more likely to do the same in their own work.
Continuous Education and Training for Compliance Teams
In the interim, employees within financial services businesses should be provided with ongoing education and training. Because financial laws and regulations can change on a regular basis, these employees need to be kept up to date to avoid potential compliance issues. This means setting aside the appropriate time needed to train and educate compliance teams as soon as changes occur.
When these team members can stay on top of changes and receive training on how to follow industry best practices, you can improve compliance within your own institution while mitigating risk, increasing transparency, and improving your reputation with the public.
Want to Advance Your Compliance Knowledge?
Whether you currently find yourself in corporate finance, banking compliance, risk management, or any other area of the industry, an M.L.S. degree can be the next logical step toward improved career prospects.
The University of Miami School of Law offers an online Master of Legal Studies program in a dedicated Finance track that is specifically designed to help students better understand the nuances of banking and financial service regulatory compliance. Plus, because this program is offered entirely online, it is versatile enough to work around your busy schedule.
Reach out to learn more about our online Master of Legal Studies curriculum or any of the other offerings available at the University of Miami School of Law. You can also get started with your online application with just a few clicks.
Sources
https://admissions.law.miami.edu/academics/mls/
https://admissions.law.miami.edu/academics/mls/curriculum/
https://admissions.law.miami.edu/apply/mls/
https://www.cftc.gov/LawRegulation/DoddFrankAct/index.htm
www.findlaw.com/consumer/securities-law/what-is-the-sarbanes-oxley-act.html
