Outsourcing: the regulatory challenge for financial services firms

Abstract

Purpose

To explain current guidelines for outsourcing as provided by the Joint Forum, the EU Markets in Financial Instruments Directive (MiFID), and the UK Financial Services Authority.

Design/methodology/approach

After discussing the international regulatory focus, describes FSA policy on outsourcing in detail, including senior management responsibility for management of risk and the need for internal and external due diligence. Provides guidance concerning supplier contracts, relationship management and monitoring, contingency planning, and exit planning.

Findings

The FSA's guidance on outsourcing highlights the need for senior management of the customer firm to take full responsibility for the increased risks that outsourcing can generate as part of their inherent accountability for efficient systems and controls.

Originality/value

A guide for ensuring that a firm's outsourcing arrangements are in compliance with FSA and MiFID guidelines.

Citation

Evans, R.M. (2005), "Outsourcing: the regulatory challenge for financial services firms", Journal of Investment Compliance, Vol. 6 No. 3, pp. 52-58. https://doi.org/10.1108/15285810510659338