In this write-up, we are about to get some quick knowledge about the compliance officer in a listed entity. By listed entity, we mean a public company whose shares or debentures are listed on any stock exchange for trading. A Compliance Officer is a person responsible for the compliance management of a listed entity. Coming to the point directly of who can be appointed as a Compliance Officer of a listed company.
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Who is a Compliance Officer?
An employee of the company is responsible for taking care of the regulatory framework for the company and also following internal controls for in-time compliance. He ensures transparency, accountability and identifies legal risks,s and manages them in an effective manner.
It is a person of integrity and discipline who keeps a record of every statutory record and provides corporate legal advice to the board.
Who is eligible to be appointed as a Compliance Officer?
As stated in Regulation 6 of SEBI (Listing obligation & disclosure requirement), 2015. A Qualified Company Secretary shall be appointed as a Compliance Officer in a Listed Company. Company Secretary as defined under Section 2(1)(c ) of the Company Secretaries Act, 1980 Or Who is appointed by the Company to perform the functions of a Company Secretary.
According to The Companies Act, 2013 it is a mandatory requirement of a listed company to appoint a company secretary and the same person can perform the role of a compliance officer.
What are the roles and responsibilities of a Compliance Officer?
- To carry out due diligence on the company’s records.
- To Handle Quarterly compliances.
- To liaison before stock exchanges on behalf of the company.
- To authenticate all legal documents of the company.
- To bridge the gap between the company and investors.
- To draft minutes and keep records of all statutory meetings.
- Implementation and management of compliance reporting to all the statutory bodies.
Listed entities are required to comply with the Quarterly and Half-yearly compliances in which the compliance officer plays an important role.
What is the procedure to appoint a Compliance Officer cum Qualified Company Secretary in a listed entity?
Once a company finalized a qualified candidate to be appointed as company secretary cum compliance officer. The hiring department is required to give details of the candidate to the Nomination and Remuneration Committee. NMR Committee shall hold the meeting and consider the application for the post of Compliance officer and draft their proposal for approval of directors in their board meeting.
A board meeting shall be convening to pass the resolution regarding the appointment of a company secretary as a compliance officer. The designated official shall intimate the stock exchange about the appointment of a compliance officer along with details of the candidate.
Within 30 days of the board meeting the authorized person is required to file e-form DIR 12 and MGT 14 along with Board resolution, consent for an appointment, appointment letter, and identity proof to MCA. The e-forms shall be filed in conformity with the Companies Act, 2013 and the same shall be certified by a Practicing professional.
The following shall be the draft Board Resolution for the appointment of a Qualified Company Secretary cum Compliance officer.
CONSIDERATION AND APPROVAL FOR THE APPOINTMENT OF MRS. SHARMA AS THE QUALIFIED COMPANY SECRETARY CUM COMPLIANCE OFFICER (KEY MANAGERIAL PERSONNEL) OF THE COMPANY.
“RESOLVED THAT pursuant to the provisions of Section 179, 203, of the Companies Act, 2013 read with Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and other applicable provisions of the Companies Act, 2013 and all other applicable provisions, if any,
(including any statutory modification(s) or re-enactment(s) thereof for the time being in force), and on the basis of the recommendation of the Nomination and Remuneration Committee, the consent of the Board of Directors be and is hereby accorded to appoint Mrs. Sharma, an Associate Member of the Institute of Company Secretaries of India having membership no. ACS 00000, as Company Secretary (Key Managerial Personnel) of the Company, w.e.f. 16th October 2021 on such terms and conditions including remuneration as placed before the Board.
RESOLVED FURTHER THAT Mr. Listed Verma, Chairman cum Managing Director (DIN: 00000000) and Mr. Listed Joshi, Director (DIN: 00000000) of the Company be and are hereby severally authorized to alter, revise, modify, enlarge the said terms and conditions in consultation with Company Secretary and to take all such steps as may be necessary, proper or expedient and to do all such acts, deeds and things as may be necessary to give effect to the foregoing resolution
What are the penal provisions for Non- The appointment of a Compliance Officer in a listed entity?
As per SEBI Circular SEBI/HO/CFD/CIR/P/2016/116 dated October 26, 2016, any Non-compliance related to Regulation 6(1) for the appointment of a Whole-Time Company Secretary is Rs. 1000 per day till the defaults continue starting from the date when the company is bound to appoint a compliance officer.
Every Listed company is required to appoint a Company Secretary before the listing procedure. The date from which the penalty shall be levied is the date of listing of the company on the stock exchange.
CONCLUDING NOTES: Though it’s mandatory for a listed company to appoint a compliance officer on the other side every unlisted company whether public, private, or government-oriented is required to appoint a whole-time company secretary to ensure compliance is the Paid-Up capital of the company is Rs. 10 crores or more as stated under section 203 of the Companies Act, 2013.
Does digitalization really help the Compliance Officer
Yes, digitalization can significantly benefit compliance officers in various ways. Here are some key advantages:
- Efficient Data Management: Digitalization allows for the centralized storage and management of compliance-related data. This makes it easier for compliance officers to access, analyze, and report on the information they need to monitor and ensure regulatory adherence.
- Automation of Routine Tasks: Compliance processes often involve a lot of manual tasks, such as data entry, document tracking, and report generation. Digital tools can automate many of these tasks, reducing the likelihood of human error and freeing up time for more strategic activities.
- Real-time Monitoring and Reporting: Digital systems can provide real-time visibility into compliance status. This allows compliance officers to identify and address issues promptly, reducing the risk of non-compliance and associated penalties.
- Enhanced Risk Assessment: Digital tools can analyze large volumes of data to identify patterns and potential risks. This helps compliance officers in proactively addressing compliance concerns before they escalate into significant problems.
- Improved Collaboration and Communication: Digital platforms facilitate communication and collaboration among different departments within an organization. Compliance officers can more easily interact with legal, finance, operations, and other teams to ensure a coordinated approach to compliance.
- Audit Trail and Documentation: Digital systems often maintain comprehensive audit trails, which can be invaluable in demonstrating compliance efforts to auditors, regulators, or stakeholders. This transparency helps build trust and confidence in the organization’s compliance program.
- Adaptability to Regulatory Changes: Regulatory requirements can change frequently. Digital tools can be updated and adapted more quickly than manual processes, ensuring that compliance efforts stay current and aligned with the latest regulations.
- Data Analytics and Predictive Analytics: Advanced digital tools can leverage data analytics and predictive modeling to anticipate potential compliance issues. This allows compliance officers to take proactive measures to prevent violations.
- Reduced Costs and Increased Efficiency: Automation and digitalization can lead to cost savings by reducing the need for manual labor and paper-based processes. This can allow compliance teams to do more with less.
- Enhanced Security and Data Protection: Digital systems can be equipped with robust security measures to protect sensitive compliance-related information. Encryption, access controls, and other security features help safeguard data from unauthorized access or breaches.
However, it’s important to note that while digitalization offers significant advantages, it’s not a complete solution on its own. Effective compliance also requires a strong commitment from the organization, well-defined policies and procedures, and a culture of compliance from all employees. Additionally, compliance officers need to be well-versed in the digital tools they use to maximize their benefits.
Who should a Compliance Person report to?
A compliance officer typically reports to the highest levels of management within an organization to ensure their independence and authority. Specifically, there are a few common reporting structures for compliance officers:
- Directly to the CEO or Board of Directors: In many organizations, especially smaller ones or those in highly regulated industries, the compliance officer may report directly to the CEO or the Board of Directors. This reporting structure emphasizes the importance of compliance at the highest levels of the organization.
- Chief Compliance Officer (CCO): In larger organizations, there may be a dedicated position known as the (CCO). The CCO is usually a senior executive responsible for overseeing the entire compliance function. The CCO might report directly to the CEO or, in some cases, to another high-ranking executive like the Chief Legal Officer (CLO).
- Chief Legal Officer (CLO): In some companies, particularly those without a dedicated compliance function, the compliance officer’s role might fall under the purview of the Chief Legal Officer. This can make sense because compliance and legal functions often intersect, especially in matters related to regulation and legal compliance.
- Chief Risk Officer (CRO): In certain organizations, especially in financial institutions or those with a strong emphasis on risk management, the compliance function may report to the Chief Risk Officer. This reflects the close relationship between compliance and risk management activities.
- Audit Committee: In some cases, particularly in highly regulated industries, the compliance officer may report to the Audit Committee of the Board of Directors. This ensures an independent reporting line, separate from day-to-day management, to maintain compliance oversight.
- General Counsel: In organizations where legal and compliance functions are closely aligned, the compliance officer may report to the General Counsel or Chief Legal Officer. This structure is common in legal-driven industries or organizations where compliance and legal functions are highly integrated.
It’s important for the reporting structure to provide the compliance officer with the necessary authority, independence, and access to resources to effectively carry out their responsibilities. Regardless of the reporting line, it’s crucial for compliance officers to have direct access to senior management and the Board of Directors to communicate compliance matters without fear of reprisal.