How to Manage Compliance Documents and Reduce Paperwork

Thomson Reuters’ 2023 Cost of Compliance Report found that 73% of compliance leaders felt that the amount of regulatory information would increase slightly or significantly over the following 12 months. They also confided that the expected number of changes to the regulatory landscape would pose a significant compliance challenge to boards and compliance teams.  

Whilst regulators create new legislation with the best intentions, each new directive and regulation adds to the burden on compliance teams. Whether the goal is to restore trust in the markets in the case of the Market Abuse Regulation or to encourage employees to report misconduct through the EU Whistleblowing Directive, the result is always an increased workload for compliance teams. 

From updating policies to implementing training for employees to managing the growing number of compliance documents, the work required to meet regulatory obligations continues. This article concentrates on the different types of compliance documentation, providing actionable tips on managing the workflow and reducing the manual work involved.  

1. What is compliance documentation? 

Compliance documentation relates to your processes for recording your actions taken to meet your regulatory obligations. This can range from the policy documents you have in place that set the tone for your compliance efforts, such as a code of ethics, to logs of compliance activity, including an audit trail of employee personal trading pre-clearance requests. 

2. The critical role of compliance documentation 

It is not enough for companies just to avoid contraventions of their compliance obligations. They must also be able to show how they actively seek to prevent them. Not only does this show a proactive approach to regulatory duties, but it can mitigate sanctions in the event that there is a violation.  

Being able to show that you took all possible steps to avoid wrongdoing is likely to be looked on more favourably by national regulators. Here are some additional reasons why it is important for companies to document their compliance processes:  

• Communicating expectations to employees, as well as the repercussions for falling short of their responsibilities 
• Creating set procedures for compliance practices 
• Providing evidence for reporting, both internally and externally 
• Offering an overview of your compliance processes, helping you identify gaps and priority areas of risk 
• Acting as evidence trail for processes such as insider list management in the event of external compliance audits or in the case of an accusation the company did not fulfil its obligations. 

3. Types of compliance documents 

There are different types of compliance documents, here are some of the most common:  

4. Compliance documentation requirements and frameworks

In order to understand the correct way to create and store compliance documents, companies must first understand what is required of them by law.  

For example, MiFID II requires financial companies to create a pre-clearance process for employee personal trades that prevents them from causing a conflict of interest with their personal portfolios.  

As well as documenting the step-by-step process of requesting pre-clearance and granting or denying it, it is also important to retain information about employees’ requests and which trades were cleared. Once you understand your obligations, you can create a procedure to ensure you keep the right information.  

Use a compliance documentation framework to bring together all of your policies, storing the information in an intuitive manner, such as in a document management system (DMS). You can then archive all future compliance documentation in a consistent manner.  

5. How to manage compliance documents and reduce paperwork 

5.1 Digitise your process 

Using digital formats for your compliance documentation is essential, especially in a world where remote work is increasingly popular. Documents stored in the cloud are easily accessible by individuals, even if they are based away from the office. This could be administrative staff adjusting the content of the documentation or employees accessing policies to better understand them.  

Digitisation also makes searching for the right documents much easier, rather than leafing through reams of paper. Another advantage is that you can replace old documents with new versions, reducing the chances of someone following out-of-date processes due to poor version control.  

A DMS is one option, allowing you to organise, store and monitor your documents. Another is to use tools like TradeLog, which employees use to seek pre-clearance on their personal trades. Within the platform, you can store your policies and restrict non-compliant trades accordingly. This allows employees to understand the reasons behind restrictions within the tool they use on a regular basis.

5.2 Consider security 

If you still use paper processes, there are a number of security concerns to be aware of in your documentation framework. Firstly, it is difficult to restrict access to specific files when people are searching for other documents. Additionally, paper versions are susceptible to theft, damage and even accidental destruction. Make sure you back up all documentation.  

With digital documents, there is the opportunity to restrict access on a document-by-document basis and cloud storage that protects against problems with your internal network. However, you do still need to consider security matters.  

Train employees on IT safety, prohibiting using unapproved shadow IT programs on work computers that could lead to a vulnerability in your framework.

5.3 Schedule reviews and audits 

Compliance does not stand still, with new legislation on the horizon, such as the EU Listing Act. This makes it important to implement regular reviews and internal audits of your processes to ensure they are up-to-date and comprehensive.  

Keep up with regulatory changes by checking with the EU and local national competent authorities, as well as the industry press. Use this knowledge to understand what your business needs to do to comply and work through your current documentation with that in mind.  

Review how your compliance processes have worked in practice and seek feedback from stakeholders on how to hone and improve them for the future.  

5.4 Educate staff 

Train staff on the importance of compliance, the reasons behind your processes and the consequences of failing to meet the expectations placed upon the organisation by regulatory authorities.  

By better understanding the compliance ecosystem, employees will view the additional processes they must undertake as more than just a hindrance to their regular work. They will perceive them as part of their daily duties to contribute to the safe running of the business.  

In addition, knowing where to find your company policies helps employees access best practices for compliance when they need them or when they want clarification on a course of action they intend to take.

5.5 Automate processes 

Automating processes cuts down on the paperwork involved with your compliance processes. An insider list management software like InsiderLog, for example, automates the emails sent to insiders informing them of their place on an insider list. It also saves all versions of the list and notes the reasons behind changes. Recording this information makes the compliance documentation process simpler, more efficient and much less prone to errors. 

Another example can be personal account dealing software TradeLog, which lets you set the parameters for what constitutes a compliant and acceptable employee personal trade within the platform. When an employee attempts to receive clearance on a transaction, they simply cannot enter trades that contravene your internal or external policies. This leaves a digital record of the request and the acceptance, showing that the employee went through the correct channel.

6. Challenges in maintaining compliance documentation 

• The complexity of current regulations requires your documented processes to become more intricate. This means creating systems that are easy to communicate and follow for employees, but that also take into account all facets of legislation to maintain compliance at all times. 

• Comprehensive record-keeping is required to fulfil compliance requirements and prove your efforts to maintain adherence to the law. Gathering and storing this evidence can be challenging, especially when using manual processes. 
• Staying current with new regulations and directives requires vigilance on behalf of the company. New processes have to be documented well in advance of the legislation coming into force so the company is prepared and has a comprehensive programme in place.  
• Managing the accessibility and distribution of compliance documentation can be an administrative challenge. You need policies in place for who should be able to access the processes and also for how to send out information in bulk for documentation that needs wider dissemination. 
• Controlling the integrity of documents and the versions of each document people have access to can be challenging, particularly when using manual systems.  

7. FAQs 

7.1 How often should compliance documents be reviewed and updated? 

Compliance documents should be reviewed and updated at least annually. However, there are always new pieces of legislation being suggested and working their way through the regulatory process. This makes it important to update documents whenever there are significant changes in regulations or in your business operations. 

7.2 How do technological advancements impact compliance documentation? 

Technological advancements streamline the management, accessibility and security of compliance documentation, making updates and compliance monitoring more efficient. They solve issues such as version control issues and the ability to safely store and search archives.  

4.3 What are some best practices for managing compliance documentation? 

Some best practices for managing compliance documents include:  

• Creating a central repository for all information 
• Classifying documents by relevance, type and regulatory requirements 
• Storing documents in the cloud so that any changes register for all stakeholders immediately 
• Developing clear guidelines for document retention and destruction policies to maintain compliance 

8. Conclusion

Legal compliance documents are key to adhering to your regulatory requirements and, by implementing a clear framework, you can reduce the workload involved. Digitising the process and training your employees in the best practices will help you meet your obligations, even in a fast-moving regulatory environment.  

To manage your compliance documents more effectively, try one of ComplyLog’s solutions: 

• InsiderLog is insider list management software that helps you fulfil your obligations to record inside information and notify insiders of their obligations under MAR. 
• TradeLog is personal account dealing software that streamlines the review of employee personal trade requests with automated rules. 
• IntegrityLog is whistleblowing software that enables employees to report misconduct in a secure digital environment that is compliant with the EU Whistleblowing Directive.

Explore the ComplyLog suite here. 

9. References and further reading

• 8 RegTech trends to keep an eye on 
• Why RegTech is so popular 
• Why you need a market abuse policy 
• How to measure conduct risk 
• How to prevent insider trading