6.3.1: Regulatory Compliance

Regulatory Compliance 

Regulatory compliance refers to a set of practices and regulations an organization must adhere to. These rules are set by law and implemented by a regulatory agency.  

Regulatory compliance may also include:

• Data and privacy compliance regulations (HIPAA, COPPA, GDPR, etc.)
• Quality management regulations such as ISO 9001
• Employment regulations such as FMLA and OSHA

Regulatory Requirements

A regulatory requirement is a rule or law, that has been enacted by a government entity, which creates a legal obligation for an organization and increases its compliance burden.

A regulatory requirement usually applies to all organizations doing business in a particular city/county/state/country, to organizations doing busines in a particular industry, or to organizations who engage in a particular type of activity.

The United States government has numerous regulatory agencies that are mandated to oversee the activities of private companies in their respective industries. A few examples of such organizations:

• The Securities and Exchange Commission (SEC) – The SEC oversees securities exchanges, securities brokers and dealers, investment advisors, and mutual funds in an effort to promote fair dealing, the disclosure of important market information, and to prevent fraud.
• The Federal Trade Commission (FTC) – The FTC investigates and prevents unfair methods of competition, and unfair or deceptive acts or practices affecting commerce.
• The Food and Drug Administration (FDA) – The FDA is responsible for protecting the public health by ensuring the safety, efficacy, and security of human and veterinary drugs, biological products, and medical devices; and by ensuring the safety of our nation's food supply, cosmetics, and products that emit radiation.
• The Occupational Health & Safety Administration (OSHA) – OSHA ensure safe and healthful working conditions for workers by setting and enforcing standards and by providing training, outreach, education and assistance.

Why is Regulatory Compliance Important?

When organizations fail to meet regulatory compliance requirements they may face substantial fines or penalties depending on the exact nature of the offense. Government regulations also provide guidance that helps businesses succeed, and failure to comply often coincides with various kinds of business failures.

Other consequences of poor regulatory compliance can include:

• Suspension or debarment from bidding on government contracts
• Damage to the organization’s reputation as a trustworthy business partner
• Individual penalties or jail time for individuals who intentionally violate the law
• Disruption to business operations caused by investigations or legal proceedings

What are Examples of Regulatory Compliance?

We can point to a variety of regulations that impact most corporations operating in the United States, such as:

• The Dodd-Frank Act – a broad range of reforms affecting nearly every aspect of the financial system with the goal of preventing a repeat of the 2008 crisis and the need for future government bailouts.
• The Sarbanes-Oxley(SOX) Act – to protect investors from the possibility of fraudulent accounting activities by corporations.