Inspections are important instruments in the ISA's supervisory toolbox. They allow the ISA to conduct thorough examinations of supervised entities' compliance with the law and the applicable regulations, and thereby they increase deterrence and compliance. They also allow the ISA to gain an in-depth look at the supervised entities' conduct in a specific area or topic, and issue position papers that guide the market towards the desired course of action, in line with ISA policy.
The Inspections and Examinations Department was established in late 2019 following a strategic decision to consolidate the ISA's departmental inspection units into a single, independent department under the Director General of the ISA, with a holistic perspective on the ISA's organizational needs.
The decision reflects the recognition that an organization-wide inspection function will make optimal use of the ISA's supervisory tools in line with ISA priorities, based on the risk level of each area of ISA activity, and will offer greater flexibility in planning and performing risk-based inspections.
The Department conducts inspections focusing on supervised entities' compliance with the law in the majority of the areas supervised by the ISA, including mutual fund managers and trustees, trading platforms, investment portfolio managers, advisory functions in banks, and reporting corporations. Inspections refer also to issues of corporate governance, various aspects of IT operations, and implementation of AML directives, where relevant. Inspections of reporting corporations cover also accounting issues and valuations.
Based on international standards, various regulators use risk-based approach for their supervision activity. The main reason is that risk assessment of supervised entities' activity integrated with ISA's goals and needs of risk mitigation, increases effectiveness of supervision and allows better use of supervision resources.
Implementation of risk-based approach means identification, assessment and understanding of supervision risks and their mitigation based on risk management model.
In order to promote a risk-based supervision approach in the ISA, the Risk Management Unit was established in the Inspections and Examinations Department. The main role of the unit is to identify and to monitor supervision risks of ISA and then assess and analyze them and the means needed to their mitigation.
The Department also handles cross-departmental issues related to unsupervised ventures and determines whether they are in compliance with the applicable requirements of the laws under the ISA's supervision.