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This article addresses the frustrations of executive management, senior management, and boards of directors (collectively “Business People”) with the compliance function and regulatory guidance. The first part of the article discusses big picture reasons why financial services regulation is so complex and important. Next, it reviews the source material that advisors consider, including suggestions for how Business People can probe regulatory interpretations and the importance of the Rule of Law. The article then offers practical suggestions for challenging regulatory advice and highlights the benefits of such debates for compliance professionals and the financial services industry as a whole. The article concludes with a discussion of HM’s regulatory advisory services.


While the compliance profession is known to be thrilling and fun, compliance officers1 often seem to have a disproportionate amount of conflict with Business People.  Examples of these debates include:

  • Why is this document required for KYC? No one else asks for this.
  • Why can’t I say “X”, speak at event “Y”, sell product “Z”?
  • Why can’t we make the approval process to approve a new business line/distribution channel/contractual relationship less complicated?

In this article, we share our thoughts on the most effective ways for Business People to question regulatory analysis.  If you think your compliance officer is being too conservative or misinterpreting regulation, here is our roadmap for pushing back.


Why is interpreting regulation so challenging?

Financial services regulations are often complex. Reasons why it can be difficult to navigate financial services regulations include:


Financial services regulations can be very complicated due to the nature of the industry and the need to address various risks and activities. Regulations are often written in legalese and cover a wide range of topics, including consumer protection, anti-money laundering, capital requirements, risk management, data protection, and market integrity. Understanding and interpreting these regulations requires specialized knowledge and expertise.  When financial products (e.g., cryptocurrencies) or transaction models (e.g., decentralized finance) emerge that use innovative technologies, it is cumbersome and time-consuming for regulators and compliance professionals to understand the new technologies and how to address them legally, especially when the analysis affects how a new product or service is launched.

Multiple Regulators

Depending on the country, financial services regulations are issued and enforced by multiple regulators at different levels, such as national regulators, central banks, securities commissions, and international organizations. Each regulator may have its own rules and guidelines, creating a complex web of regulations through which financial institutions must navigate. Ensuring compliance with all relevant regulations can be challenging, especially when the responsibilities of different regulators overlap, or they have different interpretations.

Global nature of financial services

Financial institutions often operate across borders, serving international customers and conducting cross-border transactions. This global nature of financial services adds an additional layer of complexity as institutions must consider and comply with the regulations of multiple jurisdictions. Regulatory requirements can vary significantly from country to country, making it difficult to ensure consistent compliance across all business lines.

Ever-Changing Landscape

The regulatory landscape is constantly evolving. New regulations are introduced, existing ones are revised, and interpretations of regulations can change over time. It can be challenging for financial institutions to keep up with these changes and ensure compliance. They need to actively monitor regulatory developments, analyze their impact, and adapt their operations and compliance programs accordingly.

Subjectivity and Interpretation

Financial regulations are sometimes subject to interpretation. Certain regulations can be very broad, allowing for different interpretations by financial institutions and regulators. This subjectivity can lead to uncertainty and challenges in determining the precise requirements and obligations that apply to situations. It can also lead to different interpretations between different institutions or even within the same institution, which requires careful analysis and legal guidance.

Overall, financial services regulations tend to be complex, dynamic, and subject to interpretation. Financial institutions must invest significant resources in understanding and complying with these regulations to ensure legal and ethical business operations within the legal framework.

Why is regulatory interpretation so important?

In the case of a financial institution, regulatory interpretation is critical for several reasons:

Business Strategy and Decision Making

Regulations can impact financial institutions’ business strategies, product offerings, and decision-making processes. For example, there is currently litigation in the United States between the United States Securities and Exchange Commission (the “SEC”) and Coinbase, Inc. in which the issue in dispute is the regulatory analysis of whether certain tokens traded by Coinbase are securities under US law (the “Coinbase Dispute”).2  Here, Coinbase is standing by its regulatory analysis rather than deferring to the SEC’s judgement. 


Financial institutions are subject to numerous regulations and laws enacted by regulators such as central banks, financial authorities, and government agencies. These regulations are often complex and must be interpreted to ensure that the institution operates within the legal framework. Regulatory interpretation helps the institution identify the specific requirements it must meet to comply with regulations.

Risk Management

Regulations are designed to mitigate risk and ensure the stability and integrity of the financial system. Regulatory interpretation enables financial institutions to understand the risks they face and develop appropriate risk management strategies. It helps them identify potential compliance gaps and take the necessary actions to address them, reducing the risk of penalties, fines, reputational damage, or legal consequences.

Operational Effectiveness

Regulations often impose specific procedures, reporting requirements, and operational standards on financial institutions. Interpreting these regulations helps institutions understand how to implement them effectively. It involves determining the appropriate methods, systems, controls, and processes needed to comply with regulations while ensuring efficient operations.

Accountability and Transparency

Financial institutions are accountable to their stakeholders, including customers, shareholders and regulators. Regulatory interpretation helps institutions demonstrate transparency and accountability by ensuring they understand and comply with applicable regulations. This enables them to provide accurate and timely information to regulators, investors, and other stakeholders.

In summary, regulatory interpretation within a financial institution is essential to ensure compliance, manage risk, maintain operational effectiveness, demonstrate accountability, support decision making, and adapt to the evolving regulatory landscape.


The first step to challenging a regulatory interpretation is to properly understand the opinion and its basis. Generally, regulatory advice is based on an analysis of the following:

1. Law and regulation

Regulatory views are often grounded in a textual reading of applicable statutes, regulations, and case law precedents. We believe that legislative text is the strongest, though not definitive, support for any regulatory interpretation. Nevertheless, a compliance officer’s textual interpretations may be flawed or fail to account for a relevant exception or exclusion.

2. Regulatory guidance

Published guidance should be a significant consideration in any analysis of a regulation.  Nevertheless, neither guidelines nor “FAQs” replace or override existing laws and regulations.3 Regulatory guidance is generally expected to be implemented commensurate with the size, nature, risk profile and complexity of a financial institution.4 It is possible that your set of facts does not mandate adherence to a strict interpretation of applicable guidance.

From time to time, a regulator may offer informal views on a topic. All regulatory guidance should be evaluated seriously.5  It is also fair to ask a compliance officer whether any guidance, whether published or informal, is consistent with a textual interpretation of applicable law or regulation. 

The Rule of Law

We believe that all the world’s major financial centers express respect for the Rule of Law.  Taking Singapore as an example, Singapore is governed by according to two core principles, one of which is the Rule of Law.6

The Rule of Law is accepted as a universal value.7 Although the Rule of Law can be difficult to define, in a 2023 speech (the “AG Speech”), Attorney-General, Mr. Lucien Wong, S.C., described it as follows:

In my view, a society governed by Rule of Law has (a) clear, publicized and legitimately enacted laws, (b) that are enforced in a fair and efficient manner, (c) disputes over which are determined by independent judges, (d) such that no person (including and especially the Government) is above the law, and (e) there are credible and effective means for individuals to challenge the arbitrary exercise of power.8 

In the economic arena, compliance with published laws, especially by the Government, has been cited as contributing to Singapore’s success.9 Adherence to the Rule of Law requires that policies proposed by the Government do not contravene existing legislation or common law.  If certain policies cannot be achieved within the existing legal framework, the policy is modified, or the law is amended.10

The commitment of Singapore and its government to the rule of law is commendable and inspiring. It is also instructive for companies operating in Singapore and their regulatory advisors in terms of how policy objectives should be balanced against the textual interpretation of laws and regulations.11        

3. “Best practices” or past experience

What conduct constitutes “best practice” can be subjective. Views of best practices can be based on a range of experiences and source material, including references to regulatory requirements and practices in offshore jurisdictions or recommendations by intergovernmental organizations such as the Financial Action Task Force.  It is fair to consider the possible bias of a person making a best practices argument. For example, a vendor may claim that a specific type of regulatory monitoring is a best practice because it is motivated to sell their surveillance solution. Just because an “expert” says something is a generally accepted best practice does not make it so.

There can also be exceptions to the application of best practices.  For example, many financial institutions apply broad insider trading restrictions to an employee’s household. But what happens when two competing, regulated portfolio managers are spouses? It is unlikely that the spouses can reconcile their firms’ normal insider trading policies.  Does one spouse have to quit his or her job?  Here, an unorthodox solution that deviates from the financial institutions’ normal procedures may be utilized to comply with applicable regulation. A solution being unorthodox does not make it non-compliant.

A past industry experience with a compliance question can be a compelling justification for a regulatory interpretation. However, if that experience is not combined with a textual interpretation of the applicable laws, it can be questioned. Just because something has been done a certain way in the past does not make it right.  A financial institution should also consider how any best practice view fits with the way it has historically operated.  It can be a productive exercise for a compliance officer to research the history of a specific practice the institution uses.  Sometimes you find that the reason for a business or compliance practice has been lost to the sands of time, in which case it is reasonable to conduct the regulatory analysis with a clean slate.

4. Internal requirements

A financial institution’s policies are often as important as applicable regulations. An institution’s policy may have been a factor in obtaining or maintaining a license. Consequently, changing internal policies may not be as simple as the institution changing its position on an issue. However, policies and procedures can be changed and may also be reviewed to see if they permit deviation under certain circumstances.   


You may contact another market participant or an external advisor to obtain a third-party opinion on difficult questions. Seeking the opinion of a third party may also help a financial institution’s board of directors (the “Board”) demonstrate that it has responsibly met its compliance and risk management obligations.


Although it may sometimes feel like it, the compliance function in a regulated financial institution does not make the final decisions. When the compliance officer reports to the Chief Executive Officer (the “CEO”), the CEO can likely overrule the compliance officer. However, the compliance officer may then bring the matter to the Board and raise the details of the matter, the basis for the compliance officer’s advice, and the potential consequences to the financial institution if the compliance officer’s advice is not followed. In most cases, such a report would also be provided to the relevant regulator as part of its oversight responsibilities. Although not all disagreements will be referred to the Board, you should conduct all discussions with the seriousness they deserve, as the matter could be raised before the Board.

In escalating regulatory questions up the hierarchy of a financial institution, it is important to remember that for many firms, meeting the minimum standard is not the test.  For example, in Singapore the Monetary Authority of Singapore noted that the financial services industry “must go beyond doing what is permitted legally, to doing what is right and ethical.”12


As much as we hope this article helps financial services professionals ask questions of their compliance officers, we also hope it is useful to compliance professionals. Compliance officers should be prepared to answer questions about their regulatory analyses. Even if you are proven wrong, being challenged, and learning how to handle mistakes are critical experiences for a compliance officer’s professional development. 

How regulatory analysis debates benefit the financial services industry

Debates on the correct analysis of regulatory questions can benefit the entire financial services industry.  First, it promotes critical thinking and a deeper understanding of complex regulations. By questioning and challenging regulatory analysis, industry stakeholders can uncover potential errors, gaps, or inconsistencies, which can lead to amendments to applicable law or regulation, changes in market practices and a more complete understanding of the regulatory landscape. 

Second, engaging in the debate fosters open communication and collaboration among compliance officers, regulators and Business People.  This dialog allows for consideration of multiple perspectives and promotes a balanced approach to compliance that considers both legal requirements and business objectives.

Third, debate helps ensure that compliance is efficient and effective. By examining interpretations, potential inefficiencies or overly conservative approaches can be identified and addressed, allowing financial institutions to operate within the legal framework while optimizing their operational business.

Finally, these debates foster a culture of continuous improvement and learning. By challenging interpretations and engaging in thoughtful discussions, compliance officers and other stakeholders can increase their knowledge and expertise, keep pace with evolving regulations, and develop more robust compliance programs.   


Regulatory interpretation is both an art and a science.  At HM, we take time to understand a client’s risk appetite, as well as the nature, scale, and complexity of the client’s business.  While we cannot promise to always have all the answers, our senior team has decades of experience in roles ranging from in-house compliance roles to professorships to positions within financial regulators. We draw on all this experience to amicably address the toughest regulatory questions. 

Please reach out for a coffee if HM can assist with advisory assistance.  If the question is that contentious and tempers are flying between the front office and compliance, we are open to replacing the coffee with an alternative drink.

For further information, contact:

Chris Holland: Partner | [email protected]

Disclaimer: The material in this post represents general information only and should not be relied upon as legal advice. Holland & Marie Pte. Ltd. is not a law firm and may not act as an advocate or solicitor for purposes of the Singapore Legal Profession Act.

You can download a copy of our article below.

Pushing Back on Compliance (PDF)

1. For purposes of this article, we have focused on compliance officers.  However, the points we raise are relevant to all regulatory interpretations including those provided by consultants, lawyers, and law firms.

2. See Jonathan Stempel.  “Coinbase, facing SEC lawsuit, says regulator lacks police power over crypto.” Reuters. June 30, 2023.

3. For example, see Paragraph 7 of the Introduction to the Monetary Authority of Singapore’s (the “MAS”) Guidelines on Individual Accountability and Conduct.

4. For example, see Paragraph 1.5 of the MAS’ Business Continuity Management Guidelines.

5. Regardless of the merits of Coinbase’ legal position, the Coinbase Dispute has resulted in Coinbase incurring material litigation expenses and could have other material adverse effects.

6. See Paragraph 3 of “The Rule of Law and the duty of the Legal Service”, 9 January 2023.

7. See the Paragraph 3a of the Keynote Address by Minister for Law K Shanmugam at the Rule of Law Symposium 2012.

8. See Paragraph 9 of “The Rule of Law and the duty of the Legal Service”, 9 January 2023.

9. Id at Paragraph 12(c).

10. Id at Paragraph 23

11. To share a final quote from Paragraph 23(e) of the AG Speech which we believe is applicable not only to public servants but also to HM and all regulatory advisors:  The pervasive mindset of elected office holders and public servants must be that contravening the law is a radically worse outcome than not achieving a policy objective. It is a red line that simply cannot be crossed. Achieving a policy objective at the expense of the law is myopic and dangerous thinking. There is absolutely no place in our system for elected office holders and public servants to go ahead and do something legally questionable because the risk of being sued is low, or to carry on doing something legally questionable until a court tells them to stop. This is anathema to our core principles.”

12. See “Information Paper on Culture and Conduct Practices of Financial Institutions”.  September 2020.

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