Regulatory Compliance: Definition, Types & Examples

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Regulatory compliance is an important part of running a business. While many decision-makers have a general understanding of what the term means, a definition of regulatory compliance is hard to come by. Understanding the many types of regulatory compliance and seeing examples of it in action can help decision-makers keep their companies out of legal trouble.

Regulatory Compliance Definition

Businesses of all sizes and in every industry have laws and regulations they must adhere to. Regulatory compliance is the act of keeping an organization in line with all international, federal, state, and local laws and regulations that apply. This practice touches every part of the business, including manufacturing, hiring, paying employees, advertising and selling.

Regulatory compliance is sometimes confused with a similar term: corporate compliance. In regulatory compliance, organizations follow regulations that originate with the government. However, corporate compliance refers to the act of adhering to an organization's internal policies.

Read More: Regulatory Compliance: Business Meaning, Enforcement & Noncompliance

Why Is Regulatory Compliance Important?

Legislation that regulates business is often devised in an effort to reinforce ethical and safe behavior in organizations. When organizations follow these regulations, it helps keep employees, customers and the general public safe. Furthermore, it can help organizations remain honest and principled.

While regulatory compliance is a step in the right direction toward an ethical and safe company, it is not always enough. Sometimes, regulations have not caught up with changing technology and social attitudes. Companies often rely on internal regulations and corporate compliance to make up the difference.

Perhaps the most compelling reason to remain compliant is that it keeps the organization out of legal trouble. When companies break laws and regulations, they can face legal problems such as large fines or lawsuits. If they are hit with lawsuits, companies lose an average of more than $7 million when they fail to comply with regulations due to legal fees and fines.

Regulatory Compliance Jobs

While regulatory compliance is vital, it's not always simple. Not only do organizations need to follow regulations from the government at every level, but those laws often change and can be difficult to interpret. That's why large companies and those in heavily regulated industries often look for experts who help ensure the company remains in compliance to work regulatory compliance jobs.

These professionals must have legal and business skills. A regulatory compliance specialist can earn up to about $125,000 per year, depending on the location and the individual's skill set. Experts expect the United States to add 23,000 regulatory compliance jobs between 2016 and 2026.

Examples of Regulatory Compliance

Government regulations affect almost every aspect of business operations and come from every level of government. For example, businesses must comply with international trade agreements when they apply.

Some examples of the most prominent federal regulations include:

  • The Equal Employment Opportunity Commission protects against discrimination in employment practices.
  • The Employee Retirement Income Security Act tells organizations what kinds of benefits they must offer to which employees.
  • The Environmental Protection Agency creates regulations regarding businesses and their impact on the environment.
  • The Fair Labor Standards Act sets the federal minimum wage and other regulations regarding employees.
  • The Occupational Safety and Health Administration is a federal organization that sets rules for worker safety.

States sometimes go further than the federal government when it comes to regulations. For example, many states have higher minimum wages than the Fair Labor Standards Act establishes for businesses. Finally, local governments may have rules regarding physical businesses in their jurisdictions. For example, brick-and mortar-stores must keep their safety standards up to local fire codes.

Industry-Specific Regulatory Compliance

Due to their sensitive natures, some industries have more regulations than others. For example, all professionals in the health care industry must comply with the rules set forth in the Health Insurance Portability and Accountability Act. This law keeps patient information safe and private.

Banking is another industry with additional regulations. Financial institutions must be mindful of regulations such as the Dodd-Frank Act, Comprehensive Capital Assessment and Review regulatory framework and the Large Bank Pricing Rule.

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About the Author

Mackenzie Maxwell has always been interested in law, working with legal issues since 2010. She served in Congress for some time, as part of the communications team for Silvestre Reyes and helped constituents understand the laws on the House floor. She stayed active in local politics to understand the laws that govern her area. As a writer, Mackenzie has worked with several lawyers to create thoughtful, helpful content.