Europe Faces Compliance Headaches
Regulatory compliance is the leading business issue facing asset managers and fund administrators, as they face a slew of new regulations including Dodd-Frank, Emir, MiFID II, AIFMD and Basel III.
The situation is more acute in Europe than the U.S. because most of the rules for Dodd-Frank have already been implemented, whereas rulemaking for Emir and MiFID II is still in the early stages. Add in AIFMD, and European companies face a mountain of regulations to climb over the next several years.
Dodd-Frank has been there now for a couple of years, and I think people are seeing it almost as light at the end of the tunnel,” said Matt Gibbs, product manager at Linedata. “Whereas, in Europe and the U.K., we have MiFID and Emir, and when you combine those two, it kind of equals Dodd-Frank, and both of those are just coming into implementation now.”
With the uncertain nature of the regulatory landscape still at the forefront of concerns, firms must continue to make fundamental changes to their compliance programs, according to a survey by Linedata of global asset management companies. Many regulatory requirements have been clarified, but during 2015, firms will further address emerging and evolving regulations.
Nearly half (48%) of respondents cited deploying regulation as their main challenge, and 53% said that adapting to new regulatory regimes would be a high priority over the next 12 months. Dodd-Frank was cited as the biggest regulatory concern by 45% of respondents, followed by Emir (31%), Fatca (30%), AIFMD (29%), and MiFID II (22%).
Alternatives and TPAs also must deal with AIFMD. “You have lots of different regulations, different people being concerned about different things, but when you merge them all together, it makes it a very prominent number,” said Gibbs. “That just goes to show that regulation is happening all the time.”
Compliance is also driving the IT agenda, with 58% of respondents citing improving existing systems as a top IT priority, up from 33% in 2012. “It’s a big jump, and if we look at the reasoning behind that, it’s been compliance rearing its nasty head,” Gibbs said.
Another 54% said they were deploying compliance using internal compliance groups as opposed to third-party software, external compliance services, and proprietary compliance systems, a clear reflection of the need for a rapid response.
“People are relying on internally built solutions and internal staff to try and meet the regulations in time,” said Gibbs. “A lot of people have been using those internal, very quick methods of development, especially using things like RAD, to get things in place as soon as they can.”
The number of respondents citing staff retention as a critical issue spiked to about 18% almost double the figure from a year earlier. “This goes hand in hand with regulation, in just the way in which the industry’s gone,” said Gibbs. “For years, people have been looking at cost-cutting, and that’s put a further emphasis on the quality of staff they’ve got. If you look at that number, it’s increased a lot over the last three years in percentage terms and continues to.”
Featured image via Dollar Photo Club
With Thejas Nalval, Co-Founder and Chief Investment Officer, Parataxis Capital
Corporate Sustainability Reporting Directive elevates sustainability information to same level as financial.
Essentia analyses data to create behavorial “nudges” for fund managers' investment decisions.
With Adam Conn, Head of Trading, Baillie Gifford
Partnership will develop a suite of U.S.-listed, physically backed ETFs.