The heavy volume of regulatory changes in the financial services industry increasingly requires organizations to expend extensive resources to interpret new regulations and implement a sustainable compliance operation. In this research paper, we explore how active investment management and capital markets regulation is impacting firms and what they can expect going forward.
The numerous new and proposed regulatory changes in the financial services industry place a tremendous burden on organizations to manage the heavy volume of change and require them to seek new technology solutions, controls, reporting, and staffing necessary to comply with deadlines. The competitive job market, high turnover, and untrained or undertrained resources compound these challenges for many.
Among US financial regulators, the Securities and Exchange Commission (Commission) is pursuing a volume of change to investment management and capital markets regulation unseen in the past decade. The Commission is redefining market structure, materiality, and the very universe of entities that it regulates. At the same time, companies subject to financial regulations are facing tremendous challenges, including talent issues, inflation, and a slowing economy. Some of the most significant and costly proposals are expected to be released in the coming months, including substantial changes to the equity and debt market structure.
While individual impacts might vary slightly from organization to organization, in aggregate it is evident that the numerous new regulations being imposed on the industry have significant effects at all levels of the organization.
These evolving regulations create disproportionately large burdens on small- and medium-size firms, as they are required to meet the same standards as their larger peers but often with fewer financial and talent resources. Well-capitalized and well-resourced firms can absorb the additional fixed costs imposed by regulations more easily than lesser-capitalized firms, or firms with thinner margins, which places those firms at a competitive disadvantage.
Regulatory agencies are likely to achieve better outcomes by proceeding in a more methodical and streamlined manner. This would require regulators to prioritize among the many outstanding proposals and advance to the final rule stage only those that address a clear market failure. Finalizing only the strongest and most urgently needed regulations or using a phased approach may potentially help ensure that firms are able to implement the required changes successfully.
Download our report to learn more about how the active regulatory agenda will impact your organization. The report also presents heat maps illustrating the extent of the impact across seven key organizational areas and explores the key risks organizations should anticipate.