The evolving regulatory landscape’s impact on investment compliance

Published on October 14, 2024 by Tejaswini Venkatesh

Introduction

Investment compliance refers to the rules, regulations and standard protocols an investment firm and individual professionals need to adhere to when dealing with investments. These regulations are usually set by government bodies such as the Securities and Exchange Commission (SEC).

In this blog, we discuss the impact of the ever-evolving regulatory landscape and its dynamics and how we can overcome the challenges it presents.

• Frequent changes to regulatory frameworks: Investment firms need to understand the pace at which regulation changes and keep up with the frequent updates and new requirements it they want to remain ahead of the competition.

• Regulatory uncertainty: They also need to determine how to interpret new rules in order to avoid disrupting operations and remain compliant.

• Costs and resources: Regulatory changes result in costs for an investment firm in terms of reporting, audit and staff training requirements.

• Cross-border compliance: Investment firms operating in multiple jurisdictions could face conflicting regulatory requirements. These could be managed effectively by international cooperation, implementing regulatory reforms, conducting due diligence, bringing in local expertise and being culturally sensitive.

• Environmental, social and governance (ESG) compliance: Investment firms need to understand the details of guiding frameworks (such as EU and SFDR guidelines) so issues relating to data quality, consistency and ESG metrics could be addressed. This helps improve transparency and accountability and keeps stakeholders engaged. Regulation relating to ESG claims and disclosures should also be adhered to.

• Managing client expectations and trust: Maintaining transparency in client communications and proactively educating clients on any regulatory uncertainty are vital for sustaining client relationships and trust.

• Regulatory and legal risk: Non-compliance would lead to fines, legal action and reputational damage. Investment firms would need to update their strategies regularly to mitigate legal risks and remain compliant.

• Integrating technology and associated risks: Globally, compliance practices are being reshaped by technological advancements. Investment firms would need to have strong technological solutions to mitigate risk relating to cybersecurity and data privacy. 

How Acuity Knowledge Partners can help

We highlight gaps in process and suggest customised solutions for improvement, providing advisory services, conducting detailed assessments for implementing best practices and advising on strategy.

Our detailed analysis ensures effective investment compliance in operational frameworks, and we assess regulatory changes and implement adjustments to enhance efficiency and effectiveness in all areas of compliance. Our expertise and experience span compliance tools such as Bloomberg AIM, Sentinel and Charles River and regulations such as the Company Act of 1940, UCITS, ERISA, FINRA and the Securities Act of 1933 and regulatory bodies such as the SFC, MPFA, FSA and APRA.

Recent developments impacting investment compliance:

• https://esgnews.com

• https://bankingjournal.aba.com/2024/07/directors-briefing-cyber-expertise-needs-a-home-on-bank-boards/

---

---