Investment managers prepare for larger non-compliance fines

International study reveals expectation of greater regulation ahead

Investment managers prepare for larger non-compliance fines
Steve Randall

Investment professionals and business executives are preparing for a rise in regulatory requirements and financial penalties for non-compliance.

New research from Ocorian polled senior executives at major companies and investment managers with family offices, private equity, venture capital and real estate funds as well as senior capital markets executives and found that eight in ten are expecting the number and overall value of fines in their sector to rise, 16% believe this will be dramatic.

This will likely mean greater budget allocations for potential costs with most respondents believing that their sector is already over-regulated and 41% saying it is quite difficult to comply and 27% saying it is very difficult.

And only one third of professional investors and business executives believe their organization is excellent at sticking to the rules, with most of the rest saying they are good at meeting obligations, despite just 57% agreeing that their board takes compliance seriously enough.

"As our clients grow the nature, scale and complexity of their business, the regulatory demands also increase, this has implications in terms of their investment in compliance and the expectations upon them from their investors,” said Aron Brown, Head of Regulatory & Compliance at Ocorian. “Good governance and robust compliance preparedness enhances commercial prospects and wins business. We see investors are increasingly cautious about where they invest so if they can find a good governance and compliance framework, they are more likely to invest.”

New technology is a key component of compliance with 62% of poll participants’ organizations having invested in this in the past five years. However more than half have not made a major acquisition or investment because of regulatory concerns, while this had led 43% to close part of their business, and 21% to sell a business.