85% of investment management professionals at the Investit Intelligence Conference in September, said that ‘Regulatory Change Projects’ were at the top of their agenda for 2013. Investit then asked clients from 24 global investment management firms, which regulatory activities are causing their firm the most concern; the top five were: Alternative Investment Fund Managers Directive (53%); Dodd-Frank Act (51%); Foreign Account Tax Compliance Act (43%); Solvency II (38%); Retail Distribution Review (32%).
With four of these due to go live in the next 14 months, it is clear that investment management firms feel the pressure to comply by the deadlines while developing an efficient and profitable business. Sarah-Jane Dennis, Consultant at Investit, presenting to the group of senior investment executives said: “We are facing a period of regulatory crush. The regulators are struggling to turn the politicians’ promises into formal regulation, but in a number of cases the dates for compliance are not moving. Managers need to be able to respond in a more agile way to become compliant in shorter timeframes.”
Investment managers who are already working hard to create better, more efficient businesses need to plan their set of compliance projects carefully. Working on one set of rules at a time – having separate projects for AIFMD, Dodd-Frank, FATCA and so on – is very inefficient and can result in overlapping changes.
Sarah-Jane offered two alternative ways of preparing in advance for the regulations which may remain unclear for some time:
1) Vertically from a departmental level so that you can prioritise the departments which will be most affected. Those Investit has found to be in the danger zone are Compliance, Regulatory Reporting, Legal, Investment Operations and Investment Front Office.
2) Horizontally at a thematic level, sorting the requirements of each regulation into five thematic buckets which can then be tackled collectively. These themes are Transparency, Systemic Risk, Capital Adequacy, Investor Protection and Tax Collection.
Investit’s Regulatory Heatmap is a practical tool for investment managers to regain control over their regulatory change programmes, distilling 1000s of pages of legal documentation into one easy-to-use impact assessment. The tool allows investment managers to get a clear and quick view of how regulations will truly affect their firm across each department. With just one completion of the data set, the impacts of each regulation filter down into multiple views to facilitate planning for resources and budgeting, as well as providing a firm-wide top-level overview to help with prioritisation and communication.