Institutional investment firms are becoming increasingly worried about adapting their businesses to impending regulation, according to new research.
The findings are part of a survey of 24 global investment companies from buy-side advisory firm Investit, which gauged the level of concern regarding a host of new regulation.
The primary concerns for investment managers are the Alternative Investment Fund Managers Directive (AIFMD) and the Dodd-Frank Act, which were voted on by 53% and 51% of respondents respectively.
Making up the rest of the top five were the Foreign Account Tax Compliance Act with 43%, Solvency II at 38% and Retail Distribution Review with 32%. All five sets of regulation will come into force within the next 14 months.
AIFMD will put hedge funds and private equity funds under the supervision of an EU regulatory body to add further protections for investors, and was voted through in December 2010 for 2013 implementation. Parts of the Dodd-Frank Act, which includes new rules for the trading and clearing of OTC derivatives, have already come into force in the US.
Sarah-Jane Dennis, a consultant at Investit, said this wave of regulatory change would inevitably have a high-impact on investment firms’ processes and create compliance issues.
“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. Mangers need to be able to respond in a more agile way to become compliant in shorter timeframes,” Dennis said, adding that firms preparing for the new rules should either prepare individual departments, or across the thematic groups each new rule will affect, such as transparency, capital adequacy, investor protection or systemic risk.
The research project began after an Investit conference in September, where 85% of investment management professions said regulatory change projects would top their agendas for 2013.