Compliance technology in an ever-shifting regulatory landscape

 

Introduction

Financial regulation changed significantly following the global financial crisis of 2008, which badly exposed gaps in the pre-crisis global regulatory framework. In the years since, regulators have sought to increase transparency and improve standards as the industry develops while demonstrating a willingness to pursue aggressive enforcement actions where necessary.

Although the sell-side has typically attracted the most regulatory scrutiny and received the heaviest fines, the buy-side is also dealing with an increasingly complex and robust range of regulatory requirements. Indeed, the growing size and systemic importance of the buy-side means that it is increasingly in the regulatory spotlight when it comes to the development of new rules and practices.

Not only are regulators working through a post-pandemic backlog of policy development and enforcement in long-standing traditional areas such as market abuse and communications surveillance, but there are also clear signs that financial regulators are taking on a much more ambitious and varied remit than ever before. New and emerging areas such as green finance, digital assets, and artificial intelligence are fast becoming key priorities for regulators aiming to keep up with industry developments and set standards accordingly.

As regulatory pressures continue to grow, buy-side financial firms must optimize the effectiveness of their compliance officers, portfolio managers, and trading desks in an efficient and cost-effective manner.

In this post, we discuss several significant trends and areas of investment that buy-side firms must consider as they seek to optimize their compliance regime, as they address the increasingly fast-moving and assertive regulatory landscape they operate in.

Key buy-side compliance challenges

A recent survey conducted by Waters Technology found that when asked to identify their greatest compliance challenges, 52% of buy-side firms reported that their processes were too manually intensive and lacked automation.

Forty-two percent stated they needed help understanding the minutiae of regulations and translating them to technologies and workflows. Additionally, 39% felt poor accuracy and reliability due to fragmented, legacy or proprietary systems presented a significant challenge.

As these results show, buy-side compliance teams face significant challenges. Today, many buy-side firms rely on legacy solutions built on less sophisticated technology designed to function in a simpler, less demanding regulatory environment. Such technology, which often operates in siloes, leads to inefficiencies, including manually updating each system as regulations change. All of this adds up to direct or indirect costs in the form of human time, technology inefficiencies, or unaddressed risks.

To better operate in today’s environment and prepare for what’s over the horizon, buy-side firms must take a different approach.

 

Rather than viewing every compliance obligation as requiring its own specific point solutions. Firms should seek compliance solutions designed to be as comprehensive and integrated as possible, backed by the regulatory expertise to help clients adapt and scale quickly as regulations evolve.

Using such a solution allows firms to:

• Embrace automation and ingest, organize, analyze, and report vast amounts of data quickly and efficiently.

• Facilitate regulatory compliance by providing those involved in the compliance effort with timely, relevant, detailed, and accurate data.

• Ingest data from existing technologies, including third-party solutions, and minimize the stress on your firm and compliance professionals and their efforts to create a credible and defensible program.

 

 

How we can help

Minimize the stresses and strains of compliance without compromising your ability to comply with increasingly complex and demanding regulations and laws. Empower your compliance, technology, and risk officers to manage regulatory risks and business mandates with a suite of offerings that supports the end-to-end compliance workflow — from policy to prevention, retention to surveillance, and discovery to reporting.

Investment & trade compliance
Ensure all the processes, including client onboarding, due diligence, pre- and post-trade compliance and trade reconstruction, are compliant with increasingly complex and constantly evolving regulations.

Regulatory & risk reporting
Simplify and optimize your regulatory reporting processes with integrated end-to-end reporting and quality control solutions. Plus, benefit from our focus on pre- and post-reporting quality assurance and exception management to enhance your workflows.

Transaction cost analysis
Analyze and combine your trade activity with the unrivaled breadth and transparency of Bloomberg’s market data and a wide range of benchmarks, introduce exception management into your TCA processes, easily comply with ever-evolving regulatory demands, and generate reports that demonstrate fairness to clients.

Find out more here.