In its fourth annual analysis of global financial regulations, audit, tax, and advisory firm KPMG says investment managers still face daunting challenges from a changing global regulatory environment which is fraught with unanswered questions and an array of differing rules in each region.
However, John Schneider, head of KPMG’s Investment Management Regulatory practice in the U.S. and a coauthor of the report, says he’s beginning to see some consistency regarding the implementation of new regulations across the globe, with the United States and Europe setting the bar and Asia catching up.
“We are beginning to see progress toward more consistency with regard to global regulations, but there still remains disparity in the regulatory requirements across the regions,” Schneider said in a statement.
“The goal is to reach a global connectiveness and consistency as to how regulations unfold, which is critical if we are to make sure the competitive landscape is not significantly altered,” Schneider added.
In the United States, investment managers have been dealing with new regulations brought about by the Dodd-Frank Act and other legislation that require new forms of disclosure reporting and increased infrastructure needs.
‘Avalanche’ of Regulation
The 54-page report, “Evolving Investment Management Regulation: A clear path ahead?” examines the regulatory push in the investment management industry in the United States, Europe, the Middle East, Africa, and Asia, which involves an alphabet soup of government agencies and organizations. The report says the “avalanche” of regulations is the result of two common objectives being pursued globally: protecting consumers and preventing another global financial crisis like that of 2008.
“Consumer protection and financial systemic risk mitigation are the driving forces for regulatory change that are being applied consistently. And while there have been delays in implementing many of the regulations on a global basis, taking the extra time has contributed to making them stronger and more workable,” Schneider said.
“While there is significant pressure on the investment management industry today from individual and institutional investors for more transparency, this could very well lead to more opportunity for growth as investors’ confidence is strengthened,” said Jim Suglia, head of KPMG’s investment management sector, Global Advisory, and a lead editor of the report, in a statement.
Suglia says investment managers representing private funds, money market funds, and new instruments will continue to be scrutinized with increased frequency and intensity of examinations.
Other key findings include:
- Alternative investments are under the spotlight with regard to financial stability and market transparency, with increased scrutiny of hedge funds and alternative investment vehicles.
- Globally, attention is focused on institutional investors and products such as hedge funds, which were initially blamed for the financial crisis. This has led to measures that critics say far exceed the amount of protection institutional investors actually need.
- Offshore firms have their own set of challenges in regulations from Europe and the United States.
“Evolving Investment Management Regulation—A clear path ahead?” by KPMG’s Financial Services Regulatory Centre of Excellence: http://www.kpmginstitutes.com/evolving-invesment-management-regulation.pdf