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Regulation: Adapting to the Constant But Shifting Landscape

Authored by: Vinny (Vinayak Bhat), Director-Technology, Charlotte, NC, USA

A myriad of regulations have challenged the buy-side industry and the storm doesn’t seem to be slowing down anytime soon. What seems to also be clear is that regulators are not giving any respite to the firms they govern as to their implementation dates. For example, the implementation date for Reg BI was July 30th and this didn’t change despite the pandemic, US elections or other unprecedented global scenarios. The situations in Europe are not so different.

The biggest issue which the buy-side faces is the intense cost reduction pressure due to dwindling fees on products and tight operating margins which are weighing firms down. This requires applying controls and acquiring new skills which were never before applicable. Where IT systems haven’t been overhauled by technology changes, as has been the case with sell-side counterparts, there is always a significant amount of work involved with even with a small regulatory change that needs to be incorporated. An example of this is the Required Minimum Distributions (RMD) age increase from 70-1/2 to 72 years under the SECURE Act which went into effect in Q1 of 2020. With disjointed payment systems and reporting systems, and client-facing systems, this change implementation has, in some cases, taken more than four months. This delay in implementation can cause direct reputational damage, and carries the risk of non-compliance and customer frustration.

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