Our 2018 regulatory outlook
The year 2017 will live long in the memory of compliance and regulation teams, with the DOL Fiduciary Rule running up against a barricade, the SEC Reporting Modernization program hitting a speed bump and the EU’s MiFID II and PRIIPs programs careening forward at breakneck speed. So what does 2018 hold in store for fund professionals charged with ensuring their firms remain resilient to the waves of oncoming regulation?
There are a few key themes and vectors that are driving agendas for 2018:
+ Many firms are viewing 2018 as a year to batten down the hatches, take a deep breath and re-assess the regulatory landscape through a strategic lens. Firms are using 2018 as a year to look at their regulatory reporting inventory with a view to consolidation of vendors into more unified solutions that handle multiple regulations where commonality exists across the underlying data sources.
+ 2018 is going to be a year of further geo-political uncertainty – the Brexit vote, the Trump Presidency and the rise of protectionism and populism have cascaded into the funds industry and are leading to a less certain world on the regulatory front. Witness the shelving of the DOL Fiduciary Rule in the US and other capital markets reform dilution.
+ For EU countries, whether staying or leaving, 2018 will still be a year of bedding in MiFID II and PRIIPs. Many firms and their respective regulatory change program resources faced a period of high stress and anxiety as we saw out 2017 and welcomed in the New Year — there were very few champagne corks being popped at New Year’s Eve parties for those compliance teams. The first half of 2018 will be heavily focussed on identifying errant processes and systems that were rushed into play in an effort to ensure compliance for January 3rd.
So what regulations and related change are fund professionals in the US and EU/UK worried about in 2018?
+ SEC Reporting Modernization and Liquidity Risk Management (Rule 22e-4) are still very much front of mind for US mutual fund firms in 2018 with the June compliance date coming up fast. The SEC has delayed the date on which it will begin accepting the data, to give it time to work on cyber defences prior to taking in highly sensitive pan-industry information. Funds, however, are generally proceeding on schedule as investment firms must still complete the monthly reports and have the information available to the SEC for inspection at any time.
+ All firms (US, EU and Asia) with EU clients are slowly, but very surely, becoming aware of the impending arrival of GDPR (General Data Protection Regulation) and the onerous data protection, privacy and DR requirements this brings.
+ In the UK we have a new era of transparency on pension charges (implicit and explicit) being ushered in. We have the DWP, FCA and LGPS Advisory Board all pushing an agenda for greater and more consistent reporting of the charges being incurred in pension investments. Expect to hear more about the DCPT and LGPS templates as the months roll on.
+ Some key new regulations on the horizon are SMCR (Senior Managers Certification and Conduct Regime) and the BMR (Benchmark Regulation).
+ Cyber privacy and protection issues are, and will remain, very high on the agenda. This is true on both sides of the Atlantic and in Asia. The investment in cyber defences, in particular pro-active measures to defend and detect/protect, are at an all-time high in our industry.
+ Finally, the wave of trade and transaction reporting requirements being pushed down from the G20 nations and supra-nationals is driving huge amounts of activity. We have EMIR, MiFID II, FinfraG, Bank of Israel, SFTR and REMIT all in the sights of many firms – some of these are impossible to avoid no matter where you’re doing your business because counter-party relationships are drawing firms into situations where it’s difficult to manoeuvre away. The same can be said for position limit monitoring and reporting, which now has MiFID II added to the mix. As a result firms are seeking go-to solutions that can cover the vast array of regional and sometimes company-specific requirements for substantial shareholding reports.
There’s no doubt that 2017 was the year to forget, what with confusion about the introduction of N-PORT regulations in the US and the mad rush for MiFID II and PRIIPs compliance in Europe. Let’s hope that, even with the global uncertainty, 2018 is a bit more straightforward allowing us the time to contemplate bold strategic moves and make the oversight and implementation of regulation that bit more manageable.