Regulatory compliance has always been an important issue for firms in the financial services sector. However, recent research from advisory firm Aite Group, reveals that compliance has now become a boardroom issue. According to Aite Group’s research, the majority (68 percent) of compliance professionals at financial sector organizations worldwide now view preserving a company’s good reputation as the main task of the compliance department. Because of this new focus, compliance executives are seeing their line of reporting shift from the legal department to the board.
Aite Group’s findings suggest that sell-side firms are currently thinking about the reputational impact of compliance to a much greater extent than buy-side firms. As the report states: “although buy-side firms are also emphatic about insulating the firm’s reputation, the degree of prioritization is significantly less than their sell-side counterparts.”
At RIMES, we believe this will not be the case for much longer. To date, buy-side firms have managed to avoid the heavy regulatory oversight that has characterized the sell-side. As a result, they have been at less risk of regulatory non-compliance, and the subsequent damage to reputation and brand. Indeed, buy-side firms have long been able to effectively outsource tasks such as market surveillance to the broker community.
However, the recent raft of regulations effecting the buy-side is fast putting an end to this state of affairs. Regulations such as MAR (which took effect on July 3rd) and MiFID II (which will come into force in January 2018) are placing a much greater compliance burden on buy-side firms. Consequently, buy-side companies need to completely overhaul their approach to data governance and compliance and put in place new processes and systems to monitor trades, transactions and orders. Crucially, buy-side firms no longer have the option of outsourcing this market monitoring to brokers.
The buy-side is therefore under the regulatory spotlight like never before, and any instance of non-compliance will put a firm’s reputation at risk. In a sector where reputation is everything, it is critical that buy-side firms put in place a robust and effective approach to data compliance and governance.
From RIMES’ perspective, the best approach for buy-side firms is to take data compliance as a managed service. There are several benefits to this approach over the in-house alternative.
First is speed. With time running out for firms to comply with new regulations, managed services provide a seamless and rapid way for buy-side firms to upgrade their systems and processes; providing instant access to best-of-breed technologies and expertise. Second, it is more cost effective than putting in place the requisite market surveillance technology in-house. Finally, managed data services keep pace with changes in regulations, ensuring that firms’ reputations are in safe hands in today’s fast-changing regulatory environment.
Over the next few years, buy-side firms will come to recognize how important compliance is to the good standing of their brands. Managed services provide a simple and convenient way for firms to ensure they are compliant, while allowing them to focus on their core operations.
The content provided in these articles is intended solely for general information purposes, and is provided with the understanding that the authors and publishers are not herein engaged in rendering regulatory or other professional advice or services. Consequently, any use of this information should be done only in consultation with qualified legal counsel. The information in these articles was posted with reasonable care and attention. However, it is possible that some information in these articles is incomplete, incorrect, or inapplicable to particular circumstances or conditions. We do not accept liability for direct or indirect losses resulting from using, relying or acting upon information in these articles.
- ESMA Consults on Broadening the Scope of MAR
- EU Regulators Turn Tough on Market Surveillance Compliance
- SOTERIA and RIMES Technologies Partner to Provide a Real-Time Integrated Trade and Communication Surveillance Solution for Financial Services Firms
- The ETF Market is About to Explode: Is Your Firm Ready?
- RIMES Hires New Head of Sales for Asia