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Regulation top of the agenda: investors expect the level of fines to increase

Regulation top of the agenda: investors expect the level of fines to increase

05 December, 2023
Regulatory, Compliance & Legal Compliance Monitoring

New research* from Ocorian, a market leader in regulation and compliance services for funds, corporates, capital markets and private clients, reveals that fines for professional investors and corporates for breaking regulations could be set to rise.

81% preparing for a potential increase in fines

Ocorian’s international study among senior executives at major companies and investment managers with family offices, private equity, venture capital and real estate funds as well as senior capital markets executives, reveals 78% expect the number and overall value of fines issued in their sectors for breaking regulations will increase, with 16% expecting a dramatic rise. Furthermore, 81% said their organisations are preparing or budgeting for a potential increase in fines they could face.

86% believe the level of regulation in their market will increase

Nearly three out of four (74%) interviewed believe their market is over-regulated, but despite this, 86% believe the level of regulation will increase over the next five years.

When it comes to their organisation adhering to regulations in the different jurisdictions they operate in, only 29% of those surveyed say it is not an issue – 27% say they find this very difficult to do this, and 41% say it is quite difficult. Some 59% believe their organisation will find it more difficult to do this over the next five years, and just 23% believe it will become easier.

Overall, just 32% of the professional investors and corporate executives interviewed believe their organisations are excellent at meeting their regulatory requirements, with 63%  saying they are good at it and 4% describing their ability to do so as poor.

Just 57% of those professionals surveyed say their organisation’s executive board takes regulation and compliance issues very seriously, and 38% say they take it quite seriously but could focus on it more.  Just 4% said they don’t take it seriously enough.

88% expect to increase their budgets for regulation and compliance over the next five years

Aron Brown, Head of Regulatory & Compliance at Ocorian commented “It’s surprising to see that 37% of the firms surveyed believe their organisations are too focused on compliance and regulation and not on commercial aspirations.

“Whereas what we’ve seen with our clients is if you get it right in the first place you become more efficient and are more attractive to investors. Good governance and robust compliance preparedness enhances commercial prospects and wins business. We see investors are increasingly cautious about where they invest so if they can find a good governance and compliance framework, they are more likely to invest.

"As our clients grow the nature, scale and complexity of their business, the regulatory demands also increase, this has implications in terms of their investment in compliance and the expectations upon them from their investors. Some are increasingly outsourcing to third parties like us to support them in this area, and they are also increasing their budgets for ensuring they are compliant.

“Indeed, 88% of those professionals we interviewed expect the organisations they work for to increase their budgets for regulation and compliance over the next five years.”

The research also identified other actions professional investors and corporates have taken as a result of difficulties regarding regulatory issues. Over the past five years, 62% of those surveyed said their organisations had invested in new technology to help with their compliance, but 52% said they had decided against making a major acquisition or investment because of regulatory concerns, and 43% had closed a division or part of their business because of regulatory concerns. Around one in five (21%) said their organisation had sold a business because of this.

Responses to regulatory concerns: Percentage of investors & executives taking actions in the past 5 years

Assisting with a broad range of compliance services Ocorian’s subsidiary compliance consultancy, Newgate Compliance, delivers pragmatic and flexible solutions to help clients meet often complex, evolving and increasing regulatory obligations. The team led by industry experts and ex regulators helps clients with the submission of regulatory authorisation applications, provision of Money Laundering Reporting Officers (MLROs), the implementation of compliance frameworks and governance structures, as well as regulatory and compliance training for employees.

Contact Newgate’s compliance experts today to fortify your compliance framework.

*Ocorian commissioned independent research company PureProfile to conduct a global study of 301 senior executives. The survey was carried out among board directors at companies with annual turnover of more than $250 million, fund managers working in family offices, private equity, venture capital and real estate; and senior executives working in capital markets focused on  structured credit, CLOs, securitisation, mortgage-backed securities and asset- backed securities. Respondents to the survey, which was conducted in November 2023, were based in the UK, continental Europe, Asia, the Middle East and North America