It might be hard to believe, but we are less than 30 days from the start of 2023. And as is common for this time of year, teams are looking back at regulatory compliance trends to help prepare for the coming year. If nothing else, this year has been an active one, with the Securities and Exchange Commission (SEC) and Financial Conduct Authority (FCA) both releasing multi-year strategies which address critical priorities within the financial landscape.
For those financial firms – like registered investment advisers, broker-dealers, hedge funds and private equity firms – looking to strategically address new and existing compliance challenges, we’ve gathered the top five financial services regulatory compliance trends. And while no one can predict the future, we believe these trends will have lasting implications for financial advisory firms and their compliance programs.
1.Rule, regulations and enforcement actions abound
2022 was, if nothing else, an active year for regulatory activity. With record-breaking penalties sought by the SEC and a number of introduced rulings which can only be compared to the kind of activity following the introduction of the Dodd-Frank Act, compliance programs had their work cut out for them. And, truth be told, it doesn’t look like the pace of activity will be slowing any time soon, with Chair Gensler having been quoted as saying the SEC is just getting started.
2. Cybersecurity is a top priority
The sophistication and complexity of cyber-attacks has made cybersecurity THE topic of 2022 for compliance programs and regulatory bodies alike. While not all proposed rulings have been met with resounding support, financial professionals agree, the damage of a cyber attack to both the financial firm and its clients can be detrimental. Implementing protective measures, including a thorough training of all staff, is essential to mitigating cybersecurity risk.
3. What will happen with cryptocurrency?
Cryptocurrency has upended the financial ecosystem. However, with new opportunity comes new risk, and the financial industry at large is still struggling to agree on how best to address and regulate the decentralized financial ecosystem and crypto coins. While some regulators argue crypto assets should be treated as any other kind of security, an equally large segment of the financial ecosystem argues the differences require unique regulations. Where will we land? It’s anyone’s guess at this point.
4. Examination focus areas: The new Marketing Rule, Books and Records requirements and more
Regulators have made it clear; examinations will focus on critical regulations like the new Marketing Rule, Books and Records requirements, Reg BI and others. The challenge? Not all firms have a clear understanding of how to implement new rules or updated amendments, making compliance a difficult task for even the most stringent of compliance professionals.
5. The SEC and FCA strategies highlight a focus on protecting consumers
Both the SEC and the FCA released multi-year strategies which re-asserted their commitment to protecting consumers and the integrity of the market. Financial firms would be wise to critically analyze these strategies, assessing how their compliance programs meets with regulatory expectations for this year and the next.
2022 was a year for the books (and records). And 2023 is sure to be no different. Learn more about the industry landscape and how firms like yours are addressing new compliance trends and challenges.