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Asset managers urged to prepare for growing scrutiny of individual conduct

The UK’s £7.7trn asset management sector must step up investment in trade surveillance if it is to comply with growing regulatory scrutiny of individual conduct, KPMG has warned.

05 OCT 2018 | CHRIS SEEKINGS
New regulations to boost accountability ©Shutterstock
New regulations to boost accountability ©Shutterstock


The company also said firms could look to appoint individuals removed from portfolios to act as the sell-side point of contact to support the management of wall crossing.

This comes on the same day that the Financial Conduct Authority’s consultation for a public directory, which would list individuals working for authorised firms, closed.

The directory is intended to boost trust in the sector ahead of the incoming Senior Managers and Certification Regime (SMCR), designed to make individuals more accountable for their conduct.

Banks have already started using trader surveillance tools to deal with these regulatory demands, however, KPMG UK director, Jacqui Hughes, said this may not be straightforward for asset managers.

“Technology-led trade surveillance solutions are being built by many larger asset managers, but there have been teething problems,” she said. “Poorly coded automated monitoring has delivered false positives that then required significant manual intervention, adding a further strain on resources.

“Firms should look to prioritise embedding effective solutions now. We’ve already seen a number of headlines this year about conduct issues in the industry, and frankly, our sector can’t afford more of the same.”

Hughes went on to highlight how some companies are building first line of defence teams dedicated to trade surveillance, reflecting the need for investment now rather than later.

This comes after a report from Juniper Research forecast spending on regulatory technology to increase from $18bn (£14bn) to $115bn by 2023 as firms encounter more compliancy challenges.

It is estimated that RegTech will account for 40% of businesses total compliance spending by 2023, growing by an average of 45% per annum over the next five years.

“Any heavily regulated business sector not prioritising RegTech adoption would risk damaging fines from failing to keep pace with regulatory changes,” Juniper warned.


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