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Money Management

Money managers face diverging international regulatory standards – KPMG

Money managers need to deal with a breaking down of consensus when it comes to worldwide regulatory standards, warns KPMG.

The firm's latest Evolving Asset Management Regulation report said there is a "parting of ways" among regulators around the world, following a convergence of regulation after the financial crisis.

"The U.S. administration believes the raft of post-crisis regulation has encumbered its asset management industry," said the report. "There is a desire to deregulate and take a path that forks from that of other countries, which are forging ahead with the implementation of new rules."

When it comes to potential changes to rules in Europe, "each piece of post-crisis regulation has a review clause, but each of these reviews has a different due-by date," added the report. It said it will be interesting to see how the United States' "deregulatory agenda" impacts European policymakers' views regarding "the extent to which EU legislation should be rationalized."

The report also addressed the U.K.'s departure from the European Union, which it said will impact cross-border flows between the U.K. and the rest of the EU in both directions. It also highlighted that delegation — allowing for managers to provide portfolio management from one jurisdiction to another — "looks set to become more demanding. It seems that asset managers will need to navigate a complex distribution landscape for some years to come," said the report.

Also cited were new areas of money management that regulation is entering, including financial technology, cybersecurity, crowdfunding and cryptocurrencies.

Further, "sustainable investing was until recently considered a matter only for asset managers and investor preferences," said the report, but now is a consideration for institutional investors in particular. KPMG said the consideration of ESG factors as well as socially responsible investing is now important to money managers with institutional clients.

KPMG outlined key points for CEOs at money management firms. It said they should factor into business plans "both the fragmenting and complex regulatory landscape and increasing supervisory scrutiny;" should watch carefully the evolving debate on systemic risks; and review decision-making and monitoring processes around fee structures and rates.