New research reveals that fines for professional investors and corporates for breaking regulations could be set to rise.
Ocorian, a market leader in regulation and compliance services for funds, corporates, capital markets and private clients, carried out an international study among board directors of leading firms with turnover of more than $250 million.
It revealed that 69% expect the number and overall value of fines issued in their sectors for breaking regulations will increase, with 18% expecting a dramatic rise. A total of 71% said their organisations are preparing or budgeting for a potential increase in fines they could face.
More than two out of three (67%) interviewed believe their market is over-regulated, but despite this 90% 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 25% of those surveyed say it is not an issue – 20% say they find this very difficult to do this, and 49% say it is quite difficult. Some 55% believe their organisation will find it more difficult to do this over the next five years, and just 24% believe it will become easier.
Overall, just 43% of the board directors interviewed believe their organisations are excellent at meeting their regulatory requirements, with 49% saying they are good at it and 4% describing their ability to do so as poor.
Just 61% of those professionals surveyed say their organisation’s executive board takes regulation and compliance issues very seriously, and 29% say they take it quite seriously but could focus on it more. Just 8% said they don’t take it seriously enough.
Aron Brown, Head of Regulatory & Compliance at Ocorian, said:
“It’s surprising to see that 22% of the firms surveyed believe their organisations are too focused on compliance and regulation and not on commercial aspirations.
“We’ve seen with our clients that 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, 82% 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, 63% of those surveyed said their organisations had invested in new technology to help with compliance, but 51% said they had decided against making a major acquisition or investment because of regulatory concerns, and 43% had recruited specific expertise in-house because of regulatory concerns. Around 29% of those surveyed said they had closed down a division or part of the business and around one in five (22%) said their organisation had sold a business because of this.
