Evolving Asset Management Regulation Report 2024

Regulators remain highly focused on anti-greenwashing measures in the asset management sector. This year’s report notes that a number of jurisdictions are introducing sustainability-related product labels, enhancing the scope of disclosures, and creating rules to ensure that fund naming and marketing is not misleading. Asset managers should seek to stay abreast of changing regulatory requirements.

Action: Assess your global product strategy and your approach to ESG governance to ensure alignment with relevant regulatory anti-greenwashing frameworks and controls. Consider implementing a common framework across your firm to define which products qualify as ‘sustainable’.

The regulation of AI and digital technology is front and center with regulators around the world taking different approaches and moving at different paces – creating challenges for global asset managers seeking to drive performance improvements with new technology. This year’s report also notes efforts in some markets to clarify whether retail funds should be able to invest in crypto assets.

Action: Keep on top of regulatory changes and ensure the latest communications and expectations are factored into your business strategy and your product manufacturing and approval processes. Assess whether your risk and compliance function is ready for the changes being rolled out. 

With some standards now set around open-ended fund liquidity practices and money market fund stability risks, regulators are shifting their focus to leverage and increasing transparency through the introduction of new reporting requirements for funds. As assets under management continue to grow, expect supervisors to start to question whether their regulatory frameworks remain appropriate.

Action: Consider how private assets can be brought into the corporate strategy and identify and address any potential conflicts of interest that might arise. Review the governance arrangements and policies and procedures underpinning fund liquidity risk management. 

Financial resilience requirements are being updated and enforced. Implementation deadlines for operational resilience requirements are approaching rapidly. Cyber resilience remains firmly in the regulatory crosshairs. And AML and CFT regulations and requirements are being tightened. Given recent economic uncertainty, it is not surprising that resilience is near the top of the regulatory agenda.

Action: Build a culture of financial and operational resilience within the board, supported by defined tolerances for disruption. Assess third party and outsourcing arrangements with a particular focus on cyber-related risks. 

Regulators are strengthening consumer protection frameworks, updating disclosure requirements, tightening product governance arrangements, and checking the embeddedness of existing rules. At the same time, they are also taking a close look at the value of investment products and services to ensure investors are getting the service they are paying for.

Action: Review your firm’s strategy, governance structures, culture, and purpose to ensure it is aligned with customers’ best interests. Ensure services are being delivered where clients have paid for them and perform an assessment of the benefits and costs to assess value for money. 

While good governance always plays a role in regulation, there are specific areas where regulators are focusing more recently. Accountability frameworks are being updated. New investor protection rules are being published. Delegation of portfolio management rules have been finalized in Europe. And reviews of frameworks that govern asset managers' stewardship of investee companies are underway.

Action: Assess board composition to ensure individuals have the capacity and capability to provide sufficient knowledge, expertise, and independent challenge. Evaluate current governance frameworks and accountabilities against regulators’ expectations as they evolve. 

As policymakers look to promote their own asset management and capital market industries, authorities are looking to broaden the range of investments available to investors in their markets. They are also seeking to create opportunities for fund management companies to bring new products to market to better meet investor demand. Regulation isn’t just about risk; it’s also about opportunity.

Action: Identify potential opportunities to bring new products to market or grow market share in key geographies. Assess your ability to distribute funds and services cross-border. And check that appropriate investor protection measures have been embedded in product design. 

Regulatory change management is evolving from a compliance challenge into a strategic data and workflow opportunity. And regulatory compliance is increasingly being driven and evidenced by digitalized, centralized end-to-end obligation capture and mapping. Asset managers are enhancing their approach to compliance to become more efficient and effective.

Action: Adopt regulatory horizon scanning technologies with the aim of staying on top of regulatory changes. Automate appropriate processes to improve operational efficiency, oversight, and traceability. And standardize data collection and assessment to streamline risk and control frameworks.