2011 will see greater need for compliance in continually evolving regulatory landscape

Michel van Leeuwen, Group CEO, The IMS Group

It looks like 2011 is set to be a year in which the financial services industry will be at the centre of a cornucopia of regulatory change, as continually shifting regulation requirements and stricter enforcement will be layered on both the buy- and the sell-side of the industry. Keeping players compliant with this moving target so they can get on with their day-to-day business will require sound advice, preparation and awareness.

The buy-side, most notably the alternative investments sector, is experiencing growth again after a pause induced by the financial crisis. FSA applications for start-up firms are trending upwards again and capital in search of superior returns is flowing into the market. The lure of the alternative investment sector lies in the perceived freedom of fund managers and in the real earnings potential. The boutique nature and relaxed 2+20 fee culture still guarantee unlimited earnings potential, as witnessed by the reported pay of hedge fund heavyweights – including Appaloosa Management chief David Tepper’s $4bn pay packet of 2009.

Meanwhile, in the ever more public arena of investment banking, individual earnings potential is decreasing due to regulatory pressures and the increasingly political bonus-limitation exercise that governments and regulators ponder. This has driven many erstwhile investment bankers over to the buy-side, with the alternative investment fund sector becoming the favoured exit route.

Regulation, and therefore compliance, is global. This wasn’t always the case, but given that systemic risk was exposed as a real threat, rather than a theoretical one during the financial crisis, regulators are forming global relationships under the pressures of governments and an electorate that has bailed out the financial sector and is screaming for controls and warning systems to ensure that it will never happen again. The risk of the pendulum swinging too far to the other side is inherent and real but, as usual, is likely to be overlooked until such time that the restrictions imposed become a brake on business and economic growth.

We are bracing ourselves for a busy year at IMS, a compliance consulting and business support services firm for the asset management industry, so that we can best deliver on the demand and requirements envisaged for the alternative investment management sector. With the financial services industry undergoing such significant change. those offering the industry high-quality support services will be integral in facilitating this change.

As published in Real Deals www.realdeals.eu.com, 13^th January 2011