There’s no escaping it.  The regulatory tsunami that followed the financial meltdown continues to ripple throughout the industry.  No financial sector or region is spared. 

While asset managers are over the hump implementing the mandates of several directives such as UCITS V, there’s still more on the table for 2017.  MiFID II, AIFMD, MLD4, CRS and FATCA are some of the ‘alphabet soup’ regulations whose impact will continue to saddle the investment community with operational headaches and increased costs throughout the coming year.

Here’s a brief look at what to expect in 2017.


MiFID II, which impacts the entire European investment community, is one of the most wide-reaching of all the regulations.  It will compel organizations to reassess processes and procedures and set new standards for corporate governance, transparency, trade matching, recordkeeping and reporting.

The changes under MiFID II are intended to bring fairness to the market and greater protection to end investors The challenge for the investment industry is not only how to implement the requirements, but how to balance the cost of compliance in a climate with a downward pressure on fees and increased competition.  Fortunately, compliance with MiFID II was postponed 12 months to January 2018, giving asset managers more time to figure it out.


Alternative investments flew under the radar for many years, avoiding the transparency and reporting requirements levied on banks and other financial market participants. 

That changed with The Alternative Investment Fund Managers Directive (AIFMD), which was adopted to protect investors by “harmonizing” the various regulatory frameworks across Europe.  It also saddled hedge fund, private equity and other alternative investment fund managers in the EU with increased costs for complying with the more stringent disclosure, capital, depositary and reporting requirements mandated under AIFMD.

While fund managers have turned the corner on the initial difficulties of implementing AIFMD, meeting the level of detail, complexity and frequency of reports required by AIFMD Annex IV reporting will remain a significant challenge in 2017.


Beneficial ownership has gained much attention as governments worldwide step up know your customer (KYC) mandates to prevent money laundering and terrorist financing.  The fourth Money Laundering Directive (MLD4) adds clarity to definitions of risk, calls for greater transparency of beneficial ownership and requires stricter customer due diligence, among other requirements. 

Gathering information on beneficial owners is labor intensive and time consuming.  Asset managers that have not yet begun to incorporate risk assessment policies and procedures into their operations or establish processes for identifying and mitigating risk will need to get on the bandwagon quickly.  MLD4 must be incorporated into each EU country’s law by June 2017.

Common Reporting Standard

Also causing headaches for institutions across the globe is the OECD Common Reporting Standard (CRS), which outlines due diligence and reporting obligations for financial institutions regarding the automatic exchange of information.  The goal of CRS is to fight tax evasion and offshore accounts used as tax havens.

The 47 countries that agreed to early adoption spent 2016 capturing the requisite information, which will need to be reported to regulators in 2017.  The remaining 50+ institutions that were not part of early-adopter jurisdictions must begin to implement CRS onboarding standards as of January 1, 2017.  Visibly absent from the list of participating countries is the U.S. 

How the U.S. absence plays out remains to be seen.  For everyone else, implementing the complex due diligence procedures and tax reporting requirements of CRS will be like all other regulatory obligations — costly and time consuming.


In the U.S., the Foreign Account Tax Compliance Act (FATCA) has had a considerable impact on the asset management industry since it was enacted in 2010.  Implementing FATCA withholding on designated accounts and additional tax reporting rules in 2017 represent one of the last phases of this regulation.

What does it all mean?

With transparency and reporting the linchpin of nearly all regulations, the challenge for organizations is to figure out how to gather, compile and report on data efficiently. 

Technology is the answer.  The right technology can offset the increased cost of compliance by driving operational efficiency.  It enables companies to implement institutional controls and procedures while providing cost-effective consolidated reporting that satisfies regulatory obligations.  At the same time, technology can also help meet the needs of investors, whose push for transparency mirrors that of the regulatory authorities. 

While regulatory reporting has its challenges, the individualized nature of investor and management reporting presents even greater hurdles.  Only by embracing technology can the asset management community meet investor demands and flourish under the new regulatory regime.

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