The post-2008 regulatory wave has led to significant ongoing reforms that continue to reshape asset management in 2024. Complex requirements around transparency, ESG reporting, and investor protection are now the norm, with more stringent oversight increasing operational costs and compliance burdens. Asset managers and investment firms face tighter rules on liquidity management, AML, and beneficial ownership disclosures, alongside evolving ESG standards embedded in both European and U.S. regulations. This article breaks down the latest regulatory developments and how they impact the industry, providing a practical guide for firms managing these challenges.

MiFID II – Still a Cornerstone of European Regulation

MiFID II, introduced in 2018, continues to influence the European investment community, particularly in areas of cost transparency and ESG (Environmental, Social, and Governance) reporting. Firms are required to disclose detailed cost information to investors and integrate ESG factors into their decision-making processes. This trend is expected to intensify as regulators focus on ensuring that firms provide clear and comprehensive data to meet both compliance and investor demands.

With regulators like the European Securities and Markets Authority (ESMA) increasing their scrutiny on data quality, firms must prioritize technological solutions to maintain compliance while managing the growing complexity of their reporting obligations .

AIFMD II – Expanding Regulatory Oversight

The introduction of AIFMD II has further tightened the rules for hedge funds, private equity, and other alternative investment managers. The updated directive increases capital requirements and places a stronger emphasis on liquidity risk management and ESG disclosure. Annex IV reporting remains a significant challenge, requiring detailed submissions on risk exposure, liquidity, and leverage​ ​(Deloitte United States).

AIFMD II also emphasizes sustainable finance, aligning with broader EU regulations like the Sustainable Finance Disclosure Regulation (SFDR). For asset managers, this means that 2024 will continue to be a year of adapting to more stringent reporting requirements around sustainability and investor protection.

SEC’s Increased Regulation of Private Fund Advisers

In the U.S., the SEC has adopted new rules that impose additional burdens on private fund advisers. These rules include enhanced quarterly reporting requirements, increased fee transparency, and more comprehensive performance disclosure. Advisers must now provide a breakdown of all compensation related to portfolio investments, which could increase operational complexity and costs​ (Davis Polk).

This regulation is particularly important for advisers managing private equity, hedge funds, and other alternative investment vehicles. The emphasis on reducing conflicts of interest and improving investor protections places further pressure on firms to enhance their compliance programs.

Basel III Endgame – Finalizing Global Capital Standards

2024 marks a significant year for the final implementation of Basel III, often referred to as the “Basel III Endgame.” This regulation tightens capital and liquidity requirements for financial institutions, particularly those engaged in investment activities. While originally focused on banks, the impacts of Basel III extend to asset managers and investment firms that must reassess their capital reserves and risk exposures​.

This phase of Basel III will challenge firms to balance profitability with the need to hold additional capital, especially as market conditions fluctuate and interest rate risk remains high.

AMLD6 and Beneficial Ownership Disclosure

Anti-money laundering (AML) regulations have seen continued evolution with the introduction of the Sixth Anti-Money Laundering Directive (AMLD6) in Europe. This directive increases penalties for non-compliance and expands the scope of liability for legal entities. In 2024, AMLD6 pushes asset managers to enhance their KYC (Know Your Customer) frameworks, particularly regarding beneficial ownership disclosure​ (Crowe).

Additionally, in the U.S., FinCEN has introduced new beneficial ownership rules that require asset managers to disclose detailed ownership information as part of their AML compliance efforts. These updates are critical for firms operating internationally, as they need to navigate different jurisdictional requirements while ensuring transparency and risk management.

Common Reporting Standard (CRS) – Global Tax Transparency

The OECD’s Common Reporting Standard (CRS) continues to expand, with over 100 countries now participating in the automatic exchange of tax information. This framework requires financial institutions, including asset managers, to report data on accounts held by non-residents to their respective tax authorities. For firms, this involves complex compliance procedures to ensure proper data collection and tax reporting.

Though the U.S. remains outside the CRS framework, FATCA (Foreign Account Tax Compliance Act) enforces similar requirements for U.S. institutions, making it essential for firms to manage these overlapping regulatory obligations efficiently.

Operational Resilience – A New Regulatory Focus

2024 has also seen a shift in regulatory attention towards operational resilience. Regulators are placing greater emphasis on firms’ ability to maintain critical operations during disruptions, whether due to cyberattacks, market shocks, or broader systemic crises. Firms must demonstrate that they have robust contingency plans in place, with boards playing a more active role in overseeing resilience strategies.

Operational resilience now extends beyond basic disaster recovery to include broader risk management practices that cover third-party relationships and technology dependencies. For asset managers, this requires continuous investment in risk management and compliance infrastructure.

Technology: The Key to Managing Regulatory Complexity

As regulatory demands continue to increase, the role of technology in compliance has never been more crucial. From automating data collection to enhancing reporting accuracy, technology provides the tools needed to manage the complexities of modern regulation. RegTech solutions, such as AI-driven data management systems, offer real-time insights and reduce the administrative burden of compliance, making them indispensable for firms navigating the 2024 regulatory environment​.

Investment managers must leverage these technologies not only to meet their regulatory obligations but also to derive strategic value from the data they collect. Firms that successfully integrate advanced technology into their compliance programs will not only improve efficiency but also enhance their competitiveness in an increasingly regulated industry.

Traversing Regulations in 2024

The regulatory outlook for asset managers and investment firms has grown more complex in 2024, with new rules around ESG reporting, AML compliance, operational resilience, and capital requirements. Navigating these changes requires a proactive approach, integrating technology to streamline compliance processes and uncover strategic insights.

As regulatory scrutiny intensifies, firms that fail to adapt risk facing significant fines and reputational damage. By embracing advanced compliance technologies and staying ahead of new regulations, asset managers can not only survive but thrive in this evolving environment.