Investment managers may be “worryingly underestimating” the funding and liquidity impacts
from regulatory changes, and many need to raise more capital to meet their liabilities, warns KPMG.
The consultancy says 75% of those it surveyed report increases in regulatory capital requirements. Almost two-thirds report capital increases over 10%, which KPMG says is well above expected gradual increases, and indicates an increasingly complex regulatory environment.
KPMG particularly highlights the Financial Conduct Authority’s rules on client money and asset protection, which stipulate how investment managers look after money and assets they hold on behalf of clients to prevent misuse and allow their return in the event of insolvency.
David Yim, investment management partner, says: “The capital increase is significant as it reflects the increasing regulatory focus across the sector, with a number of high profile and high value enforcement cases observed in the last 12 months.”
Yim says the regulator will not just be looking at capital requirements, but will also be scrutinising the governance processes imposed by senior management.
“Management must take action now and not wait to be prompted by the regulator, if they are to avoid further regulatory action or scrutiny,” he adds.
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