Alternative fund managers are bracing for a surge in compliance risks over the next two years, according to a study.
According to the findings of the study conducted by administration and compliance service provider for funds, Ocorian and Bovill Newgate, an Ocorian company and specialist financial services regulatory consultancy, almost nine in ten senior leaders and compliance executives in the industry predicted an increase in compliance risk, with more than one in ten expecting a dramatic rise.
This forecast rise in risk comes amid existing challenges, including under-resourced compliance teams and a significant number of fines. The study found that 64% of compliance teams are currently under-resourced, with 34% of those feeling significantly understaffed.
Wealth managers struggle with FCA compliance as deadline looms
The high level of regulatory scrutiny is evident, as 67% of respondents reported facing risk and compliance fines or sanctions in the past two years. An additional 9% admitted to receiving an information request or a visit from the regulator during the same period.
Matthew Hazell, co-head of UK funds, Guernsey & Mauritius at Bovill Newgate, commented: “Our survey shows a worrying backdrop of fines, sanctions, and under-resourced compliance teams within alternative fund managers. It’s encouraging that leaders within these firms are recognising these future challenges and know they must act now to remain one step ahead.”
Regulation and compliance impede private debt market, say professionals
To address these rising risks, the study highlighted an urgent need for investment in technology and systems. Specifically, 58% of alternative fund managers identified technology as a priority, followed closely by systems to manage processes and procedures (57%) and hiring knowledgeable personnel (53%).
“Firms must have a thorough understanding of their own compliance and risk needs,” Matthew added. “We recommend following three lines of defence approach: implement robust procedures, policies, and training; comprehensively monitor these; and review and challenge through an independent audit.”
