Bank-like regulation headed to funds and advisory industry

increase regulations fund blog

Recent oversight actions by the Financial Stability Oversight Committee (FSOC) of the U.S. Treasury are prompting unfavorable comparisons to banking regulations from investment industry professionals.

Committee composition

After the 2008 financial crisis, the FSOC was established to create accountability and guidance to financial market regulators. The committee looks across the insurance, investment, and banking industries to assess systemic risks, evaluate hazardous trends, and draw attention to governance gaps.

For example, the disorderly wind-down of Lehman Brothers led to FSOC authority that allowed it to designate institutions as systemically important financial institutions. This action then mandated that these firms establish resolution and recovery plans.

Although the FSOC is composed of leaders from each industry, it's heavily influenced by bank regulators. This is perhaps because the Treasury and Federal Reserve, while both tied to banking, have the most experience researching economic and systematic risk.

Expanded regulations

Now regulatory initiatives typically associated with banks, like capital liquidity, operational risk management, and resolution planning, are finding their way into mutual fund governance. SEC examination priorities support this notion of a broader mandate to assess market-wide risks.

These initiatives are in their formative state and haven't come without controversy. Investment industry members have argued large fund complexes don't represent systemic risks to the broader economic system. Investment firms are concerned the new regulations would be costly to investors at best and at worst disruptive to markets.

Wdesk can make managing these challenges easier by helping you :

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  • Record the processes and the people involved to enable sustainable replication

Gathering, organizing, and using data in an intelligent way will help companies stay focused on what matters as they meet new reporting requirements. Building structured, repeatable frameworks will become essential overtime.

Constantine Kokolis

About the author

Constantine Kokolis is a thought leader and subject matter expert on the power of enterprise documentation process transformation. He's spent the past three years consulting with some of the largest banks in the world to optimize financial and regulated risk reporting documentation processes, such as CCAR, DFAST, and resolution and recovery planning. He specializes in workflow process improvement, process design and architecture, and creating innovative solutions to complex problems. He also has extensive experience in project management and implementing process improvement strategies using LEAN and Six Sigma methodologies.