Alternative fund managers are expecting an increase in fines for regulatory violations

A recent study conducted by Ocorian, a leading provider of fund administration and fiduciary services, has shed light on the growing concerns among alternative fund managers regarding regulatory fines. The research, spanning private equity, venture capital, and real estate sectors, indicates a prevailing sentiment among 79% of respondents who anticipate an increase in both the frequency and magnitude of fines for regulatory violations. Alarmingly, 18% of those surveyed foresee a dramatic surge in penalties.

The study underscores the pervasive apprehension within the alternative fund management sphere, particularly regarding money laundering risks. Despite nearly 79% of participants expressing the belief that their market is overly regulated, a striking 85% foresee even stricter regulatory measures over the next five years. Cross-jurisdictional regulatory adherence presents a significant challenge, with only 29% finding it unproblematic, while 30% describe it as very difficult and 37% as quite challenging. Looking ahead, 59% anticipate a greater struggle with regulatory compliance, with a mere 27% expecting any easing of the burden.

Assessing their own regulatory compliance, alternative fund managers revealed a mixed picture. Only 30% rated their compliance as excellent, while 66% deemed it good, leaving a mere 1% to label it as poor. Board engagement with regulatory matters varied, with 54% prioritizing regulation and compliance, 41% recognizing the importance but acknowledging room for improvement, and a concerning 4% neglecting its significance altogether.

Aron Brown, Head of Regulatory and Compliance at Ocorian, emphasized the pivotal role of governance and compliance readiness in bolstering commercial prospects. He noted, "Good governance and robust compliance preparedness enhance commercial prospects and win business. We see investors are increasingly cautious about where they invest so if they can find a good governance and compliance framework, they are more likely to invest."

The research also delved into the strategies adopted by alternative fund managers to navigate regulatory challenges. Notably, 65% have invested in compliance technology, while 55% have refrained from significant investments due to regulatory concerns. Additionally, 53% have opted to close business divisions to address regulatory issues, while 27% have increased outsourcing, and 24% have resorted to selling businesses to mitigate regulatory risks.

These findings underscore the evolving landscape of regulatory compliance within the alternative fund management sector, highlighting both the growing challenges and the proactive measures taken by industry players to navigate this complex terrain.

By fLEXI tEAM