New research from regulation and compliance services company Ocorian has found that professional investors and corporates expect fines for breaking regulations to rise.
Among those questioned were senior executives at major companies, investment managers and senior capital markets executives.
Ocorian, which has a branch in the Cayman Islands, commissioned independent research company PureProfile to conduct the global study.
According to the results, 78% of those surveyed expect the number and overall value of fines issued in their sectors for breaking regulations will increase, with 16% foreseeing a dramatic rise.
In addition, 81% said their organisations are preparing or budgeting for a potential increase in fines they could face.
Nearly three out of four (74%) interviewed believe their market is over-regulated, but despite this, 86% believe the level of regulation will increase over the next five years.
When it comes to their organisation adhering to regulations in the different jurisdictions in which they operate, only 29% of those surveyed said it was not an issue.
Another 27% said they found it very difficult to do, and 41% said it was quite difficult.
Some 59% believe their organisation will find it more difficult over the next five years, and just 23% believe it will become easier.
Overall, just 32% of the professional investors and corporate executives interviewed believe their organisations are excellent at meeting their regulatory requirements.
Meanwhile, 63% said they are good at it, with 4% describing their ability to do so as poor.
Just 57% of those professionals surveyed said their organisation’s executive board takes regulation and compliance issues very seriously.
Just over a third – 38% – said they take these issues quite seriously but could focus on them more, and 4% said they do not take it seriously enough.
‘Too focused’
Aron Brown, head of regulatory and compliance at Ocorian, said he was surprised that 37% believe their organisations are too focused on these aspects.
“Whereas what we’ve seen with our clients is if you get it right in the first place you become more efficient and are more attractive to investors,” he said.
“Good governance and robust compliance preparedness enhances commercial prospects and wins 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 identified other actions professional investors and corporates have taken as a result of difficulties regarding regulatory issues.
Over the past five years, 62% of those surveyed said their organisations had invested in new technology to help with their compliance.
Just over half (52%) said they had decided against making a major acquisition or investment because of regulatory concerns.
Increased complexity
And 43% had closed a division or part of their business because of regulatory concerns, while 21% said their organisation had sold a business due to those issues.
“As our clients grow the nature, scale and complexity of their business, the regulatory demands also increase,” Brown said.
He explained this has implications in terms of their investment in compliance and the investors’ expectations of them.
“Some are increasingly outsourcing to third parties like us to support them in this area, and they are also increasing their budgets for ensuring they are compliant,” he said.
“Indeed, 88% of those professionals we interviewed expect the organisations they work for to increase their budgets for regulation and compliance over the next five years.”
Among the 301 people surveyed for the study were board directors at companies with annual turnover of more than US$250 million.
Fund managers working in family offices, private equity, venture capital and real estate were also interviewed, as well as senior executives working in capital markets focused on structured credit, CLOs, securitisation, mortgage-backed securities and asset-backed securities.
The survey was conducted in November 2023, and respondents were based in the United Kingdom, continental Europe, Asia, the Middle East and North America.
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