Regulatory changes to impact securities and investments industry

Date: Thursday, May 7, 2009
Author: Hedgeweek.com

A research report by TowerGroup has outlined ten far-reaching regulatory changes facing the securities and investments industry in the next 24 months and beyond.

The report finds that not only will a completely new regulatory structure and set of rules be established, but these changes will cause strategic shifts in the industry. These dramatic changes will cause some business lines to prosper while others wither.

The report identifies ten major regulatory initiatives facing the US securities and investments industry, each with a different impact on firms operating in the space. The initiatives range from the introduction of new industry rules, guidelines and best practices, to an anticipated rise in self-regulation, as well as governmental nudging or competitive pressure to curb undesirable practices.

"Most industry observers agree that vast changes are afoot, but there is still widespread uncertainty about what these changes will actually look like and the impact they will have," says Dushyant Shahrawat, senior research director at TowerGroup in the investment management service, and author of the report. "The regulation being introduced will significantly impact the IT operations and back-office systems of hedge funds, broker-dealers, asset managers, custodians, and credit-rating firms - and any firm that has accepted Troubled Asset Relief Program funding."

The report says the US securities and investments business faces the biggest change in regulatory law since the Great Depression. The greatest regulatory attention is on OTC derivatives, structured products and securitized assets, especially related to improving disclosure, transparency, and valuation of these instruments and the markets in which they operate.

It says concerns about closer scrutiny of the hedge fund business, new standards for the amount of leverage firms can take on, and new capital adequacy rules also are bound to manifest themselves in updated rules and regulations.