signs-direction-stop-compliance

The pace of regulatory change has continued to accelerate since the financial crisis, weighing on markets, banks, firms and advisors.

So it’s time for regulators to review whether they’ve made the right calls.

In his most recent industry letter, the IIAC’s Ian Russell predicts, “Recent developments in global capital markets suggest securities reform may now have reached its high water mark, [meaning] the pace of rulemaking will slow and, in some cases, reverse direction.”

He concedes that even though “banking and securities regulators have been in overdrive” since the crisis, that was because they were “focused on building a more resilient financial system through capital and liquidity protections, greater transparency and better rules for market conduct.”

Read: 

However, says Russell, “The urgency and extent of reform, particularly in the early years, laid the ground for excessive and unintended consequences. There is a growing consensus that the pendulum has swung too far. [As such], regulators in many jurisdictions are taking stock of the impact of reform on markets and on the economy. The weakened liquidity in markets, and pernicious slow economic growth, have added urgency to these investigative efforts.”

What does this mean for you?

Russell says, “We expect that an ongoing review of the reform impact and rising compliance costs for the financial sector will slow the rulemaking process, roll back certain rules, and increase reliance on industry best standards and tougher enforcement.”

Read: Compliance officers targeted for enforcement

Events like President-elect Donald Trump’s win of the U.S. election and his intentions for Dodd-Frank legislation are likely to have the greatest global impact, but Canadian regulators will be watching developments in the U.S., Europe and England, says Russell.

Read: Why SEC Chair White’s departure could hurt U.S. advice industry

As a result, he predicts “the pace of [domestic] rulemaking is likely to be more measured in the next few years, with the likelihood of some retrenchment in the proposed rules.” In particular, “Canadian securities regulators have committed to a comprehensive post-implementation review of the CRM1 and CRM2 rules, [given] these rules were imposed without formal cost-benefit analysis.”

Read: Why regulators should provide cost-benefit analyses–and why they don’t

Adjusting to CRM-related reforms has been tough, so further tweaks may not seem like good news. The key is to keep an eye on regulatory news around the globe and, says Russell, to recognize that any additional changes will come slowly.

Read: Ontario to introduce legislation to create financial regulator

Originally published on Advisor.ca
Add a comment

Have your say on this topic! Comments are moderated and may be edited or removed by
site admin as per our Comment Policy. Thanks!

See all comments Recent Comments

WEALTHADVISER

Industry participants have not only forgotten history, they have chosen to rewrite it.

First of all, Canadian financial advisors were the victim of the U.S. Financial Crisis.
-not its cause.

As everyone should know, the U.S. Financial Crisis was a residential mortgage crisis.

Readers should definitely re-read the official “The Financial Crisis Inquiry Report” (Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States)

There is nothing about the Canadian regulatory environment or perceived deficiencies in the Report..

Time to stop, take a deep breath and reflect.

Tuesday, Dec 6, 2016 at 4:37 pm Reply