Filed Under:Your Practice, Regulatory

Local regs key reason for severing client relationships

Photo credit: Thinkstock
Photo credit: Thinkstock

A new study reveals that 77% of senior managers in the financial services sector would consider ending relationships with clients in a particular jurisdiction because of local regulatory requirements and their global consequences, a new report shows.

Global professional services firm Kinetic Partners, New York, released this finding in “Global Regulatory Outlook.” The study explores the views of senior executives within the banking, broking and asset management industries. 

The report reveals that more than 8 in 10 (86 percent) of chief operating officers say they would consider ending relationships with clients in a particular jurisdiction over the potential consequences of local legislative requirements.  Additionally, 78 percent of chief compliance officers and 66 percent of chief executive officers shared the same view. 

“Reading into these results and the potential consequences for the U.S. market, there’s clearly a sentiment that overregulation will have undesirable and unintended consequences,” says Jonathan Saxton, New York based Partner at Kinetic and the study’s co-author. “Between the various governing bodies such as the SEC, CFTC, FINRA and others, and the various markets and institutions they overlap, regulation has become increasingly complex.  

“The number of authorities to which institutions are answerable, makes for a more difficult environment in which to do business,” he adds. “This could therefore seriously harm the competitive environment.”

The research study also reveals that, while most respondents highlight commercial opportunities as the biggest influence over where they look to do business, local regulatory requirements is the second most important factor.  The challenge is both local and global. 

While the financial crisis has moved the stability of financial firms to the top of the regulatory agenda, the shift towards more localized regulation has resulted in significant cultural differences in interpretation across several countries or regions, and therefore a more ambiguous regulatory environment. 

 “When regulators are looking at how they are going to regulate the market, they are reacting to risk or an event,” says Saxton. “But it’s also important to balance that with what the impact of the new regulation might be. 

“It’s therefore key for regulators and the industry to engage, to make sure the balance is sensible, so as to create an environment that addresses the public’s concern without stifling business and competition,” he adds.

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Nichole Morford

Nichole Morford
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