Activity-based Regulation Moves Into Focus

By The Regulatory Fundamentals Group


The head of the ERFG Logouropean Securities and Markets Authority (ESMA) recently gave a speech (here) addressing potential systemic risk in the asset management space and saying that this risk will be a priority for ESMA.

That is not remarkable.

Here is what is remarkable: He noted that asset management is different from other sectors of the financial system and indicated that an “activity-based approach” (as opposed to focusing on individual institutions) may be the most effective way to mitigate systemic risk.

This same thought, the need to focus on activities, came up in a recent FSOC meeting on whether asset managers create systemic risk. In fact, the industry participants at that program seemed to largely support the concept.

If that approach takes hold, as seems increasingly likely, expect more regulation of all types of investment activities, starting with securities lending and other areas of leverage. This will directly impact managers as well as investors as they seek to undertake regulated activities.

The trend for 2015?

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