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Global compliance officers play a pivotal role in safeguarding market integrity and protecting investors by upholding financial regulations. Their foremost responsibility is to ensure their organization’s adherence to local and international laws. Nasdaq’s 2023 Global Compliance Survey received feedback from 190 compliance professionals in the capital markets ecosystem, shedding light on some of these experts’ most pressing challenges. Conducted for nearly ten years, the annual survey provides both a point-in-time analysis and historical data on the trends in the compliance landscape.
When asked about their top compliance challenges over the next 12 months, respondents who include compliance experts from sell-side firms, the buy-side, retail banks and corporate entities, and market infrastructure providers highlighted the following as the top three.
Navigating new reporting and administrative requirements
The survey found that the most prominent challenge for compliance professionals in the next 12 months, cited by 33% of respondents, is grappling with new reporting and administrative requirements specified by regulations. This ranking is unsurprising, as regulatory reporting can be immensely complex and varies by jurisdiction. Compliance professionals generate various reports, including market abuse reporting, trade reporting, transaction reporting, and insider trading reporting, each with their own complexities. These requirements often involve managing extensive and diverse data, demanding precision, data quality, and integration from various sources. Effective implementation and reporting, specifically, were top concerns– not, interestingly, new regulations.
Understanding and implementing technological capabilities
While firms and institutions have invested in technology over the past decade, understanding and implementing technology remains a significant challenge for compliance professionals. This has, however, fallen from last year, where it was noted by 37% of respondents as the top challenge, down to 25% citing it this year. The ever-evolving landscape of technology and trading methods introduces novel means of market manipulation. The emergence of new technology poses an ongoing challenge for compliance professionals. It opens the door to different platforms and media for market manipulation, creating the need for more robust monitoring and detection capabilities. The survey reveals that this challenge aligns with “a trend toward closer partnerships with technology vendors to provide more transparent, usable and explainable solutions.”
Inadequate preparedness for regulatory changes
27% of respondents, a seven percent increase from 20% in 2021, acknowledged being ill-prepared to meet regulatory requirements, marking a substantial increase from previous years. The continuous evolution of trading practices and technologies leads to the introduction of new regulations, further underscoring the need for compliance. Responding effectively to regulatory changes has become a significant concern, with a mounting responsibility for ensuring compliance. Interestingly, compliance officers in the Americas (predominantly the U.S. and Canada) are experiencing disproportionate pressure and, therefore, punishment from regulators taking a tougher stance on compliance failings with enforcement actions and fines. This is made even more problematic because these geographic areas also have more legacy technology, processes, and infrastructure in place, all contributing to the challenges compliance officers must face to ensure they are prepared for regulatory changes.
This year’s Global Compliance Survey results reinforce that compliance is core to organizational strategy and operations. Compliance professionals have solid budgets and investments to support new technology adoption and transformation despite the challenges. In the face of persistent regulatory pressures and requirements, and operational and technological hurdles, compliance continues to grow in organizational significance and importance.
To access all the data and insights in Nasdaq’s 2023 Global Compliance Survey – visit us here.
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