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NEW TOWERGROUP RESEARCH HIGHLIGHTS SWEEPING REGULATORY CHANGES TO IMPACT SECURITIES AND INVESTMENTS INDUSTRY



Widest Regulatory Overhaul Since Great Depression Will Have Profound Impact on IT and Operations of Securities Firms



NEEDHAM, MA, May 6, 2009 – A new research report by TowerGroup outlines 10 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 10 major regulatory initiatives facing the U.S. 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. With the forward-looking insights it offers, the report serves as a guidebook for firms operating in the space to prepare for this new regulatory environment.

"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," said Dushyant Shahrawat, CFA, 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 (TARP) funding. Our research helps these firms prioritize the areas of regulatory focus that will have the highest impact on their businesses, enabling them to be better prepared for the imminent changes ahead."

The main tenets of the report include:

  • The U.S. securities and investments business faces the biggest change in regulatory law since the Great Depression, change encompassing almost every line of business and every functional area.
  • The greatest regulatory attention today 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.
  • 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.
  • In addition to greater disclosure and transparency, common themes across regulation for the U.S. securities and investments industry are simplicity of operations, protection of investor interest, and lower systemic risk for the financial system.
  • The regulatory initiatives facing the institutional securities and investments business today will have a profound impact on IT and operations of securities firms, driving changes in processing, accounting, recordkeeping, and valuation.

The TowerGroup Research Note titled "Dropping the Regulatory Hammer: Ten Impending Regulations in US Securities and Investments," is available to members of the press for review. To request a copy of or to arrange an interview with Mr. Shahrawat, please contact Tom Steiner at 212-704-8272 or tom.steiner@edelman.com.

The research report may also be purchased online at the TowerGroup Store via credit card by clicking this link.

About TowerGroup: TowerGroup is the leading research and advisory services firm focused exclusively on the financial services industry. A respected source for trusted information and advice, TowerGroup brings many of the world’s leading financial institutions, technology companies, and professional services firms a deeper understanding of the business and technology issues impacting their organizations. Headquartered near Boston in Needham, Massachusetts, and with offices in North America and Europe, TowerGroup serves a global client base. Visit www.towergroup.com for more information.

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