Since the financial crisis, regulation has become more prescriptive. Now there are signs that many regulators are substantially intensifying their activities, delving ever deeper and involving themselves in the technical operations of investment firms’ activity in order to detect and head off undesirable practice.
Costs and charges have emerged as a standalone global regulatory theme, for both institutional and retail investments. More and more regulators are seeking more granular disclosure of costs and charges within products and portfolios. They are also becoming ever more prescriptive about how fees are calculated and managed, and are even focusing on the absolute level of fees levied by investment firms. In some cases they are setting caps on charges. Others are encouraging simpler products with reduced costs.
More generally, regulators are getting closer to investment funds and investment firms’ business models, questioning whether investors are getting a fair deal. A number of regulators are conducting surveys of how the industry is currently operating, with some considering costs and charges from a competition perspective. In particular, so-called “closet trackers” have come under the spotlight.