The Changing Role Of Investment Compliance Services In The Financial Landscape

Financial Landscape

The modern financial world requires a new approach to investing and complying with relevant regulations. The investment compliance process entails a holistic approach towards investment restriction monitoring and effective administration. It is a very complex discipline and requires sensitive decision-making to achieve investment objectives. It focuses more on the concept of sustainability and takes more than profits into account when weighing an investment opportunity. In this note, we try to understand investment compliance services and how they help companies in the 21st century.

Understanding investment compliance services

In the contemporary digital world, technology has become more refined, with the majority of businesses relying on it to achieve faster results. Firms dealing in investment and financial services are also leveraging new-age technological solutions. This presents new regulatory and compliance challenges. Investment compliance services focus on providing value to firms by leveraging effective compliance monitoring solutions that factor in all recent amendments. Commonly offered investment compliance services include pre- and post-trade monitoring, client reporting and trade surveillance.

The role of investment compliance services

Investment compliance as a discipline has become far more complex and sophisticated than it was a decade ago. After the 2008 global financial crisis, governments and regulatory bodies across the world introduced new rules and regulations to stabilise the markets and ensure a high level of transparency. These new rules and regulations require companies to have dedicated compliance teams in place to continuously monitor compliance with the new guidelines and rules related to investing.

Investment compliance services help firms monitor regulatory changes that could jeopardise operations and lead to financial loss. They also protect a company from legal obstacles that may arise if they fail to follow these. They ensure the business complies with all external guidelines and internal processes. An investment compliance service provider covers the five essential areas of identification, monitoring, detection, prevention and advisory.

Evolution of investment compliance services

Investment compliance services were not considered very significant in the past, when regulatory obstacles were limited. But they have gained prominence as we move towards a hyper-globalised economy powered by new-age technology.

Fintech companies have revolutionised the financial markets, previously dominated by industry giants that had been in the market for a while. However, with the introduction of cutting-edge technologies to facilitate financial transactions, there is a growing need to monitor and detect financial risk. This has made investment compliance an essential service for most businesses in this space.

The contemporary financial world is fuelled by data. Firms are increasingly reliant on the use of data to obtain valuable insights and incorporate them in their decision making. This is also applicable to compliance testing and reporting procedures. Firms now leverage even the smallest bit of data to ensure effective compliance. They are also considering incorporating performance analytics, and alternative and risk information into their testing and reporting procedures.

One of the key findings of a compliance risk study conducted by Forbes in 2018 was that compliance could no longer rely only on adding headcount to increase effectiveness. Despite headcount reductions, compliance spending is expected to increase, putting compliance services in the limelight. There have been major regulatory changes in recent decades, including the introduction of MiFID ll, anti-money laundering directives and market abuse regulations, increasing demand for investment compliance services.

Investment compliance services are evolving by the day. They are set to be transformed into a function that provides senior management with strategic advice on investment compliance issues in the modern age. Investment compliance services will rely more on the use of data to analyse and assess latent risks and challenges that may arise as a result of regulatory changes and new policies. However, human judgment would remain important, and the decision-making process would require individuals with experience in this space.


Using effective compliance services will help firms avoid legal pitfalls and penalties. A robust compliance culture will help identify a firm’s regulatory challenges before they are scrutinised by a regulatory body. Companies could then take the necessary precautions to ensure best practices are followed and any fraudulent activity is kept in check. Data science and other regulatory technologies can disrupt the market as they help companies overcome compliance and other regulatory challenges with ease and at lower cost.