Regtech firm sees surge in demand as financial services industry prepares for Brexit
A global RegTech company has seen enquiries for its software triple as financial services firms prepare for a Post-Brexit landscape.
Lawson Conner has seen a such a marked upturn in demand for its software and services, as the possibility of Brexit approaches that it has taken on extra staff in Singapore and Luxembourg. The firm, which provides regulatory infrastructure and managed compliance, says that financial services firms are concerned about the implications of Brexit and the possibility of regulatory shifts afterwards.
Executive Director, Andrew Frost, says: “Brexit is definitely going to present regulatory challenges, which firms have recognised. Many are turning to us to prepare for Brexit, and in particular, to mitigate against the growing uncertainty.”
One of the biggest issues that firms may face is the loss of passporting rights and the reliance upon equivalence instead. Post-Brexit, the UK would lose its current passporting rights and become a third country reliant on equivalence to market to investors. Although a deal on equivalence was agreed in January, equivalence will depend on the UK maintaining EU regulations, and it could be revoked at any time.
Frost explains: “This is a particular concern for smaller or mid-size firms who don’t have the resources to easily relocate or apply for licenses in other countries. That’s why we are seeing increased interest in our regulatory hosting platform, as firms that use this will be able to carry out regulated activities and take advantage of the arrangements we have made to mitigate the risks of Brexit, giving access to integrated fund solutions and MandCo services, including AIFs, UCITS and RAIFs.
According to Lawson Conner, financial services firms are also planning for longer-term changes to regulation, post-Brexit too. The FCA has stated that Brexit may present an opportunity for the UK to rethink its laws, which might mean some fast-paced changes in the regulatory sphere, which will result in more firms turning to RegTech to handle these demands. Both the UK and US regulators have recently experimented with translating regulatory requirements into code, which if the initiative takes off will make RegTech even more central to managing compliance. It's possible that post-Brexit, without the constraints of EU directives, the FCA will be able to respond and legislate more quickly, therefore allowing the UK Regtech sector to capitalise on its technological advantage.
Frost says: “Demand for RegTech is certainly likely to stay high even post Brexit, as the global framework becomes more fragmented and compliance becomes even more complex.”