Asset manager governance and compliance: five market shocks to watch

Introduction

Asset manager governance and compliance is now the centre of several fast-moving stories. Across Europe and the UK, regulators and big firms are acting. Therefore, asset managers must reassess how they govern, disclose and protect clients. This post pulls five linked developments into a single, practical narrative. Additionally, it highlights immediate risks and what leaders should plan for next.

## How ESMA's push changes asset manager governance and compliance

The European Securities and Markets Authority (ESMA) is being urged to take more direct oversight over large cross-border funds and even global crypto firms. This is a notable shift. Previously, oversight was more fragmented across national regulators. However, giving ESMA stronger powers would centralise supervision for entities that operate across borders. As a result, asset managers with cross-border structures would face clearer, and likely stricter, expectations on governance, reporting and risk controls.

For firms, the change means planning for another layer of oversight. Therefore, governance frameworks that already align to the highest home-country standards will win. Meanwhile, fund boards should revisit decision-making lines and compliance reporting channels. Additionally, cross-border legal and operational structures may need simplification to reduce regulatory friction.

Impact and outlook: In the short term, managers should expect tougher scrutiny on global distribution, delegated managers and crypto exposures. Consequently, firms that invest now in transparent governance and consolidated reporting will gain a competitive edge. Over time, a stronger ESMA could reduce regulatory arbitrage and raise baseline standards across the EU.

Source: FT.com

When disclosure lapses strike: fintech governance and reputational risk

A high-profile fintech disclosure issue is a reminder that governance slips can ripple fast. Recently, media reports revealed that a CEO was listed as a resident in a different country without regulators being told. Consequently, UK watchdogs sought assurances after the surprise emerged. This episode shows how small governance or disclosure gaps can trigger regulatory attention, especially for digital banks and fintechs under close supervision.

For asset managers and their service providers, the lesson is clear. First, diligence on board and executive disclosures must be rigorous. Second, firms should maintain real-time communication with regulators when key facts change. Otherwise, confidence can erode quickly and reputational damage can follow. Moreover, third-party providers and partners—such as custody, trading platforms or fintech advisers—must be held to the same disclosure and oversight standards.

Operationally, firms should tighten controls around public profiles and residency claims of senior executives. Additionally, compliance teams should run scenario playbooks for fast regulatory engagement. This will reduce ambiguity and show preparedness when questions arise.

Impact and outlook: Expect regulators to demand faster, clearer communication on leadership disclosures. Therefore, firms that demonstrate robust governance and proactive disclosure will face fewer follow-up probes and less reputational risk. Ultimately, better disclosure practices protect both clients and corporate value.

Source: FT.com

Data breaches and asset manager governance and compliance

A major data breach at an e-commerce company exposed 33.7 million customer accounts. This kind of incident is a stark reminder that operational risk extends beyond financial systems. For asset managers, third-party data incidents can create direct exposure. For example, a fund’s distributor or a cloud provider suffering a breach may expose investor details or trading data. Therefore, governance must explicitly cover vendor cybersecurity and breach response.

First, managers should map critical data flows and identify which suppliers hold sensitive investor information. Second, contracts and audits should include clear security obligations and breach notification timelines. Third, incident response plans must be tested with third parties. Only then can a manager show regulators and clients that it treats data protection as a governance priority.

Moreover, compliance teams need to align privacy, cyber and regulatory reporting. This will ensure timely notification to authorities and to investors when required. Additionally, firms must be ready to explain how they monitor vendor security posture and remediate gaps.

Impact and outlook: Expect regulators and clients to demand stronger vendor oversight and faster transparency after breaches. Consequently, firms that invest in vendor risk management, encryption and regular testing will reduce both regulatory and client fallout. Over time, stronger standards will become part of routine governance reviews.

Source: TechCrunch

ESG ratings, conflicts and asset manager governance and compliance

The UK Financial Conduct Authority (FCA) plans to regulate ESG ratings providers to tackle conflicts of interest and improve transparency. This move matters for asset managers because many investment decisions, product labels and client reports rely on third-party ESG scores. Therefore, when the providers themselves face scrutiny, managers must reassess how they use ratings.

First, firms should review their reliance on single-source ESG data. Second, managers must document how ratings influence portfolio construction, reporting and client communications. Third, conflict checks should extend to data providers and index partners. This will help prove that investment advice and product placement are not driven by opaque incentives.

Additionally, expect greater demand for traceability in ESG methodologies. Managers will need to show how ratings map to investment mandates and stewardship activities. Moreover, internal governance—such as ESG governance committees and independent model validation—will become more important. This helps demonstrate that ESG claims are supported by robust processes, not just third-party badges.

Impact and outlook: The FCA’s move will increase transparency and raise the bar for ESG product governance. Consequently, asset managers who diversify data sources and strengthen internal oversight will maintain client trust and meet higher regulatory standards. Over time, clearer rules should make ESG assessments more comparable and reliable.

Source: FT.com

Deal-making, ETFs and the shift to asset management

Large banks are increasingly buying asset managers and ETF firms to reduce reliance on traditional banking income. For example, a major investment bank recently acquired an ETF provider to expand its asset management line-up. This trend affects governance and compliance in two ways. First, bank-owned managers must align group-wide risk appetites with fund-level governance. Second, acquisitions often bring legacy systems and differing compliance cultures together.

Therefore, integration planning must prioritize regulatory alignment and client protections. Boards should set clear oversight for the newly acquired businesses. Additionally, compliance teams must harmonize trade surveillance, reporting and conflicts policies across the combined entity. This will prevent gaps that regulators could flag later.

Moreover, product strategy will matter. As firms scale ETF offerings, disclosure and operational resilience come into focus. Managers must ensure that distribution channels, pricing transparency and index licensing comply with investor protection standards. Meanwhile, clients will watch whether scale leads to lower costs and consistent governance.

Impact and outlook: Expect more strategic deals as banks seek fee income from asset management. Consequently, managers involved in or affected by M&A should plan for rapid governance harmonization and transparent client communication. Ultimately, well-executed integrations can strengthen product offerings and risk controls.

Source: FT.com

Final Reflection: Connecting the dots and acting now

Together, these developments form a coherent signal: regulators and markets are tightening the expectations around governance, disclosure and third-party risk. Therefore, asset managers must act on three fronts. First, strengthen governance structures and make oversight visible to regulators and clients. Second, harden operational resilience by testing vendor, data and cyber defences. Third, reassess reliance on third-party ratings and align M&A governance quickly after deals.

Importantly, these moves are not just compliance tasks. They are strategic opportunities. Firms that show clear governance, transparent disclosures and robust incident response will win trust and business. Meanwhile, those that delay will face regulatory friction and reputational costs. In short, now is the moment to make governance a competitive advantage rather than a compliance burden.