Compliance Radar: Technology’s Role in Helping Firms Navigate the Regulatory Change Agenda

Regulatory change continues to be an area where asset managers and asset owners feel like they are drinking from a fire hose. The sheer volume of regulatory change is being driven not only by regulatory considerations but also by factors such as geo-political shifts, technological developments, and changes to market structure.

In this article, Simon Abbott, Global Head of Compliance for Northern Trust Banking & Markets, discusses the challenges of recent and upcoming developments and how technology may help firms to navigate their change agendas.

Our recent Integrated Trading Solutions Summit held March 2025 in London highlighted that regulatory change was high on the agenda for firms with a significant amount of engagement around upcoming changes. Delegates were also focused on recent regulatory changes and how implementation programs had gone.

Regulatory Change – Past 12 months

Before we look at the current regulatory horizon in financial markets, it’s worth looking back over the prior 12 months or so and recap what firms have been required to implement.

T+1 Implementation

In North America we saw the go-live of a shortened settlement cycle in May 2024 in the US, Canada and Mexico with securities moving to T+1 rather than T+2. This change had significant impacts on market structure vendors as well as market participants, particularly as other large markets, such as the United Kingdom and European Union, remained on T+2. Northern Trust partners across Asset Servicing invested an enormous amount of time with our clients to support them in understanding the impacts for their operating models and the key pain points – for example selling items in T+2 markets and buying in T+1 markets. As we pass the one-year anniversary of the go-live, the industry transition has been, overall, very smooth, with UK, Swiss and EU regulators hoping for similar success for their recently announced move to T+1 in October 2027.

Changes to Research Payment Rules

In EMEA we saw several smaller initiatives with the UK continuing to focus on some of the MiFID II rules post-Brexit, starting with changes to research payment rules and the permitting of paying for research from client funds rather than the firm’s own Profit and Loss (PnL) which had been directed by MiFID II.

The UK Government commissioned a report from a regulatory lawyer, Rachel Kent, to examine the options for research payments and the potential effect to the market from the rebundling of research and commissions. That review recommended, amongst other things, to allow optionality for firms to move back to using client funds for research costs thereby allowing firms to make that choice. The FCA adopted this measure along with some additional guardrails concerning policies and budgets at the end of summer 2024. As of now there has not been a stampede back to using client funds, however, some firms are starting to shift their thoughts on it.

In the EU, the prospect of ‘MiFID III’ continues to be closely watched by firms’ regulatory practitioners with several MiFID II rules under review. Across the summer of 2024 a volume of related consultation papers were issued for market participants to provide feedback on areas such as transparency rules, order execution, transaction reporting, the long-awaited consolidated tape and reform to the market data costs rules. As with the previous implementation of MiFID II, the European Securities and Markets Authority (ESMA) will follow a similar path of significant engagement with the industry via consultations, discussion papers and drafts of technical standards. The outcome of these could be significant and will require a material amount of work for firms.

APAC Focus on Market Integrity

In APAC the focus for 2024 in the markets space was on areas where the US and EMEA had previously focused – namely market abuse and best execution. In Singapore, this was highlighted by the Monetary Authority of Singapore (MAS) Enforcement Report¹ published in April 2025 looking back on 1 July 2023 to 31 December 2024. MAS issued civil penalties totalling US$7.16m for false trading, insider trading and deceptive practices. In addition, there were 33 criminal convictions of which 19 resulted in terms of imprisonment, again the majority of these driven by false trading. The focus on market abuse was even more stark with 163 cases opened during the period, with approximately 60 related to market abuse.  In addition to the enforcement action the report contains MAS’s “Key Areas of Focus” of which market abuse is listed first with the rationale being “Market abuse undermines the integrity of Singapore’s financial system, erodes public confidence in its capital markets and discourages market participation. Therefore, it is important that there is effective enforcement of the laws to protect investors and ensure a level playing field for all market participants”. This is a clear piece of regulatory guidance that this will continue to be a focus for MAS over the next few years.

In India, a significant increase in retail investors has put more of a focus on market integrity and led to the Securities and Exchange Board of India issuing additional rules to brokers concerning market surveillance expectations with respect to surveillance systems, internal controls, and policies². These changes have been staggered with firms informed of them in July 2024 and go-live dates in early 2025 onwards. As we have seen in our previous article on Market Abuse Frameworks, this is a tight turnaround.

Future Focused Regulatory Change

The pace of regulatory and market change will continue over the next 12 months (and longer).

T+1 Implementation in the UK and Europe

In EMEA, one of the key developments will be the UK and EU switching to T+1 settlement on the same day, 11 October 2027. The decision to transition on a joint date highlights the integrated nature of the European financial markets - even post Brexit - and the mitigation of risk by transitioning on the same day. Industry researchers are warning of significantly more costs than the US transition, citing the complexity of additional markets and currencies with even small buy side firms expecting to spend north of US$220,000 each.³ The focus for Northern Trust will be on leveraging our successful client initiatives, such as webinars and client engagement used during the US T+1 implementation, to help our clients work through their operating models and the potential solutions we can offer.

Crypto Regulation Focus in US

In the US, the focus of the Securities and Exchange Commission (SEC) and Commodities Futures Trading Commission (CFTC) has moved to other areas with the change of administration seeing a pivot to topics such as crypto regulation. Paul Adkins’ appointment as SEC Chair in April 2025 is expected to usher in a new regulatory oversight model for crypto assets with Adkins describing the need for “a rational regulatory framework for crypto asset markets⁴” at a Crypto Task Force Roundtable in April 2025. These remarks were followed by a keynote speech at the May Crypto Task Force Roundtable focused on three main themes – Issuance, Custody and Trading. Following on from this we may have seen the starting gun for this framework with the US Clarity Bill that was introduced on 29 May 2025, which is designed to create a regulatory regime for digital assets. It will be interesting to see how this bill takes shape over the next few months.

Tokyo Stock Exchange Initiatives

In Asia, the Japanese stock exchange has outlined plans to lower the minimum investment via the exchange from its current limit of approximately US$3,500 down to under US$1,000 to open up investments for a wider range of investors. This follows on the back of another initiative from the Tokyo Stock Exchange (TSE) in 2024 which looked for firms to publish plans to increase their share price, as more than half of them trade below their book value.⁵ At the start of 2025, the TSE issued an update which confirms that approximately 1500 companies (approximately 90%) on the prime markets had disclosed their plans to improve their cost of capital and share price with nearly 200 focusing on increasing their access to institutional investors.⁶

Continuation of AI Growth

Finally, it would not be a discussion on regulatory change without mentioning Artificial Intelligence (AI) as we continue to see growth of AI initiatives in the market and significantly more focus from regulators on how firms are deploying their AI projects. The EU Artificial Intelligence Act went live in February 2025 with additional go-live dates in August 2025 where the focus will be on the deployment of AI systems and the governance, transparency and notifications required. In the UK, the FCA announced in June 2025⁷ that they would be developing a statutory code of practice for firms that deploy AI offerings, with a focus on third party deployment. To assist firms with this deployment, the FCA AI Lab will continue to help with the development and testing of AI products through collaboration with Nvidia which is creating a “supercharged sandbox”.⁸

Technology – Enabler or Replacement?

With all this in mind, how are we seeing technology assist firms with the management of regulatory change? The answer is everywhere! Technology is being used increasingly throughout the regulatory change lifecycle. Historically this focused on workflows and collaboration but unsurprisingly the rise of AI has now seen vendors offering more efficiency-based solutions with the concept of ‘reducing noise’ and allowing focus on key requirements. In addition, natural language processing allows for regulatory information to be classified and tagged to relevant business units and themes, thereby streamlining what regulatory change practitioners are seeing.

These efforts are having impact across the regulatory change lifecycle and its main component parts, namely horizon scanning, impact assessment, solution design, implementation and finally operationalisation.

Horizon scanning used to include hours of researching, conference visits and poring over regulatory consultation papers. Not anymore! What used to be drinking from a fire hose has now become sipping from a teacup as regulatory change systems provide firms with tailor made regulatory feeds that digest enormous amounts of information and filter for relevancy. This tailoring of information allows firms to focus their efforts on things that are relevant to them and mobilise resources. A quick search of the internet will see vendors offering to reduce tens of thousands of regulatory sources into a finely tuned regulatory delivery pipeline.

The Human Touch

Impact assessments continue to require expert resources alongside the technology. Technology can help to facilitate assessments with regards to things like workflows and metrics, but the skillset of the assessors becomes of utmost importance. Have someone who understands regulation? Great! Have someone who understands the business operating model? Great! Have someone who understands both? The holy grail! This combination of technology and resource has seen demand rise for resources with the requisite skill sets and has driven significant hiring in the past few years.

When it comes to solution design and implementation, the hand off to the relevant teams for implementation is critical to the success of any regulatory project. Often these projects live and die by both business and functional requirements. A poor hand off, or unclear requirements in the solution, can lead to at best some throw away work, and at worst material non-compliance in the final delivery. Linking the regulatory change system via an API to the project management tool allows firms to transfer relevant information such as specific requirements, go-live dates and regulatory updates from the golden source to the project management tool. This also assists with management information for governance functions such as steering committees and working groups.

Finally, the operationalisation of the change is historically one of the more overlooked components of regulatory change. Firms may implement a successful project on time without thinking about the sustainability of the model. Who owns the polices? Who owns the procedures? Who is testing the controls?

Where technology has really helped is the linkage of regulatory change to the operational components of firms’ compliance programs: for example, policy library mapping – check! Input to the risk assessments – check! And finally, link to the testing and controls library – check! This integrated approach allows the regulatory change lifecycle to blend seamlessly with the Business as Usual (BAU) operating model that is required, thereby strengthening the handover from ‘change’ to ‘run’.

Conclusion

In conclusion, we have journeyed through the last 12 months and predicted where we might see some of the regulatory focus in the next few years as well as where firms might deploy technology to assist. However, while technology promises to be an enabler to gain efficiencies, regulatory expertise and knowledge will be needed more than ever.  The ability to free up resources to focus on the value-add by removing manual workflow management and summarisation tasks is the big win that technology brings, but it will not remove the need for subject matter expertise. Let us see what the next few years bring.

Sources:

1. MAS Enforcement Report 2023/2024
2. SEBI | Measures to instil confidence in securities market - Brokers' institutional mechanism for prevention and detection of fraud or market abuse
3. New research reveals the cost, complexity, and level of readiness for European T+1 - Euroclear
4. SEC.gov | Remarks at the Crypto Task Force Roundtable
5. The Weekender | The right questions, pricing change and becoming less exceptional | Northern Trust
6. TSE Has Published a Revised List of Companies That Have Disclosed Information Regarding “Action to Implement Management That Is Conscious of Cost of Capital and Stock Price” | Japan Exchange Group
7. FCA to develop statutory code of practice for firms deploying AI - FTAdviser
8. AI Lab | FCA