NEW REGS spell BIG OPPORTUNITY
"Treasury’s Plan Would
Give Fed Wide New Power"
barked the headline on
page one of the March 28
New York Times. In case
anyone missed it, that’s the
Republican administration
proposing new regulations
on Wall Street.
You don’t need to be
a stockholder of a troubled
brokerage firm or investment
bank to think that new federal
regulations of fi nancial
institutions might be good
for investors. But there’s one
group more than any other that stands to
benefit handsomely: companies that develop
and market regulatory compliance products
and solutions.
As Tier One institutions reach a new pain
point, their characteristic resistance to thirdparty
vendors of systems and technologies will
weaken, creating new opportunity for smaller
and middle market companies with tools and
solutions that already address those risk management,
valuation and compliance concerns.
The silver lining to the cloudy economic
forecast is the opportunity for well positioned
firms to markedly increase revenues and valuations
in what is arguably the most roiling
confluence of macro-economic conditions in a
generation or more.
This isn't the first exogenous event to spur
demand for new oversight and the legal, regulatory
and compliance tools and solutions the
added scrutiny requires. The Patriot Act, Basel
II, Sarbanes Oxley, and even decimalization
have all been tonics to this growing niche. The
current firestorm in the mortgage and credit
markets is at least as potent a stimulus as any
of those in recent memory.
As happened in each of those earlier
bursts of regulatory fervor, we expect to see
a wave of demand (and rising valuations) for
value-at-risk, counter-party risk, source- and
transparency-of-funds solutions and related
products.
At the risk of sounding immodest, we
predicted that more "bodies will float to the
surface" even before Bear Stearns knew it was
in deep water (Outlook + Strategies, December
2007, www.berkerynoyes.com). Months before
that New York Times headline proclaimed new
zeal for federal oversight, we forecast that the
political tide would shift in favor of new regulations.
And so it has.
We think this is a good time to explore
how market change is affecting your business
and steps you can take now to capitalize on it.