Adrian Whelan (AW): What are the key regulatory trends that U.S. asset manag­ers should be particularly attentive to in 2022?

Amy Matsuo (AM): Great question be­cause KPMG have recently published our Ten Key Regulatory Challenges for 2022. We anticipate that regulatory “perimeters” will continue to expand and expectations (with or without new regulations) will rap­idly increase. We have bucketed the regula­tory challenges into three distinct areas:

1. Rapid Change

2. Maintain Focus

3. Mitigate Risk

AW: The three KPMG buckets interest me since they are quite like the themes contained in this Regulatory Field Guide for 2022. In particular, the reference to rapid change is one which many global asset managers will recognize. Can you tell us a little more about which rapid changes you think will impact in the U.S. in 2022?

AM: Sure. We have highlighted four spe­cific areas within the rapid change bucket:

1. Fairness & Inclusion

2. Climate & Sustainability

3. Crypto & Digital Assets

4. Platforms & Conduct

In terms of fairness and inclusion, a mix­ture of investor demand, public awareness, social unrest and the priorities and direc­tives of the Biden Administration have fo­cused regulatory attention on supervision and enforcement of consumer and investor protection on a broad scale. They have also expanded the parameters of “fairness” to include all consumer touchpoints.

AW: One of my recent catchphrases I’ve been using is “ESG is everywhere” as global regulators move to integrate ESG principles into their policymaking. Do you agree that ESG will rise significantly up the U.S. regulatory agenda in 2022?

AM: Yes. Pushed largely by significant and widespread investor demand and facilitat­ed by myriad voluntary disclosure frame­works, financial services companies are working toward measuring, monitoring, and mitigating their climate related financial risk. Regulatory expectations in this area have experienced sweeping changes that will continue with rigor into 2022 under ex­isting and expanded jurisdictional authority. Federal financial agencies must develop, and execute on a strategy to quantify, disclose, and mitigate the financial risk of climate change on both public and private assets. Public policy seeks to advance “consistent, clear, intelligible, and accurate disclosure of climate related financial risk” and “to mitigate that risk and its drivers, while accounting for addressing disparate impacts on disadvantaged communities and communities of color.

AW: It was stiff competition but perhaps the most vociferous regulatory debate of 2020 in the U.S. was in relation to cryptocurrency. Is it likely that crypto and digital assets will continue to domi­nate the U.S. policy landscape in 2022 until such time that the rules of engage­ment have been agreed upon?

AM: Regulatory activity around crypto and digital assets is intensifying as usage by in­vestors, companies and even some central banks show widespread interest and adop­tion at retail and institutional levels. The regulatory landscape in the U.S. is evolving alongside the market expansion, with state and federal regulators and legislators all considering approaches to add clarity. Key issues include a focus on chartering, licensing, fraud and financial crimes risk, and consumer and investor protections.

AW: In many ways, crypto is merely another manifestation of the rapid in­crease in nascent technology across the financial landscape. Is the technologi­cal shift also influencing U.S. regula­tors’ minds something we are set to see much of throughout 2022?

AM: Rapid developments in technology, increases in digital banking activity, grow­ing sophistication of data collection, and the increasing influence of social media is reshaping the financial services landscape in ways never seen before or anticipated. These unprecedented times, underscored by ongoing social and economic changes associated with COVID-19, have fostered and accelerated unique advancements in the consumer experience – and given rise to new risks related to data security, fraud, and conflicts of interest.

KPMG’s report can be accessed here: Ten Key Regulatory Challenges of 2022.