Early in my career as a regulator, I often wondered why firms struggled to implement what appeared to be straightforward regulatory requirements. From my perspective at the time, the purpose of the rules seemed clear, and the expectations appeared reasonable. Years later, after moving into industry, I found myself asking a very different question: why did regulators sometimes underestimate the complexity of putting those same requirements into practice?
Having worked on both sides of the regulatory table, I have come to appreciate that many of the tensions between regulators and regulated entities stem not from disagreement, but from differing viewpoints. While both are often working towards the same objective, each encounters distinct challenges, risks, and priorities.
From a regulatory standpoint, the focus is naturally on the risks that rules are designed to address. My supervisory experience highlighted recurring weaknesses across firms and demonstrated how inadequate controls can contribute to financial loss, misconduct, consumer harm, and risks to market integrity. Viewed through that lens, regulatory requirements often appear both necessary and proportionate.
What is not always visible, however, is the complexity involved in translating those requirements into day-to-day operations. A rule that seems straightforward on paper may require significant changes to systems, processes, governance structures, reporting lines, staff training, and internal controls. Firms must often manage multiple regulatory obligations simultaneously while operating within constraints of time, resources, technology, and competing business priorities.
I gained a much greater appreciation for these realities after moving into industry. One of the first things that struck me was how much work is required before implementation can even begin. Requirements must be interpreted, assessed against existing business models, discussed across multiple departments, and translated into practical actions. Compliance is rarely a simple exercise in applying rules. It requires coordination, planning, professional judgement, and often significant organizational change.
A recent example that illustrates this challenge is the implementation of legislative amendments affecting securities dealers. From a regulatory perspective, requirements such as the appointment of a resident director or increases in minimum paid-up share capital are intended to strengthen governance, accountability, and financial resilience. These objectives are both understandable and important. However, firms may face practical constraints in meeting them. In smaller jurisdictions, there may be a limited pool of suitably qualified individuals available to serve as resident directors. Increased capital requirements may also require firms to secure additional funding, reassess growth plans, or adjust their operating model. The policy objective may be clear, but achieving it can involve significant operational and financial considerations.
My experience in industry also reinforced the importance of the regulatory perspective. Within organisations, it can be easy to view certain requirements as administrative burdens, particularly when resources are stretched and deadlines are tight. Yet many regulatory obligations exist because previous failures exposed weaknesses in governance, risk management, or oversight. What may appear excessive from an operational standpoint is often rooted in lessons learned from real-world events.
One of the most valuable lessons I have learned is the importance of constructive engagement. During my years in supervision, I occasionally encountered firms that were reluctant to engage with regulators until issues had already become significant. There can be a perception within industry that regulators should only be approached when absolutely necessary, or that engagement may attract unwanted attention. As a result, firms may hesitate to seek clarification, discuss implementation challenges, or raise concerns at an early stage.
In reality, many regulatory issues become more difficult precisely because communication happens too late. Early engagement allows firms to clarify expectations, identify potential obstacles, and address concerns before they escalate. Equally, regulators benefit from understanding how proposed requirements operate in practice. Open dialogue can highlight implementation challenges, unintended consequences, and areas where additional guidance may be beneficial, often leading to more effective and proportionate outcomes.
From experience on the regulatory side, I have found that regulators generally recognize that firms operate in complex and constantly evolving environments. The focus is often not on perfection, but on whether firms understand their obligations, manage risks appropriately, and respond proactively when issues arise. Supervisory engagement, guidance, and ongoing dialogue can help bridge the gap between regulatory intent and practical implementation, while also providing supervisors with greater insight into the operational realities faced by the firms they oversee.
I have also found that the most productive regulatory relationships are characterized by trust, transparency, and constructive engagement rather than being driven solely by the prospect of enforcement. While enforcement remains an important part of the regulatory framework, it is only one aspect of a broader supervisory approach. Regulators often provide guidance, communicate expectations, and promote good practices alongside their supervisory and enforcement functions. Open communication can foster mutual understanding and help achieve better outcomes for firms, supervisors, and the wider market.
This philosophy also underpins FiveComply’s approach. We work alongside regulated entities to bridge the gap between regulatory expectations and operational implementation, helping firms develop practical compliance solutions, strengthen governance frameworks, and maintain constructive relationships with regulators. By combining regulatory insight with industry experience, we support firms in navigating increasingly complex regulatory environments while maintaining effective and sustainable compliance programmes.
Looking back, I recognize that there were occasions when I underestimated the practical challenges firms faced while working as a regulator, just as there were times in industry when I gained a deeper appreciation of the considerations that shape regulatory expectations. Experience on both sides has reinforced that neither viewpoint is complete on its own. Regulators have visibility of systemic risks and recurring weaknesses across the market, while firms are closer to the operational realities involved in implementing change within complex organizations.
The most successful regulatory outcomes rarely emerge from rules alone. They arise when regulatory objectives are clearly understood, implementation challenges are openly discussed, and both sides recognize their shared responsibility for maintaining trust, protecting stakeholders, and supporting well-functioning markets. Regulators and industry may approach issues from different angles, but they are ultimately working towards the same goal. Effective regulation is strengthened not by choosing one perspective over the other, but by recognizing the value of both.
Disclaimer: This article is provided for general informational purposes only and does not constitute legal, regulatory, tax, or professional advice. Readers should seek independent professional advice before acting on any information contained herein.
