Investment Compliance: It’s Not Just About Complying

Compliance can be a complex, dynamic task for companies raising capital, and sometimes might feel like an unnecessary burden just to stay in the good books of regulators and their seemingly arbitrary requirements. However, compliance can have other added benefits when managed correctly and introduces new efficiencies and trust within the regulatory environment. Some of these benefits include:


  1. Avoid unnecessary costs and delays: When it comes to managing compliance, one of the most important things to keep in mind is that it helps protect your company from regulatory risk. While failure to meet regulatory requirements can itself create costly delays, taking shortcuts and merely going through the motions of compliance can create a risk of much more costly liabilities and litigation. 


  1. Understand shareholder base: Another benefit of managing compliance instead of controlling it is that it allows you to understand your shareholder base better, and identify and engage with your shareholders more effectively. When you know who is investing in your company, you can tailor your messaging, convert investors into ambassadors and build trust and confidence with investors.


  1. Identify high-risk investors: One of the critical functions of compliance is to help identify and flag high-risk investors, protecting the company from both regulatory and reputational risks. Is the investor on any blacklists that would make them ineligible to invest? By managing compliance, you can more easily identify investors who may pose a threat to the company and take steps to mitigate that risk.


  1. Make continuous improvements: Managing compliance instead of controlling it helps create a continuous improvement process. Active engagement with the compliance process can help you to identify potential shortcomings and anticipate regulatory changes before they happen. This gives you the foresight to adapt when they come, or even allows you to enjoy a competitive advantage over competitors who may be blindsided. This is critical in the ever-changing landscape of compliance.


Investment compliance is not about control but learning to effectively manage this dynamic task. By understanding and managing compliance, companies can avoid costly penalties and fines, better understand their shareholder base, identify and flag high-risk investors, ensure that all the correct information about an investor is captured, and create a process for continuous improvement. 


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