What is regulatory hosting?

Explore what it is, the benefits, risks, and how it helps firms navigate compliance in this comprehensive guide

What is regulatory hosting?

Regulatory hosting refers to a market practice where one firm offers infrastructure and regulatory support to other financial service providers. Typically, these providers are either too small to establish and sustain their compliance infrastructure or are venturing into new markets. Hosted firms operate under the regulatory umbrella of the hosting provider, outsourcing various aspects of regulatory compliance. In this relationship, the provider becomes the legal and regulatory sponsor of the hosted firm, assuming responsibility for ensuring compliance with all relevant regulations and laws.

Key Characteristics of Regulatory Hosting

1. Compliance Expertise: Hosted firms have dedicated teams of experts with in-depth knowledge of industry-specific regulatory requirements to make sure that their clients remain compliant.
   
2. Risk Mitigation: Engaging in this service helps companies to mitigate regulatory risks, identify and address compliance gaps, and enhance overall risk management.
   
3. Flexibility and Scalability: It offers companies the flexibility to adapt quickly to changing regulatory requirements and scale their compliance efforts. It is ideal for companies in highly regulated industries and those expanding into new markets.
   
4. Access to Technology and Tools: Providers leverage advanced technology and compliance tools to streamline processes enabling their clients to keep pace with regulatory changes and maintain competitiveness.
   
5. Regulatory Reporting: Providers can give assistance with regulatory reporting obligations helping their clients to prepare accurate and timely submissions to relevant authorities and enhancing transparency and accountability.
   

Reasons for Choosing Regulatory Hosting Services

Companies opt for these services for various reasons, including regulatory compliance, market entry facilitation, cost savings, and the time freed up for them to focus on core business activities. Providers typically have robust risk management procedures in place to mitigate non-compliance risks, reputational risks, and operational failures. We have outlined the benefits of regulatory hosting in greater detail below.

Risks and Challenges

Hosted firms must understand the regulatory framework within which they trade and acknowledge their full responsibility for compliance with applicable laws and regulations. 

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