Reducing Complexity and Cost of Compliance with a Dynamic Data Enterprise Approach

How can alternative investment managers leverage existing infrastructure to satisfy reporting mandated by the many global regulatory agencies, including SEC, FINRA, CFTC, and others?

How many fund managers have the luxury of unlimited resources to help manage the increased complexity and barrage of mandates handed down by regulatory bodies? As alternative investment managers are facing an increasing number of compliance requirements and growing operational costs, they’re looking for ways to leverage their existing investments while meeting the demands set by the regulators. The way to improve efficiencies and bring down costs in the ever-changing landscape of regulatory reporting is through technology.

Dodd-Frank Act and Beyond!

Managers and fund administrators have just come through the July 2013 deadline for the Alternative Investment Fund Manager Directive’s (AIFMD’s) implementation. This regulation’s far-reaching compliance implications for both EU and non-EU funds has significantly impacted the alternative investment sector.

And it doesn’t look like the avalanche of regulatory mandates is going to abate any time soon. The number of alerts issued by global regulators including Asia, Australasia, Middle East, North America and UK/Europe in 2012 – 18,761 – nearly doubled from the pre-credit crunch volume in 2008 of 8,704, according to a Thomson Reuters study. Already a staggering difference, the trend will only continue. Industry experts are looking at a nearly three-fold increase in reporting volumes and coverage by 2019. In addition, the regulations themselves are growing in heft, from Sarbanes-Oxley at fewer than 100 or 200 pages, to the Dodd-Frank Act at a phenomenal nearly 850 pages. According to Deloitte Financial Advisory Partner Ivan Zasarsky “Only 39% of the Dodd-Frank rules as of today, have been finalized and adopted” – another sign pointing to the long road ahead for the financial industry.

Efficiency and Compliance through Technology

Regulatory risks are no longer just about the ability to comply – it is now imperative to meet the requirements of a multitude of regulators while keeping up with the pace of change. The common trend among all these regulations is the drive for increased transparency, data integrity and a new level of granularity required to meet all filing requirements for hedge funds, private equity firms and other funds.

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Data integration in a central repository combined with a rule based regulatory reporting solution for all compliance disclosures on a single platform provides not only increased efficiencies, but a consistency across the numbers reported to the regulators.

Change is driving the way fund managers run their businesses. As the complexity and costs of compliance mount, CIOs, chief information security officers (CISOs) and IT compliance managers need a better way to ensure that the data on all the necessary forms, including Form ADV, Form PF, Form CPO-PQR, SEC Form 13D, 13F, 13G and 13H and AIFMD documents, contains the same accurate numbers.

Strategic Road Map for Alternative Investment Fund Managers

Regulations are placing a heavy burden on fund managers, compliance, legal and IT departments and are impacting the firms’ overall business strategies. To reduce the complexity and cost of compliance, a strategic multi-jurisdiction, dynamic data enterprise approach is required to integrate siloed systems and successfully meet regulatory reporting requirements.

Alternative investment fund managers need to implement a strategic, data-driven platform to scope and source clients’ existing data structures, without forcing data conversion and can aggregate, calculate and validate rules to filing the schedules. This integrated framework should also include a complete workflow – for automated end-to-end processing and allow for a user friendly, transparent and scalable process-based solution to address complex funds and extensive disclosures for investment advisers.

Time to act is now

A strategic data-driven platform will enable you to meet new and evolving regulatory requirements while increasing the value and trustworthiness of data.

Alex Tsigutkin is CEO at Axiom Software Laboratories, Inc., (AxiomSL), the global leader in regulatory reporting and risk management solutions for the financial services industry.