Fund managers urged to have holistic approach to regulatory data gathering

13 Nov, 2014

Fund managers need to take a holistic approach towards regulation, particularly when it comes to gathering various data sets for different regulatory reports, according to the head of regulatory change at M&G Investments.

“Firms can sometimes approach different regulatory driven requirements in a siloed fashion. Common data requirements across different regulations might be one example of where taking more of a holistic approach to the requirements and implementation offers those firms some implementation benefits,” said Adam Pacey of M&G Investments, speaking at the Linedata Exchange Conference in London last week.

This comes two weeks after the early-stage alternative investment fund managers (AIFMs) compliant with the Alternative Investment Fund Managers Directive (AIFMD) filed their Annex IV on October 31. Those firms which obtained their Variation of Permission (VOP) application approvals in June 2014 will follow suit and must file Annex IV by January 31, 2015.

Many managers are leveraging their expertise filing Forms PF and CPO-PQR with the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) and applying these skill-sets to Annex IV. While there is some overlap between all of these regulatory reports, most lawyers acknowledge approximately just one third of the data can be replicated across them all.

Others warned fund managers not to be complacent when it came to filing. “Our experience back in August 2012 when the first batch of Form PF filers submitted their Form PF to the SEC was that many underestimated the workload. Aggregating the data points in Annex IV is not going to be without its challenges so fund managers need to start preparing. Ideally, they should be aggregating this data into a centralised data warehouse from which they calculate the answers and populate the template,” said Gary Kaminsky, global head of regulatory and compliance at ConceptOne.

Regulators have also warned fund managers that information reporting in Forms PF, CPO-PQR and Annex IV – as well as Albourne Partners’ Open Protocol Enabling Risk Aggregation – must be consistent. “Regulatory reporting is an exercise in aligning all third-party transparency - all reports must have aligned data. Firms cannot provide disparate data to different regulators and constituents otherwise they will face unwanted scrutiny,” said Kaminsky.

This is easier said than done. A number of these regulatory reports utilise different methodologies to reach similar calculations, which means they will likely have misaligned data. Form PF, for example, incorporates leverage and gross assets on an audited balance sheet into the Regulatory Assets under Management (RAuM) number while the EU incorporates the notional value of derivatives as well as leverage into RAuM. RAuM as it appears in Annex IV will therefore be higher than what is presented in Form PF.


AIFMDAnnex IVM&G InvestmentsForm PFForm CPO-PQRSECNFAOpen ProtocolConceptOne