New regulations and stricter risk reporting and compliance requirements for Asset Managers
Risk reporting and compliance requirements are becoming stricter and new regulations - e.g. UCITS V, AIFMD, on funds, EMIR on OTC derivatives, - are introduced at an increasing pace, driving up risk management and compliance costs. Monitoring and managing compliance is becoming a matter of business survival and the ability to do so a competitive advantage as firms that do not keep up with industry standards risk being left behind.
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Client, regulatory and internal reporting
Finalyse has a great deal of experience in the design of underlying data flows, data storage and the most effective reporting to support management decision making as well as the requirements of external stakeholders.
UCITS V (Undertakings in Collective Investment in Transferable Securities)
UCITS are norms that seek to give investment managers a ‘European Passport’ to operate throughout the EU whilst ensuring appropriate investor protection and risk management practices. Since 1988, the UCITS Directive has been modified to adapt to the rapid evolution of the fund industry. UCITS IV is currently the norm but will be soon replaced by UCITS V.
The key impacts of UCITS IV & V
- Extended requirements of Risk management processes
- Implementation of the Key Investors Document
- Valuation of OTC and assets
- Extended requirements for depositaries duties and liabilities (UCITS V aimed at aligning with AIFM Directive)
- Remuneration policies
How Finalyse can help
- Expertise in risk management support activities
- Transparent, independent & auditable derivatives and structured products valuation
- Participation/Management of projects to comply with regulation requirements for depositary banks or investment managers
AIFMD (Alternative Investment Fund Managers Directive)
AIFMD established within the EU needed authorization by 22 July 2013 (or 22 July 2014 in European Union Member States that use the transitional period). This directive aims at regulating investment funds not yet covered at the EU-level by other norms such as UCITS.
In the actual financial environment, the main goals of the directive are
- to ensure a greater protection and regular & accurate information to investors
- to provide national regulators with detailed information and
- to enable AIF management to identify potential events on the market and take appropriate actions.
The regulatory framework for these funds will widely change and affect the different actors of the fund industry (managers, depositaries, administrators, etc.).
The directive gives new specifications and rules in the following topics:
- AIFM authorisation – identification of AIFM, definition of an AIF, exemptions, registration requirements, capital requirements, authorisation requirements
- Governance structure – governance principles, operational & organisational conditions, delegation, leverage
- Depositary Bank – appointments and eligibility, role and duties (safekeeping, oversight duties, etc.), liabilities, delegation
- Risk and liquidity management – permanent and independent risk management, risk management policy, assessment, monitoring and review of the risk policies, identification & measurement of the risk
- Valuation – methodology, policies, procedures, frequency, responsibility and liability of the AIFM (oversight and delegation)
- Transparency and reporting – annual report, reporting to investors, reporting to regulators
- Marketing – strategy, dual-regime, EU Marketing report
How Finalyse can help
- Expertise in risk management support activities:
- proof of independent performance of risk management (market risk, liquidity risk, counterparty risk and other risks including operational risk)
- stress testing procedures (risk and liquidity management)
- dashboard and risk profile reporting implementation
- Independent valuation of assets
- Set-up of performant reporting solutions (definition of the target data model, implementation of the agreed reporting tool, etc.)
- Project management/participation – Analysis and change implementation to comply with the regulation requirements (intervention at all levels of the investment management chain – fund managers, depository banks).
MiFID I & II and MiFIR
The Markets in Financial Instruments Directive (MiFID) and the trend towards a unified European capital markets industry is progressively changing the way market participants trade on or off exchange. Always ready to help its clients addressing new European regulations, Finalyse welcomes the directive as a new challenge to develop additional expertise and put it at the disposal of our clients. We are developing a pragmatic approach, focused on key issues such as the storage of market quotes, and the analysis of transaction costs as well as the Best Execution measurement.
The upcoming MiFID II / MiFIR resulted from an extensive consultation in the wake of the financial crisis: the goal remains the same, but additions are made to the original Directive to:
- Establish a safer, sounder, more transparent and responsible financial system
- Increase integration, efficiency and competition within the EU financial market, thus reducing costs to participants
- Create a single rule market in Europe, with a level playing field for states and participants
- Improve supervision and transparency on regulated and OTC markets (G20 commitment). Efficient valuation is a key component of such transparency.
Finalyse offers a transparent and independent valuation and risk management service for derivatives and structured products in order for you to comply to all these changes in the legal environment.
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