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Top 5 Tips for Buy-Side Participants to Make Complying with Market Regulations Easier and Less Prone

The recent dramatic spike in the number and complexity of regulatory reporting guidelines, has left buy-side firms and administration companies worldwide scrambling to keep up with changes in order to minimize risk and avoid costly filing errors.  Recent independent surveys show that one of the main challenges buy-side participants face today is adapting to new regulatory requirements.  The Linedata 2016 Global Asset Management and Administration survey reports that 58% of participants cite regulatory compliance as a top challenge facing their firm.  In a recent INDATA survey, clients named compliance as their top data management priority.  Just this past February, the Securities and Futures Commission in Hong Kong censured a large investment bank for breaches of its Takeover Code.

The companies that will manage through this complex and rapidly evolving regulatory environment most successfully are the ones who can keep things simple, and focus on top priorities.  Here are 5 recommendations for navigating today’s rapidly evolving regulatory environment.

#1: Understand Existing Regulations

The most important and first step companies face is simply making sense of the plethora of new regulations. These include a host of new entities and acronyms such as Form PF, CPO-PQR, AIFMD, EMIR; and for global shareholding reporting; TDA, 13D/G, 13F and so many more.  While some companies rely on a cobbled-together resources including free legal newsletters to stay educated, it is critical that they have reliable expert, and/or readily available resources to educate teams thoroughly on the current regulations.

#2: Stay Abreast of the Rapid Stream of New Regulations

In a recent Thomson Reuters Survey, 70% of respondents expect regulators to publish even more regulatory information; with almost one-third expecting significantly more.  In this same survey, more than one-third of organizations stated that compliance spends at least an entire day per week just tracking and analyzing regulatory change – a tremendous tax on time and resources.  For companies with global shareholding disclosure requirements, this time investment increases with each jurisdiction where the organization has investment exposure.  With no slowdown in sight for the release of new regulations, companies need a turn-key mechanism for quickly tracking, interpreting and applying new regulations.

#3: Secure and Integrate Data Organization-wide

While many firms spend hundreds of thousands of dollars on data, the data is usually imperfect and fragmented across multiple locations.  And, some pieces of data are simply not available.  This ‘patchwork quilt’ of data can leave compliance personnel manually hunting and pecking across multiple sources in order to get the data needed to accurately report.  For error-free compliance, it is essential that companies can easily access and integrate all the data needed to report across all jurisdictions.

#4: Streamline Globally

Just as U.S. regulations are increasingly in number and complexity, so too are global regulations with the most recent of regulations coming into effect last November under the EU’s Amended Transparency Directive (TDA).  As EU countries continue to implement the TDA standard, this will require firms to comply with the incoming EU standards while simultaneously managing the regulations imposed by each country where they are invested.  This will require monitoring the regulatory landscape of each country, understanding the regulatory obligations of each country (sometimes written in a different language), and dynamically managing the disclosure obligations when they come about using specific forms to make the actual disclosure.

#5:  Leverage a Global Automation Compliance Partner

In today’s confusing and rapidly shifting compliance environment, where it is all too easy to make an inaccurate filing or miss a filing date completely, it is important to work with outside experts that can help streamline, integrate and safeguard compliance efforts.  Even large market participants with global compliance teams have come to rely on 3rd party vendors for regulatory intelligence and automation solutions.

Whether it is global shareholding disclosure reporting or any other regulatory reporting obligation, one thing is clear, regulatory reporting is where data and compliance converge and it alone presents a critical challenge for buy-side participants to optimize if they are to reduce regulatory exposure, streamline workflows and limit enforcement actions levied against them for non-compliance.


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