2019 FinReg Outlook: The Calm Before the Storm

Get Reporting Capabilities Ready for the Next Wave of Requirements In recent years, almost every new regulation came with a new reporting requirement. Reacting to different implementation deadlines from different regulators, firms often built solutions in isolation, which has led to inefficient workflows and duplicative processes. For example, the data requirements of the Alternative Investment Fund Managers Directive (AIFMD) Annex 4 and Dodd- Frank Form PF are broadly similar but the format and calculations differ, forcing managers to report the same information twice. With the pace of regulatory change slowed, asset managers should take the opportunity to perform a holistic review of their regulatory reporting processes. Firms should assess their data management practices to help reduce duplicative data requests. Workflows should also be reviewed to improve efficiency, eliminate manual processes, and increase automation. Thinking strategically about regulatory reporting will help firms ensure they have scalable solutions and can help increase the efficiency of their current processes. It will also put them in good stead for any future requirements that might emerge from the US Securities and Exchange Commission’s (SEC) ongoing reporting modernization efforts or the upcoming Securities Financing Transactions Regulation reporting requirements. Regulatory Fee Pressure Will Continue to Rise Asset management has been dealing with the ongoing shift to low-cost passive investing through index funds or Exchange-Traded Funds (ETFs) for the past ten years. Beyond the market shift, there is also increasing pressure coming from regulators on fees. In the UK, the Financial Conduct Authority’s new annual assessment of value requires managers to review how fees are affecting their funds’ overall value proposition. In the US, the SEC’s share-class initiative is forcing managers and distributors to review share-class selection and revenue sharing arrangements. This includes determining if investors have been overcharged when placed in more expensive share classes if cheaper alternatives were available. 2019 FinReg Outlook: The Calm Before the Storm    3