Notes From a Buyside Compliance Roundtable

Published On March 4, 2020

Earlier this week, Behavox hosted its usual regular roundtable with compliance officers from regulated alternative and traditional asset managers in London (UK). Here is a summary of the issues discussed and some of the latest topics that were raised.

Not surprisingly the first issue was precautions and preparations that are underway related to coronavirus. Many had dusted off their disaster recovery plans and were seeing if these were viable and whether there was sufficient coverage if certain key people became sick. Provisions for remote working were being checked (printer paper; print cartridges; laptops; screens etc) and a check was conducted on the mobile phone number registry to ensure it was up-to-date and available to all. Many were communicating with their landlords to assess if there was potential for firms to be suspended from going into premises in instances where they were operating in a shared space. There has been a significant uptick in PA dealing approval requests. 

No one had had any advice or contact from their regulators but it was assumed they were focusing on the banks right now. 

Some of the attendees were concerned that they would lose touch with the front office if everyone was working remotely – this would reduce the natural interaction that assists monitoring and the delivery of advice when everyone is in the same location. Some hoped that this development might trigger a more permanent change in attitudes to working from home and remote interaction as there seems to be mainstream resistance to it from most senior management. 

Discussion turned to the SM&CR and the UK FCA’s adoption of the ESMA and EBA Guidelines on the composition of the Management Committee. One attendee said this suitability matrix has been adopted by FCA in the Handbook, and in some respect is proving a challenge to apply retrospectively especially when this application might deem the original partners of these fund managers as unsuitable. This led to general musing on the view that regulators do find smaller hedge fund managers tricky and expensive to regulate and that the regulators seem to favour more consolidation in the industry. This was viewed as ironic bearing in mind the general mandate for the regulator in the UK to encourage competition. The smaller firms just feel they are being regulated out of the market by the increasing costs of compliance. This comment was made with particular reference to the Irish regulator where one firm had been asked to provide a fulltime compliance officer for a tiny dormant fund! 

Another attendee spoke about their authorisation process in setting up in Luxembourg where the regulator was obsessed with their AML controls – they did at least manage to process the authorisation in under a year. All applications are being sent through ESMA in order to confirm proper substance in any jurisdiction as a form of ‘double check’.

Final comment was the continuing lack of transparency despite MiFID 2’s changes; while firms are publishing their trades individually, no one is aggregating this data (or if they are they are not making it available) and this hinders many forms of monitoring and analysis that would greatly enhance compliance if this sort of data were available.