Will You Be MiFID II Compliant? Publish, Report or Perish

Will You Be MiFID II Compliant? Publish, Report or Perish

There has been a great deal of confusion over trade publication and transaction reporting, and there are several differences between the two. Read more to watch an overview of Trade Publication vs. Transaction Reporting presented by Jon Gold.

Read More

Will You Be MifID II Compliant? Impact on Non-EU Asset Managers

Will You Be MifID II Compliant? Impact on Non-EU Asset Managers

There is a misconception that if your firm is a US asset manager, then you don’t need to worry about MiFID II, when in reality you do. Even if your firm doesn’t have a physical presence in the EU, there may be components of the rule that are still applicable to your client mix or your asset classes.

Read More

Will You Be MiFID II Compliant? Five Areas of Focus

Will You Be MiFID II Compliant? Five Areas of Focus

Slow down! That was the number one request that IMP heard after our webinar, MiFID II: US Asset Managers Brace for Impact.

IMP heard you, loud and clear. As a result, we’re rolling out a slower, more detailed video series to help you to either prepare for the January 3rd deadline, or educate yourself on the basics of what this massive directive entails.

Read More

MiFID Who? Three Immediate Areas Where Non-EU Compliance Teams Need to Pay Attention

MiFID Who? Three Immediate Areas Where Non-EU Compliance Teams Need to Pay Attention

If you’re in compliance, specifically with a Non-EU asset management firm, you may be prepared to sit back and enjoy the show that MiFID II has produced among those firms servicing clients in the European Union. It can be hard enough to keep up with the ever-changing landscape of regulations at home, never mind keep an eye on what goes on across the pond.

However, don’t get too comfortable just yet. With refinements being released as recently as July, MiFID II seems to always have something new in store. Compliance professionals need to understand the changes taking place in the front, middle and back office as well as the potential impact to the systems that support them. To some firms, this has meant strengthening the role of the compliance officer in anticipation of increased regulatory scrutiny.

Read More

The Rise of MiFID II: Does it Apply to You?

The Rise of MiFID II: Does it Apply to You?

If you work for a US Investment Management firm, and are celebrating the notion that MiFID II won’t apply to you, it’s time to take off the party hats, and give this directive a second glance. MiFID II may just apply to you after all. This series, authored by IMP Consulting, will walk you through the highlights of the directive, and help to guide you in identifying how your firm may be impacted.*

Read More

Out of Options for This Self-dealing PM

Out of Options for This Self-dealing PM

Last week, it was reported that a portfolio manager for a major asset manager has agreed to plead guilty to defrauding investors in closed-end funds for which he executed option trades. One major newspaper described this as an “option scheme”. However, it may also be viewed as a scheme that was best effected by using options. There is a difference.

Bernard Madoff was well known for his “split strike conversion” strategies. Here, a complex option strategy obscured how the investments actually performed. Defendant Kevin Amell is alleged to have merely engaged in self-dealing, using trades which were most effectively executed to his advantage because of the structure of listed option markets.

Read More

Trade Compliance Video Series - See The Cause of Hundreds of Violations

Trade Compliance Video Series - See The Cause of Hundreds of Violations

This week, we’ll look at how one word caused hundreds of daily violations for a very frustrated PM, and walk through the simple fix that cut the risk of increased SEC scrutiny.

For more information on how your compliance team can update your trade OMS compliance rule library, contact Michael Toomey or visit www.impconsults.com/CLEAR.

Read More

Will Canadian Investment Advisors (IAs) Survive With Changing Regulations? How Technology Solutions are Coming to the Rescue

Will Canadian Investment Advisors (IAs) Survive With Changing Regulations? How Technology Solutions are Coming to the Rescue

Significant changes to Canadian financial regulations in the last few years have made Investment Advisors (IAs) question whether they will be able to survive in the new environment, yet technology is providing the answer. The regulatory changes improve the client’s experience by ensuring a minimum standard of care as well as an increase in transparency. 

Read More

Top 6 Pitfalls of Implementation

Every year, the rescue workers of the White Mountains have to fetch hikers who started out their climb on a bright and sunny day in their shorts and tee shirts, with minimal supplies and little or no experience with the terrain. It was happening so often, that the New Hampshire Fish & Game Agency launched the “hikeSafe” program that has checklists for required gear, discussions of weather, technology recommendations, etc. Hikers who ignore the recommendations may find themselves with a bill from the Agency, for the tens of thousands of dollars expended during the search and rescue.

Technology professionals, under pressure to deliver on project deliverables, often bypass the tedium of inventorying the current state of systems, interfaces and data quality in favor of getting an immediate start on the project. They spend little time questioning the end users on the current terrain–which can be rife with disagreements about the goals of the project and competing needs–and fail to account for the changeable “weather” of regulatory requirements. Advocating for the time and budget to do a thorough current state analysis can be tough, but skipping it can often leave a project in need of an expensive rescue.

Read More

Exchange Traded Portfolios (ETPs) Part 3: A Band of Gold

In Parts 1 and 2 of this series, we discussed exchange traded portfolios (ETPs), namely funds (ETFs) and notes (ETNs) in terms of their structural and operational characteristics. In this concluding article, we’ll look at practical considerations facing investment compliance professionals using the example of exposure to gold.

Why gold? The majority of institutional investment managers who might utilize a gold ETP would not be focused on commodity investment. It’s much more likely that an equity or debt focused fund manager might use a gold ETP to create exposure to an alternative investment class without the expense of constructing a vault in the break room. Because of this, and the way in which data providers classify ETPs at a high-level, a gold ETP is more likely to trip up a well-intentioned investment compliance program.

As an example of what can go wrong, consider SSGA’s GLD ETF, which holds only physical gold bullion. IMP witnessed a fund with a prohibition against precious metals miss a purchase of GLD. The reason? The pre-trade compliance system considered GLD to be an equity. It trades on an equity exchange, it has an equity security type from data providers and it was set up as an equity by a data management team unfamiliar with the nature of exchange traded portfolios. It’s not hard to imagine.

Read More

Exchange Traded Portfolios (ETPs) Part 2: Structural differences among ETPs

In part one of this article, we reviewed Exchange Traded Portfolios (ETPs) and defined them as including Exchange Traded Funds (ETFs) and Notes (ETNs). They trade like common stock but create mutual fund-like exposures. Part 2 will examine the different structures under which ETFs are created, and the key distinction of ETNs.

There are several major structures used in the creation of an ETP, and new ones are on the horizon. We’ll focus on those aspects which may be relevant to compliance.

Read More

Exchange Traded Portfolios (ETPs): Definition, Creation and Redemption

Saturday Night Live’s 1976 commercial spoof attempted to categorize a product called New Shimmer. Gilda Radner proclaimed “It’s a floor wax”, while Dan Aykroyd enjoyed it on his pudding with the retort “It’s a dessert topping”. It was durable, scuff resistant and delicious!

Not quite so readily resolved is the classification of Exchange Traded Portfolios (ETPs). Broadly speaking, ETPs include Exchange Traded Funds (ETFs) and Notes (ETNs). Mechanically, they trade like common stock but create mutual fund-like exposures.

Read More

Trade Compliance from a Portfolio Manager’s Perspective PART 2: Seven Suggestions to Improve Your Work Culture and Relieve Tension

Two weeks ago I illustrated the often-strained relationship between Portfolio Managers (PMs) and the compliance team. PMs complain that the compliance team is slowing them down, whereas compliance professionals push back when PMs demand that compliance ‘fix it’. To combat tension, periodic communication between the PMs and compliance is needed. Understanding the PMs viewpoint on the current state of pre-trade compliance and mutual education as needed will facilitate a better working relationship.

In this article, I will offer some practical pointers to help improve and maintain the relationship between PMs and compliance. IMP Consulting’s experience working with multiple clients shows that a little proactivity from the compliance side calms things down, and allows an environment of trust to develop between the PM and compliance teams. Please note an underlying assumption is that the PMs have undergone proper system training. If this is not true, then training the PMs so they can properly understand and work with compliance alerts is critical and must be done first. Here are seven ways Compliance can foster a better working environment with PMs:

Read More

Trade Compliance from a Portfolio Manager’s Perspective

An interesting dynamic exists between the Compliance team and Portfolio Managers at many investment management firms. Portfolio Managers complain that the Compliance team is slowing them down, whereas Compliance professionals fret when Portfolio Managers demand that Compliance ‘fix it’. With few exceptions, there is tension between Portfolio Managers and Compliance. 

But why exactly does this tension exist? Of course there is a balancing act between efficiency and compliance, but there is more to it. To understand better, let’s first go over how orders are created, and importantly what the Portfolio Manager’s perspective is.
 

Read More

The Third Avenue Fund: A follow up

On December 15, we blogged about the struggles that some high yield funds were having trouble with honoring redemption requests. One of them, the Third Avenue Focused Credit Fund, in lieu of cash,  had taken steps to provide its shareholders with interests in a trust that would be used to liquidate the fund’s assets once it had been closed down. Since that time, the Fund has come to an agreement with the SEC, permitting it to postpone honoring redemption requests until it can liquidate the fund’s assets in orderly fashion. 

Read More

The Best of IMP’s Blog in 2015

If you’ve been following IMP’s blog over the last year, you’ve seen our team of experts leverage their hands-on industry experience to share information and insight on relevant topics ranging from compliance to implementation to “managing” managed service providers. 

We’ve taken a look at the ten most popular blog posts of 2015 and provided our subscribers with the list below in case you missed one or you would like to read it one more time. If you’re new to IMP’s blog and wish to subscribe for 2016 please click to subscribe.

Read More

An Update to the 2016 Compliance Date Rule 2a7 Revisions

In 2014, the SEC announced the first significant changes to Rule 2a-7 since the comprehensive post-financial crisis revisions announced in 2010 (see our blog post from earlier this year, entitled “Preparing for the 2016 Rule 2a7 Requirements”). At that time, the SEC also announced that they were “re-proposing” the elimination of credit rating requirements, a change that would be in line with section 939A of the Dodd-Frank Act. This section called for amending rules that pertain to the reliance on ratings from credit rating agencies. Just this past September, the Commission announced that the removal of the language in Rule 2a-7 pertaining to the relied upon NRSRO* credit ratings would have a compliance date of October 14, 2016. This means the revision takes effect the same time as the majority of the changes that were announced in 2014. 

Read More

An Intro to NFA Reporting: How prepared are you?

Reporting requirements for the National Futures Association (NFA) have only been in effect for two years and are mandatory for firms trading futures, forex, or OTC derivatives. It has taken the full two years to answer some of the questions complying firms have. The NFA has provided some guidance on their terminology and definitions but there is a long way to go. In this blog, we provide:

  • Background on the NFA
  • Key topics on NFA reporting requirements
  • Lessons Learned:  Three issues and suggestions for a smoother filing process

Read More

Preparing for The 2016 Rule 2a7 Requirements

Over its life span of more than 30 years, Rule 2a-7 has gone through no fewer than 5 updates. In 2010 we saw the most drastic changes to the rule since 1997 as a result of the Reserve Fund’s “breaking of the buck” in 2008 (due to the Lehman Brothers default). In July 2014, after several years of debate and discussion, the most recent changes to the rule, which will come into effect in October 2016, were announced.

The new rule will have greatest impact on Institutional Prime money market funds: however, government, and municipal money market funds (MMF) will also need to make specific changes in how they operate. All MMF will need to decide whether and how to utilize new tools provided to them by the law in order to prevent future runs on their assets by shareholders.

Read More

Crash and Burn: What Investment Management can learn from the Aerospace Industry

On my way to work a few months back I drove past a software development firm I had never heard of. I was curious, so I found them online and looked at what they did. The firm developed QA automation software specifically for aerospace airborne systems. What struck me as interesting is that this QA Automation tool not only helps to automate, manage, and document testing, but it also helps their customers become compliant, certified, and safe so that they can receive FAA approval. It makes sense; with today’s aircraft that are heavily dependent on avionic hardware and software, it could mean the difference between life and death. For those that might be interested in it, it's called DO-178C, Software Considerations in Airborne Systems and Equipment Certification.

As a flight instructor in my spare time, all things related to aviation are interesting to me, so I kept digging into this certification process to see if I could relate it to the investment management technology arena. As I read on, I could not help but think to myself, “why does the investment management industry not have similar types of specific software certification when it comes to trading and compliance applications?” Having worked for two software vendors that never had the terms “certified” or “compliant” come up in the design and testing phase. These systems, however, manage and transact trillions of dollars a year for investment managers.

Read More