AQMetrics customer success team regularly interacts with our large community of asset management customers, many of whom use our technology platform for risk aggregation reporting to financial regulators.
Consequently, the customer success team at AQMetrics have deep experience across multi-jurisdictional risk reporting, including Form PF, CPO PQR and AIFMD Annex IV. They’ve helped many tier one banks, major asset managers and Super ManCos with their reporting, and are gearing up once again for the deadlines that are fast approaching – a time that will be particularly challenging for many firms’ given recent events.
We recognise that the crisis makes getting prepared for the upcoming deadlines more challenging than ever. Here are the top tips from AQMetrics’ head of customer success, Cathal Connolly, to help operational teams get through their bi-annual reporting this July.
1. What’s needed?
It may seem obvious, but it’s important to first clarify the reporting frequency and the funds in scope for reporting.
Business shifts throughout the year, including some reporting exceptions as a result of Covid-19, can lead to changes in reporting and reporting deadlines. With the current volatility in markets, for instance, you may find that some funds previously planned for bi-annual or quarterly reporting are now under the reporting threshold, whilst others not planned for reporting have now passed the reporting threshold and need to be included in your workload.
2. Technical differences and regulatory changes
Fortunately, there haven’t been any major regulatory changes since the last reporting season. However, while the regulatory reporting requirements are harmonised across Europe, each regulator can implement different technical standards for their reporting portal.
Given this, you should register with any new NCAs well in advance, and request the technical specifications for submitting reports. The timeliness of this task is now more important as ever, as regulators themselves are working under severe pressure given the global pandemic.
Some regulators, for example, accept submissions via a portal while others require specific encryption methods. Be sure you know in advance what the regulator requires of you, as they may not be available to provide support in the same manner as pre-crisis.
Should you have any critical support needs that AQMetrics can help with, feel free to contact us at https://www.aqmetrics.com/contact/ and we will do our best to answer your question, whether you are a customer of ours or not.
3. Get your data in shape
As always, make sure your data is in good shape, including minimising redundancy, duplication and defects.
Although your NAV packs may not be signed off yet, now is the time to check your static data. Are you currently receiving data in files over email from your fund administrators? If so, consider requesting automated files, enhanced for regulatory reporting with sub asset codes mapped. Many fund administrators will be happy to help.
Also remember to validate the data at each point: on loading, on processing and on generation of XML to be submitted to the regulator. Inaccurate data should not pass through these three gates.
4. Don’t chance it
There are always grey areas when it comes to exposure (market, credit, counterparty, currency etc.) and risk reporting to regulators. It can be difficult to strike a balance between upholding industry standards while also reflecting the firm’s risk exposure and strategy in the report.
An independent partner can help with providing industry wide best practices and also automating the aggregation of risk data to reflect your firm’s methodologies.
5. Stay ahead this year
By closing the H1 filings with a clean set of data and a robust reporting workflow and process, you are placing your firm in a position of strength for the remainder of 2020, particularly with new regulations coming down the line.
The new liquidity requirements, for instance, set to come into force in September of this year, will bring new reporting requirements. The technical details emerged in H1 and are likely to be a major feature in the coming months.
It is also important to prepare for the future now. In addition to the challenge of preparing data for the new liquidity stress test requirements, most recently the European Commission released a document assessing the application and the scope of Directive 2011/61/EU of the European Parliament and of the Council on Alternative Investment Fund Managers, alternatively known as AIFMD.
Under AIFMD, Alternative Investment Fund Managers are required to take measures to manage risks and ensure the requisite transparency regarding the activities of their managed alternative investment funds.
On page 8 of this document the EC makes it clear that further regulatory change is afoot for AIFMD Annex IV regulatory reporting. Mention is made of streamlining this risk reporting in line with ECB statistical reporting requirements.
Undoubtedly, this emerging change will challenge Alternative Investment Fund Managers even further and specialist support will be required for change management. It is clear that the more robust your reporting process and workflow is today, the better prepared you are for emerging and imminent regulatory change.