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Meeting The Data Compliance Challenge

In the wake of the 2007/8 financial collapse as well as subsequent scandals that have rocked the sector – everything from fixing the Libor rate to mis-selling securities – financial services organizations have found themselves under greater scrutiny than ever before. This scrutiny has manifested in a rapidly-expanding array of regulations, with which asset managers in mutual funds, pension funds and insurance firms must comply. As we have discussed elsewhere on these pages, many of these regulations have major implications for data governance within buy-side firms, and it is becoming increasingly difficult for data managers in such companies to stay on top of this regulatory burden.

The issue was once again highlighted on January 12th, when new EU regulations on securities financing took effect: Regulation (EU) 2015/2365 on transparency of securities financing transactions (SFTs). The regulation ostensibly deals with data transparency, making it incumbent on fund management companies dealing with newly-constituted funds to report data on: each type of SFTs and total return swaps; the types of assets that can be subject to them; the maximum proportion of Assets Under Management (AUM) that can be subject to them and; the expected proportion of AUM that will be subject to each.  From July 2017 the compliance burden will increase further, when the legislation extends to all funds constituted before January 12th 2016.

Once again we have an example of data managers being asked to oversee huge data compliance tasks – tasks which singularly and in aggregate can significantly increase the total cost of the organization’s data management workflow. But of course, the costs of not being compliant are much more severe: no fund wants to fall foul of financial legislation in today’s climate.

The choice facing fund managers therefore seems clear. Either they can look to manage the complexity of growing regulatory burdens in-house with all that entails: more data to manage, more employees to manage it, and ever more systems to handle the increase in data; or they can outsource this burden and concentrate on what they do well: managing funds. Through managed services such as the Rimes Data Governance Service, organizations can free themselves from the time-consuming back office functions data compliance requires. Not only does this ensure that not a single compliance ‘ball’ is dropped, but firms can lower the cost of their total data estate and enable their in-house data managers to focus on additional, value-add tasks.

Ultimately, in an environment where data compliance and governance is only going to become more complex, buy-side firms need to ask themselves one question: do we want to spend our time managing data; or managing funds. Those that decide on the latter will find themselves with lower costs and a competitive edge.

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