The Challenges in Developing a Culture of Compliance
It even led Olympian Capital Management founder Michael Levas to deliver an impassioned speech about how the hedge fund industry is being unfairly targeted because of the sins of a few.
Scott Condron, CTO of BlackRock, says his firm's client-facing IT budget will largely go toward its Aladdin trading platform, growing its global footprint, and, most importantly, addressing regulatory demands.
"Probably the largest driver is our response to the regulatory challenges and how we can help our customers of that Aladdin platform meet some of those needs," he says.
Investors are clearly taking more notice than ever of how firms are answering this regulatory challenge. And, according to a new survey conducted by due diligence firm Corgentum Consulting, they're not entirely impressed with how hedge funds are answering the call.
Corgentum asked a swath of investors if they felt there was a culture of compliance at funds, or simply a desire to achieve technical compliance. In other words, are funds establishing a culture of compliance to improve their operations, or are they simply trying to meet the requirements by the deadlines?
Seventy-two percent of respondents say hedge funds are only seeking technical compliance.
"Hedge funds are so focused on technical compliance that they're just treading water because they're just trying to keep up," says Jason Scharfman, managing partner at Corgentum. "It's kind of counterintuitive; the results of increased regulation have not inspired increased oversight, just more technical rule compliance."
One hedge fund CTO at Waters USA told me that 2013 is going to be rough on the hedge fund industry. Maybe it's an election defeat hangover, but there is not a lot of optimism floating around about the New Year.
Scharfman says that even if a firm wants to change its culture, the current environment is not an easy one in which to right the ship, especially when you consider the loads of new mandates that keep flooding the industry.
"Now, what you're seeing is that people who want to devote extra resources to compliance can't because they're resource-constrained," Scharfman says. "Even if a fund has a dedicated compliance officer, they're now so focused with the technical rule of compliance versus pre-2008, where a dedicated compliance officer had a little more freedom to pursue what they thought was relevant to the firm."
Meanwhile, on the sell side, Adam Broun, CIO of the front office for Credit Suisse, says his team has struggled to meet compliance with Basel because in some instances they have to provide data for Basel II, Basel 2.5, and Basel III.
"The regulatory agenda dominates across the board, from our banking business to our wealth management and capital markets business," Broun says, referring to where the firm will focus its IT budget in 2013. "Because we're a Swiss bank, we have to be ahead of the pack on Basel III and that has required a lot of work on reporting systems, calculation engines and so on."
It's certainly an uphill battle, but as has been noted before, this is a fight that isn't going away.
What do you think? Which regulatory guidelines or deadlines are going to be the greatest hindrance for you and your firm in 2013? We can discuss off the record if you prefer. Give me a call at +1 646-490-3973, or send me an email at anthony.malakian@incisivemedia.com to share your thoughts.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@waterstechnology.com or view our subscription options here: http://subscriptions.waterstechnology.com/subscribe
You are currently unable to print this content. Please contact info@waterstechnology.com to find out more.
You are currently unable to copy this content. Please contact info@waterstechnology.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
More on Trading Tech
Ace high or busted flush? Digital Asset’s mixed fortunes mirror DLT adversity
The vendor hoped to remodel post-trade using blockchain technology—and it still might—but its bumpy progress raises questions over the future of DLT in finance.
This Week: BlackRock/Preqin, Trading Technologies, FIA Tech and more
A summary of some of the past week’s financial technology news.
Adaptive’s Aeron goes live on Microsoft Azure Marketplace
The messaging software used for building bespoke trading platforms is now available on Microsoft’s marketplace, making it accessible through major cloud providers.
Bloomberg, industry bodies push back on Cboe’s proposed OEMS rule change
Some industry bodies disagree with the options exchange’s proposal to carve its Silexx OEMS out of the SEC’s definition of an exchange facility and place it into a separate business line.
Waters Wrap: CME, Google and the pursuit of ultra-low-latency trading
CME Group and Google have announced Aurora, Illinois, as the location for the exchange’s new co-location facility. Anthony explains why this is more than just the next phase of the two companies’ originally announced project.
WatersTechnology latest edition
Check out our latest edition, plus more than 12 years of our best content.
Natixis refines in-house interoperability model
The French asset manager has refined its canonical data model over the last decade, as the interoperability movement continues to evolve.
Zeros and ones: Industry contemplates T+0 as the next step
With the North American transition to T+1 settlement complete, same-day settlement could be the next goalpost set, though skeptics are many.