Guest contribution Governance
Governance and reporting take centre stage In today’s complex regulatory landscape, firms across the investment ecosystem are evolving to ensure that funds are well governed and offering value to investors. Words SÉBASTIEN DANLOY
In recent years, every industry conference seems to be dominated by the theme of regulation. Across our industry we are always adapting to new or revised regulations that influence how investment funds should be governed, and form part of a robust and resilient investment ecosystem. In an increasingly complex environment, industry associations provide an essential connecting thread between investment managers, the firms that support them, and the regulator. Alfi’s working groups have provided feedback on key regulatory developments which will affect how funds operate, such as T+1 and AIFMD, as well as sustainability developments such as the EU sustainable finance package and Esma’s guidelines on fund labelling, to name but a few. These working groups--which BNP Paribas’ securities services business is a part of--provide an essential forum for dialogue and to align stakeholders’ interests, fundamentally helping to develop regulations that are fair, enforceable and protect investors.
Fund boards provide a driving force Throughout my time in Luxembourg in the 2010s, another key change I witnessed was the growing responsibilities placed on fund boards. Under both the revised Ucits directive and the AIFMD directive, funds are now strongly advised to appoint at least one non-executive or independent director to the board of the relevant Ucits fund or AIF when distributed to retail investors. Following new substance and reporting requirements set forth in these directives, boards are also expected to ensure sufficient resources--technical and human--are dedicated to the oversight of delegated portfolio and risk management functions including delegated portfolio and risk management, and administration when applicable. Liquidity and valuation have also come into the fund board’s purview. The CSSF’s recommendations on Esma’s supervisory action include recommendations for the validation and monitoring of valuation policies and the design of valuation policies in
“ Reports are not just a tick-box, but an enabler of efficiency and decision-making” SÉBASTIEN DANLOY Global head of sales & relationship management for institutional investors, securities services BNP Paribas
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stressed market conditions. Liquidity management tools have been examined by the FSB and Iosco, who provide standards on oversight requirements to ensure that these tools are used effectively. These developments will be vital in enabling the greater democratisation of private assets, as well as other less liquid asset classes. Boards will have a critical role in ensuring that their funds implement these requirements, and are equipped to take advantage of the new opportunities that arise. Improving the investor experience As risk frameworks become more stringent, funds and their service providers must follow complex anti-money laundering (AML) and know-your-client (KYC) processes to onboard clients. At the same time, in today’s digital world, clients expect more streamlined experiences. Firms can turn these challenges into opportunities by exploring how to offer more automated processes that still maintain a robust compliance framework. For example, BNP Paribas’ securities services business is investing in digitalised reporting and workflow tools that offer clients investment and operational data across a wider set of channels. Our focus is on developing reporting that is as customisable and user-friendly as possible, so that reports are not just a tick-box, but an enabler of efficiency and decision-making. After all, that is what good governance is all about.
Sébastien Danloy chairs the day 2 morning session on governance at the Alfi Global Asset Management Conference, Wednesday 20 March.