ESMA, the over-arching Paris-based regulator, on 1 October published its “final guidelines” for reporting. As always with regulation, it seems the devil is in the detail – and indeed some details may not yet be finalised. The precise technical specifications defining up to 500 reporting fields have not been firmed up, according to Blackrock’s legal and compliance chief, Alex Nightingale, who was speaking at last month’s ALFI (Association of Luxembourg Funds Industry) AIFMD Implementation event held at London’s Savoy hotel.
Nightingale therefore argues that ESMA should give serious consideration to the possibility of allowing funds to report on a “best efforts” basis for the first few quarters. That the world’s largest asset manager would welcome some form of transitional grace period for reporting purposes must surely speak volumes about the potential complexity of the task.
AIFMD is far from the only risk reporting obligation. Many funds have already been getting to grips with Form PF in the United States, and as more funds both inside and outside the US become “US persons” (without citizenship rights or a green card!) and so get caught in the CFTC net, they must also file form PQR amongst others. Venn diagrams illustrating overlap and underlap amongst these reporting requirements have seven segments. When managers superimpose other reporting requirements and risk aggregation data feeds onto the Venn diagram, it could become a mosaic containing hundreds of windows for those who have manipulated the data to the required level of granularity – or a giant jigsaw puzzle for those who have not.
Which is why so many of the world’s leading institutional investors and hedge fund managers signed Albourne’s submission to ESMA in July of this year, arguing that the non-commercial Open Protocol standard could help to harmonise reporting standards. Yet all regulators continue to ask unique questions.
EY, whose global practice we profile in this issue, is one of many commercial service providers that assist with regulatory reporting. Managed account platforms, lawyers, administrators, custodians, technology providers and other consultants are also helping with various aspects of regulatory reporting. We would be interested to talk with funds, advisers and service providers to hear about their experiences with the new reporting standards. So far we have yet to see any power-point presentation promising a “silver bullet” solution to any and all reporting requirements – which must bear testimony to the scale of the challenge at hand.