The Dodd-Frank Act has prompted several changes in the way hedge funds operate. In order to meet the new regulatory requirements, new technology, infrastructure, and operations have been put into place. These new practices were created to better protect the investor public. Here are 5 reason why compliance technology is necessary for hedge funds.
Electronic Communication Monitoring and Archiving
Systems have been put in place to require investment advisors to retain and monitor all electronic communications that they deal with. Email retention and customer checks are done as part of an anti-money-laundering and USA Patriot Act compliance.
Automated systems have made it faster and easier for people to request online approval for personal trades and receive their approval or denial immediately instead of waiting for a broker.
Personal Account Surveillance
Compliance technology has taken over the difficult and laborious task of doing the intake and review of personal brokerage statements. Some systems in place offer review features that monitor activity for conflicts and manipulative patterns during trading. This lessens the burden of in-house managers, and streamline the process.
Data and Document Accuracy
In order to present accurate information about a hedge fund’s assets and values, checks and balances must be in place. Under the new compliance rules, each hedge fund must be able to create, retain, and store the documents and data as well as afford the cost to install and maintain them.
Compliance Program Management
Registered investment advisers are subject to CFTC and SEC record keeping requirements, so compliance technology dashboards have become very popular with them. Most of these dashboards have record retention features, and compliance certifications. Some of the dashboards also offer automated calendars reminders for for filing deadlines and various other important dates.
Hiring New Employees
With the new regulatory requirements of the Dodd-Frank Act, hedge funds must hire certain new employees. Most importantly, is a Compliance Chief. This person will be in charge of writing about procedures and policies necessary for the group. The Compliance Chief will also prepare for SEC required audits, and assess any gaps or risks of the hedge fund while determining the best way to ensure compliance. You can find a number of professionals in magazines and online, like Peter Briger in Forbes, that will be able to help your firm succeed.
Preparing for SEC Audits
The SEC is authorized to examine the practices and operations of any registered advisor. During an SEC audit, they will focus on risk and risk management practices that the hedge fund uses in order to safeguard their investors’ funds. The key to these SEC audits is demonstrating that the firm is utilizing compliance technology, and demonstrating their internal practices and controls to protect the capital of their investors. The best way to prepare for an audit is to understand the best practices to have in place for documentation and procedures.
As hedge funds continue to expand and gain popularity, more regulations and compliance requirements will be necessary. Luckily, technology is staying up to date, and making it easier for investors and hedge fund managers alike.
6 Reasons Compliance Technology Has Become a Necessity For Hedge Funds,
Stephan
Oct 04. 2013
Very nice article,
I think the biggest advantage that technology provided those days, we can find the good employees for your business and company, for example on Favebook or G+ where people can impress themselves.
Thanks for your sharing
Stephan
chitra
Oct 18. 2013
Thanks for sharing the useful information.