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Compliance & Technology: Your top priority
Affiliated Member of the Association of Greek Institutional Investors
Technology is increasingly criti‐ flow— what they do, how they cal in controlling risks through‐ organize data, what kinds of out the portfolio manager work‐ reports they produce, and how flow. There is no single they can help you enact and “compliance solution” for auto‐ enforce policies. mating the Compliance Officer’s Moreover, understanding that job. Rather, systems designed to the risk associated with each support different steps in the driver of compliance—for exam‐ investment process—portfolio ple, client directives on APX— management, trading, recon‐ have ramifications across the ciliation—should also have the entire workflow, it’s important benefit of improving compliance readiness and mitigating risk. The CO, then, needs to know the systems the firm is using across the investment process and whether they serve to mitigate risk. A first step in identify‐ ing key risk points in your operations is to Client Structure understand the risks associated that the systems can communi‐ with the three primary drivers of cate with one another. For ex‐ compliance: Client Relationship, ample, current client restrictions Internal Management Policies need to be communicated to and Regulation. portfolio management and port‐ For every question raised by the folio modeling systems (like drivers of compliance, technol‐ Moxy) in order to check invest‐ ogy has an answer, and some‐ ment decisions and trade orders times more than one. Highly against restrictions. Wherever advanced technology solutions any two systems connect is a like the ones that Finvent offers, potential failure point. Thus, the enable you to turn your policies better the integration among a and procedures into automated firm’s systems, the lower the processes, ensuring that policies overall risk. This is a driver that do not simply exist on paper but Finvent has followed throughout are automatically implemented all its course in providing inte‐ as part of your workflow. grated, STP solutions. Since risk runs throughout the Certainly, not every firm has the workflow, it is important to same breadth of technology. A know the systems that handle firm’s technology investment is the various aspects of the work‐ typically proportional to its size
in terms of number of advisors, number of accounts, Assets Un‐ der Management, and other measures. Small firms that make up the majority of the “Advisor” uni‐ verse, may just have a portfolio management system. On the other hand, their trades are fewer, their assets smaller, and their activity easier to track, so their risks are lower. The largest firms habitu‐ ally invest in technology —as the asset base and trading volumes de‐ mand a high level of automation. Hence they are more likely to have a full complement of technology covering every aspect of their operations. Mid‐sized firms might get by with a core platform consisting of a portfolio management and order management system, and increase back office automation gradually as their business grows. Among mutual fund managers, smaller firms may not have the bandwidth and the technology to ensure compliance with core regulatory directives. They will often outsource that responsibil‐ ity to their fund administrators or prime brokers (“Fund Admin” in chart). As firms grow and ac‐ quire technology, they are likely to move to a mix of partial out‐ sourcing and in house compli‐ ance management. Continue to next page