We were recently asked by a global investment bank if we could make the FundApps shareholding disclosure platform available on their internal private cloud.
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And of course the answer was, with the technology available to us, yes in theory we could, however… we had to ask ourselves, would we choose to go down this route for just this one - albeit one very large - potential client?
Back when FundApps first started offering a cloud-based platform, objections or concerns about the cloud were fairly common. However, now nearly nine years later, these issues are raised less and less frequently. But, in this case, the bank's (dare I say, antiquated) security policy wouldn’t allow them to consider a true cloud solution provider - even one that is widely used by numerous other financial institutions and meets all regulatory security requirements.
After much discussion within FundApps, we made the difficult decision NOT to make the significant changes to our business model required to accommodate the private cloud requirements of this bank. After all, as our homepage states, “we help investment managers harness the power of community…” and “private cloud” doesn’t exactly scream community.
As a result of the IT security limitations, the shareholding disclosure team at the bank will have to choose a non-cloud (or private cloud) service for their disclosure solution. We believe this is an inferior solution and could open them up to additional unnecessary operational risks, that may be greater than the perceived risks posed by using our secure cloud service. And as shareholding disclosure reporting, especially by such a well known, headline-grabbing institution, is under continued scrutiny from global regulators - is this a risk worth taking?
Regulatory Changes
According to Thomson Reuters the number of regulatory changes a bank has to deal with every day has increased from ten in 2004 to 185 today. That’s a regulatory change that has to be interpreted and implemented every 12 minutes. Of course, the vast majority do not relate to shareholding disclosure; that said, for 2018 (to 18 December), we had received 179 updates to shareholding disclosure rules from Allen & Overy’s aosphere.
The high volume of change within the shareholding disclosure space is one that requires multiple updates and automated feeds on a daily basis.
Our cloud solution uniquely keeps pace with this change and gives our clients clarity and confidence in staying compliant. With version 40,000 of the FundApps technology platform recently released, this equates to more than ten releases a day over the past eight plus years - each one either incrementally improving the service or updating a rule based on changes from either aosphere, a member of our client community or a regulator directly.
Market Data
These updates, however, don’t take into consideration the frequency of changes on the regulatory data sets that need to be monitored to accurately manage position reporting. At FundApps, we scrape 28 data lists (rising to 35 shortly) as frequently as every three hours. Looking at just one of those lists, we note that the UK Takeover panel has changed 160 times in 2018 (to 18 December). And that is only a fraction of the 73,011 new listings in one day only on the 11 December FIRDS delta file.
We asked the bank to consider how they will be able to keep up with the velocity of changes to regulatory data sources without access to the flexibility and agility that a cloud-based service offers.
Compliance Community
Asides from staying on top of regulation and data, there are unique features FundApps offers, which are only made possible through being a true cloud-based service.
Without leveraging the knowledge and power of industry peers, the bank will be spending extra resources replicating work that is being done by the entire community of FundApps clients.
For example, this year alone, it was not only aosphere or regulators who contributed to our 498 rule updates - vital feedback and input was also received from our expert client community. This equates to about two rule changes per day which are released in real time to ensure that our clients stay up-to-date with changes as they happen. Without this vital input, and the use of a cloud provider that can act rapidly on new information, the bank may miss out on key market insight provided by the wider compliance community.
Denominator Data
The power of a true cloud provider also lends to crowd-sourcing information relevant to shareholding disclosure. The rapidly growing FundApps client community contributes vital issuer specific information which can be shared across our client base - including issuer limits where they differ from the regulator’s standard limits; and the all important denominator data (total shares outstanding). The combination of automatically scraped denominator data (including in the Netherlands and Hong Kong for example) paired with a layer of checks provided by other market participants, considerably reduces the risks around getting this key piece of information wrong. The bank will miss out on these and many other risk reducing features by selecting a private solution for position reporting.
It’s You, Not Me
Ultimately, all financial services firms need to make a decision between working with the market leading, always up-to-date, secure cloud provider - and a community of fellow compliance professionals; OR a private cloud / on premise static service where they are required to keep pace with the regulatory change in isolation.
If you know the trade-off between the perceived security of an on-premise / private cloud solution is not worth the risk of fines, reputational damage and scrutiny around shareholder disclosure reporting then Contact Us for a bespoke demo of our Shareholding Disclosure Service.
