Mandatory shareholding disclosure regulations have been in existence for a long time. Why is it that many financial institutions continue to struggle with it?
Legacy Systems: Many financial institutions utilize legacy systems that are incompatible with each other and integration of data is a major challenge. Despite all the planning for technology investments, most companies still cannot future proof their technology platforms and data consistency is always in a state of flux. Till this day, a data lake with a single data standard remains largely a pipedream.
· Complex Organizational Structures: For shareholding disclosure, financial institutions are mandated to report at different levels –group, entity, portfolio, fund and/or umbrella fund levels. For a typical global financial institution, its complex organizational and fund structures i.e. legal entities, multiple offices, business units, trading desks, portfolios, funds, means potentially, a mammoth task to track the respective equity positions and aggregate at the different levels required by different regulators globally within a typically T+2 window. Even after completing this mammoth task daily, one can never be too sure of the accuracy of the aggregated results, thus raising data governance issues and regulatory risks. Getting this data right would not only help a company with capital market regulatory reporting, it would also translate into more effective decision making for business growth.
· Complex Financial Instruments: Post-GFC, with pressure on investment returns, more creative and complex financial instruments have emerged in the market and these have come under the scrutiny of regulators for reporting e.g. ETF & Indices.
· Multiple Jurisdictions: Investors are doing more cross border transactions and have diversified into a larger number of stock markets to increase returns and manage risk.
· Multi-language Disclosure Forms: Compounding the pain-points above, the regulations across the jurisdictions might not be in English. Frequently, the disclosure forms must be completed in the native language of the jurisdiction.
The above factors add up to frustrating hours of compliance and operational expertise being “lost” when it can be more productively used elsewhere. At the worst, they compound to serious transgressions that are brought to the attention of the regulators because of inaccurate data, belated filing, or negligence. Any of these are potentially damaging, resulting in hefty fines, sanctions and reputational risk as regulators increase the impact of punitive actions.
The challenges of shareholding disclosure can be mitigated and resolved with a commercially proven and automated end-to-end solution such as Artius Global Shareholding Disclosure. Contact us today to find out more.