PrintWe’ve created the Hedge Fund Regulation Blog to collect useful information about the ongoing flow of regulatory developments that impact the way hedge funds operate. We will strive to reach across subject matter boundaries (legal, compliance, operations, financial, and technology) to gather relevant information that can be applied by practitioners. In some cases the information may call for immediate actions, in others it may be a factor to consider in longer term planning. We will also exercise editorial discretion to filter out the background noise from the flow of daily facts that do not rise to the level of generally useful information, so the wheat won’t be obscured by the chaff.
One of our strategies will be to identify, analyze and track major patterns of change in the overall climate of regulation. There already are multiple sources of information about day-to-day developments in this area, but there are far fewer that try to apply some perspective to identify and consider the longer term implications of those developments. We believe that sustainable advantage can be gained by those who do recognize and act on these patterns before their competitors.
Clearly the current push to reform financial services regulation, including the Administration’s plan for Financial Regulatory Reform, is an example of such a pattern. Most commentaries seem to address how this is likely to affect the status quo business models found in the industry. We believe that the mix of changes being proposed in legislation, when combined with changing attitudes toward enforcement, are likely to break parts of those models and lead to a more fundamental industry realignment.
We see another such pattern in the push by regulators, particularly the SEC, to require institutions to strengthen and formalize their internal compliance functions, effectively outsourcing some aspects of regulation through a process characterized as Institution-Based Regulation in an article last year by John Walsh, Chief Counsel at OCIE. The resulting push for demonstrable compliance, reinforced by similar demands from client due diligence, call for rethinking how the compliance function is performed to make it a more effective operational process, not simply to add more staff to the existing advisory-team model. Another pattern concerns efforts to reinvigorate the roles played by (or at least assigned to) independent monitors of the industry, the gatekeepers like audit firms and rating agencies, in keeping firms on track.
Of course these patterns overlap, as will be reflected in out articles.
Another strategy is to be multidisciplinary. The existing sources of deeper analysis typically come from firms that are deeply ensconced in one field of subject matter expertise (law and accounting firms being the best examples), which limits their ability to take into account interactions among multiple disciplines. Modern regulatory developments can grow out of technical developments (like high frequency trading), operational concerns (like processing OTC derivatives), or organizational developments (like incentive-based compensation), not merely from legal and regulatory changes. Our background gives us the broader perspective to assemble all of those pieces to see more of the big picture. Our perspective is shaped by our founder, who combines experience from working in the some of the leading firms in the fields of law (Sullivan & Cromwell), audit (Price Waterhouse), consulting (A.T. Kearney), financial services (Goldman Sachs), and technology (BearingPoint), as well as experience in advisory, management, technical, and oversight roles.
In addition to detailed analyses, we will be including shorter postings concerning developments that relate to the patterns we’re following. These notes will summarize the development and provide links, embedded features, and videos to let you gather more information if the subject is of value to you. We will also publish background articles on the history, structure, and regulation of the industry. While all of this information is available in scattered locations across the Web, we believe that we can add value for our readers by filtering, assembling, integrating and adding some analytical perspective to the information that’s out there.
As the reader base grows, we’d also like to add forums or wiki features to allow our readers to participate in the discussion and collaboratively work on building a useful base of information and documents. For the moment though, the ability to post comments on our articles will have to suffice.
In all cases, we will try to includes useful links back to original documents, analyses, articles, and entities that are relevant to our postings. We also are providing tools to sign up for RSS, email and Twitter notices of new postings so that you can stay up to speed with developments on this site.
Finally, we plan to vary our approach and content to suit the expressed needs of our readers. Please pass along your criticisms, suggestions and creative ideas on how we could better serve your needs.
About the Diel Group
The Hedge Fund Regulation site is produced by The Diel Group, Inc.
The Diel Group is a management consulting firm dedicated to serving the financial services industry. Founded in 2001, DGI focuses on delivering high-valued services to leading financial services firms. We’ve adopted a networked business model that reflects the growing consensus that consultants are best selected on the basis of the capabilities of the project team not the size, publicity-value or marketing budget of the proposing firm.
Our engagement teams are formed by combining our seasoned internal staff with resources drawn from a broad network of consulting, legal and technology firms, and experienced individual consultants. As a result, our teams’ expertise spans the key legal, operational and technical drivers impacting the industry, which enables them to solve the tough interdisciplinary problems our clients face in today’s business environment.
Our business model also permits us to staff projects based on the needs of our clients not on the size or content of our bench of unengaged staff; it also means that we don’t need to leverage a pyramid of inexperienced staff to carry our bags and support our firm’s economics.
To enable us to better serve the compliance needs of the hedge fund industry, the Diel Group developed ComplianceManager (TM) – an integrated GRC solution that provides automated support to help our clients satisfy the supervisory oversight requirements under the regulations associated with the Advisers Act §206(4)-7 and §203(e)(6), the 40 Act 38a-1, and/or FINRA §§3010, 3012, 3013. Our software can be used to track their legal requirements (including contractual requirements under PPMs, side letters, etc), their policies and controls, control tests and test results, exception management, issue management, and reviews. By linking records at each level, the system is able to automatically notify the “owner” of an entry whenever an event occurs for a related record (notify the attorney who “owns” a requirement when a control to enforce that requirement fails its test, or the reverse – to notify the control “owner” when the legal requirement changes).
A built-in messaging capability and dashboards track required reviews, approvals and control actions for each user, allowing participants to access and complete actions whenever a window of free time opens. The system retains a full audit trail of changes, approvals, reviews and messages which can be used to demonstrate compliance activities. In addition to meeting regulatory requirements, clients can use ComplianceManager to satisfy due diligence requests and to provide assurance to senior management that an appropriate framework of controls is in place and functioning correctly.
We’d be delighted to provide more information about ComplianceManager, our experience, our staff and our clients upon request. To make a request, you can reach us through the channels listed below.
Contacting The Diel Group
Comments and suggestions concerning this Blog can be sent to:
HedgeFundRegs: support@hedgefundregs.com
The publisher, The Diel Group, can be reached as follows:
Our Web site: The Diel Group, Inc.
By e-Mail: rdiel@diel.com
Direct Dial: (212) 419-4300
GoogleVoice: (646) 657-8380
Address:
The Diel Group, Inc.
160 Riverside Blvd
Suite 8S
New York, NY 10069
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