Building a Regulatory Reporting Process to Ensure Consistency and Minimize Effort

A large multi-strategy hedge fund adviser with $9 Billion in regulatory assets under management (RAUM) across diverse asset classes, including listed securities and complex OTC derivatives, was required to file Form PF including Sections 2a (Aggregate Positions) and 2b (Risk Measures). In addition, the firm was deemed to be a commodity pool operator and required to file Form CPO-PQR with the CFTC. Each business group had their own manual data retrieval, scrubbing and compilation process, resulting in additional effort spent on validation and reconciliation when sharing data across teams. Risk Advisors’ was engaged to streamline the process and to make sure that the filing was prepared in a consistent manner across the firm.

Solution

• Educated key stakeholders on the Form PF and Form CPO-PQR filing requirements as related to their group.
• Worked with the portfolio management and risk teams to understand how the firm’s investments translated to the Form PF reporting requirements of Sections 1b, 1c, 2a, and 2b.
• Collaborated with the accounting group to understand the funds’ structure, balance sheet information, and regulatory AUM required for Section 1a, 1b, and 1c, and requirements of Form CPO-PQR Schedules A, B, and C.
• Working with the technology team, analyzed and documented over 1,300 data points received from 24 sources, normalized to 400 common fields. The normalized data was further scrubbed, enriched and categorized into data warehouse to serve as the central source for Form PF reporting.
• Communicated and actively discussed the data with each user group to verify and ensure accuracy of the resulting reported data.
• Documented the process flow from initial data gathering to final filing step and reviewed with client to identify areas to streamline process.

Benefits

• Met Form PF and Form CPO-PQR filing requirements accurately, verifiably, and on-time, mitigating potential regulatory and compliance issues with the SEC and CFTC respectively.
• Standardized the data gathering and compilation process, ensuring consistent data usage across business units and shortened time required for both regulatory filings.
• As a result of developing a regulatory reporting data gathering process, the firm was able to access its global investment profile with risk metrics, with the ability to drill down to individual security level.
• Central source of regulatory reporting data substantiates the Form PF and Form CPO-PQR filing and is auditable back to source business groups and systems.
• Streamlined process combined with centralized data can be leveraged for additional filings to regulators in other jurisdictions (such as EU AIFMD) or other industry standards based reporting (such as OPERA risk reporting).