Back to all articles

Aggregation, Regulation… don’t forget Delegation!

6 mins
Posted on Jul 14 2021 by Amber Hall

Understand delegator relationships across corporate hierarchies and global jurisdictions, and how they impact shareholding disclosures.

Delegation - The Client Experience

In our blog on delegation last month, our regulatory expert Karl Schindler walked us through what delegation is and why this matters for shareholding disclosure. You can read that article here, where he explores the complexities of delegation disclosure requirements and common misconceptions.

In part 2.0 of the series, we walk through how the practicalities of this impact those in the shareholding disclosure space, what the implementation of identifying delegator relationships looks like and how it really is as simple as 1 delegator, 2 delegators, 3 delegators to get accurate disclosures with FundApps.


To put it simply, delegation is when entities or persons with discretionary management power or voting rights delegate those powers to affiliated (internal) or external parties. The most frequent question asked when approaching delegation conversations is...

"How does this impact my disclosures?"

The answer depends on who is asking! If you are a global asset manager that delegates multiple times across regions and funds, your delegation requirements will naturally be more complex than a small boutique hedge fund that delegates management externally - but that doesn’t mean they are inapplicable! Even the upcoming/smaller players in the shareholding disclosure space can quickly come up against difficulties in understanding the requirements, and with the nuances of delegation, this is no surprise. 

The complexities of delegation are seen not only across one's corporate hierarchy, but also across the jurisdictions globally.

When implementing delegation, there are a few scenarios that surprise people the most:

1. “But I delegate away voting rights and management discretion, why do I need to disclose?”

In some jurisdictions, like Germany for example, where the BaFin specifically mentions that “delegating authorisation does not terminate attribution to the party originally authorised”, delegation has to be considered for voting discretion over assets. As you may know, it is not always the case that management discretion and voting control is delegated to the same entities.

This highlights how delegation not only relates to a single factor such as if discretionary management power is delegated, but also that one must consider if the power over voting rights (proxy voting) is delegated as well.

Remember, when it comes to disclosure obligations, we also need to consider forms (or regulator portals) that must be filled in! Disclosure documents may include delegator requirements too, displaying a chain of control and the relationships you have to assets is a key component of disclosures. FundApps looks to support delegation relationships across forms in the near future to align with our FundApps Filing Documents Standard, which you can read more about here.

2. “I have four entities contractually involved in delegating the same assets, why does the top-level need to report this and how do I stop double counting?”

Let's walk through a hypothetical example, where you have a set up of three or four entities:

Entity (EntityA) might delegate management (or voting power) to EntityB, but then EntityB then signs another delegation agreement with EntityC, where EntityC is the entity that is actually managing (voting, etc.) the assets on a daily basis (we can call this entity the ultimate delegated). There might be any number of delegation steps between EntityA and Entity C in reality, but for purposes of keeping it simple, let's stick with two layers of delegation.

In reporting obligations, one would need to consider both the relationship that the ultimate delegatee, Entity C, has to the assets, but also the relationship that Entity A and Entity B have to the “Multi Delegated” portfolio in question. They are both delegators in a chain of control.

In this case, the calculation of holdings in scope for disclosure obligations may (depending on the jurisdiction) need to consider the relationship with entity A, B and C, but not double count the holdings at the level of an entity (e.g. holding company) that has common control of Entities A, B and C. For example, in the diagram below we can see that the 3% in Entity A and C are not totalled up to 6% at the Top Level Entity.

Delegation - diagram (1)

We can see how very quickly this can turn into a challenging situation once hundreds (or thousands) of assets are added into the mix, split in different ways across the hierarchy. Keeping track of the disclosure obligations across a horizontal and vertical aggregation is no easy task - something no spreadsheet  /  IF, AND, OR statements could handle. 

In FundApps’ automated Shareholding Disclosure service, clients have the ability to see the breakdown of holdings via portfolios and entities, allowing them to clearly understand the relationship between assets and delegation. This simple view allows clients to understand their disclosure obligations at the lowest granularity.

Additionally, our clients benefit from a flag in the rules that highlights where delegators are required to aggregate. This element of aggregation functionality allows us to capture delegation requirements globally. 


Screenshot from our Shareholding Disclosure service

3. An umbrella fund delegates to two different entities, how do we disclose this?

There are cases where an umbrella fund delegates assets in different portfolios to different areas of the corporate hierarchy across the globe. This can get even more complicated as some holdings in one portfolio may have been delegated but other holdings in the same portfolio may have not. FundApps clients are able to distinguish between the assets that have been delegated away and those that are retained and should be aggregated directly. 

How do you help us to know where we have delegator relationships?

From day one of the implementation with FundApps, your dedicated Client Success Manager (CSM) gets to know your corporate structure and hierarchy in detail, not only to provide expertise on the implementation into the FundApps platform, but also to be able to guide you through any regulatory nuances, like delegation. 

With the help of your CSM, a regulatory expert (Regspert!) and our delegation questionnaire, FundApps can walk you through the delegator requirements across all jurisdictions and help identify where the delegator information can be found internally. Once sourced, this information can be provided alongside your aggregation relationships to build your company structure in our Shareholding Disclosure service.

We like to think of your aggregation structure as an important skeletal framing on which our rule algorithm runs. More often than not, FundApps provides the only place in a firm where all the hierarchy and position information is centralised and presented in a simple and easy to view UI. Through our reporting engine, we allow clients to slice and dice this information for business intelligence (BI) reporting.

When delegation adds complexity to aggregation requirements, viewing your firm’s relationships to assets in an easy format can be a breeze when you're a FundApps client.

How do we accurately model these relationships and disclose confidently knowing we have captured our delegation requirements?

Use FundApps! No, seriously. Why wait? Our constantly updated rule set is used by over 100 clients within our community and supported by legal information from our provider, aosphere (an affiliate of Allen & Overy). Our rules distinguish between which disclosure regimes require delegating entities to aggregate holdings and our user-friendly UI guides you through your disclosure requirements in as little as 3 clicks. It’s just another example of Compliance Made Simple. 

If your firm delegates management or voting rights either internally or externally and you haven’t thought about this important area of Shareholding Disclosure monitoring, feel free to reach out to us and ask how we can help! We’d be happy to talk to you in more depth about this topic and how it can affect your firm’s compliance obligations.