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Goodbye “proof of concept”, hello “proof in numbers”

5 mins
Posted on Jul 8 2019 by Andrew White

Do your due diligence to the level of comfort you require, take some reference calls, trust strength in numbers and join the FundApps compliance community!

While sometimes the terms “Proof of Concept” (PoC) and “Trial” are interchangeably used, PoCs hark back to a really dark time in software, where vendors actually sold software that wasn’t guaranteed to work in a financial institution's ecosystem.

Classic cases such as the financial institution using Windows XP and the vendor’s software only working on Windows 2000 were common. But more esoteric issues, like middleware not being compatible or database driver issues, often meant getting a vendor’s software up-and-running within the four walls of a bank was an absolute crapshoot.

Combined with this was the fact that a lot of software was basically a “tool kit” that had to be completely assembled by “professional services” teams (at an exorbitant day rate) once purchased and installed. Order Management Systems sometimes had to be installed and configured just to get the compliance “module” to work. This sorry state of affairs meant it was good business practise to test any software to within an inch of its life before signing a lengthy agreement to avoid getting stuck with a solution that wouldn't work as expected / promised.

numbersFast forward to the fully cloud-enabled era of 2019 and all technological compatibility issues are a thing of the past. Have an internet connection? You’re set. Likewise software companies have been established that solve very complex but niche issues, extremely well. No more “tool kits”, send data in the right format and the service works 100%.

OK, with that little semantic clarification out of the way, let’s discuss why we don’t do Trials either! Here are some of the common things we hear:

We want to verify your rules are correct” / “We want to compare the results from FundApps with our existing system”.

Seems logical at first glance. There are a few major issues here though:

  • It’s very likely the legacy systems’ results are not 100% correct. There are many reasons why this happens and we’ve spent the last nine years refining this as the market leader in this space. Some of the primary reasons to current inaccuracy with home-grown systems are as follows:
    • In-house system often miss vital calculations on exotic asset classes, complex rules and corporate hierarchies.
    • The velocity of regulatory change is such that a small army is needed to stay on top of all changes across the globe, meaning that systems that may have once been correct, no longer mirror the latest regulation.
    • We have ca. 60 clients ranging from $500M Hedge Funds to $1 Trillion Sovereign Wealth Funds all using EXACTLY the same rules with no bespoke versions. We have asset managers, investment banks, wealth managers, and pension funds using the system. We have those who only trade long equities and those that mainly short cash settled derivatives. Every day our clients trade in over 90 jurisdictions. The likelihood of our rules being incorrect decreases towards zero the more clients we have on the platform. Strength in numbers means that all our clients are constantly reviewing and commenting on our rule set. This global expert community delivers unparalleled reassurance on making sure the rules are correct which reduces financial and reputational risk.
  • To get truly comparable results, a prospect would need to do a full implementation, setting up their corporate hierarchy, mapping in all positions in all relevant asset classes across all portfolios. Because of so-called “swinging thresholds”, existing disclosures would also be needed to be mapped in. All in all this is something that could take 3-9 months based on their complexity. FundApps' standard agreement is a 3-year term, but for those who maybe have been burned previously we are happy to do a 1-year agreement. If you’re not happy with the results after 1 year, just walk away.

We want to see if we have all the data required”. Again, makes a lot of sense, but we like to make life easy for you - all the required data items for FundApps are described in detail and available on our website: Better still we have an XSD schema which you can use to ensure your XML file is valid and correct pre-signature.

“We just want to click around”. Unfortunately there’s a lot of FundApps' and aosphere’s Intellectual Property available in our UI, which can be easily extracted, so we need a full agreement in place before we can hand over the keys.

What FundApps does instead

We get it, sometimes things do have to be seen to be believed and we love strutting our stuff, so here’s what we suggest:

Select a handful of the rules that really keep you up at night! Pick the ones that give you cold shivers when you hear their name!

  • Brazilian Substantial Shareholding with respect to Depository Receipts (and filing in Portuguese)?
  • Japanese Major Shareholding and the Special Reporting System?
  • EU Short Selling with Index look-through and portfolio level netting?
  • 13F and matching the latest SEC list with your holdings?
  • Trying to correctly ascertain EU Home Member State based on FIRDS?
  • UK Takeover Panel and their all-seeing eye?

All our rule algorithms are visible to the user and we’ll get one of our Regulatory Experts (#regspert) to walk you through them to any level of detail you require.

Feeling particularly sporty? Send us a couple of complex scenarios!

  • How about  “On day 1 a Fund buys 3% in China Oilfield Services Ltd on the HKSE. On day 2 the same Fund buys 3% in China Oilfield Services Ltd on the Shanghai Stock Exchange. On day 3 the Fund buys an additional 2% in China Oilfield Services Ltd. on the HKSE” - what are our disclosure obligations?
  • Or how about a cheeky “On day 1 a Fund buys 5.6% of Weatherford International on the NYSE. On day 2 a second Fund (but same manager) buys an additional 1% of the shares. On day 3 the first Fund sells 2% of Weatherford”.

We’ll put some example data together and model the scenarios and show you live in the system what alerts are triggered.

With FundApps’ online compliance services being rapidly adopted by dozens and dozens of financial institutions, the age of multi-month PoCs and trials is long gone. Do your due diligence to the level of comfort you require, take some reference calls, trust strength in numbers and  join the FundApps compliance community! #StrongerTogether