In our previous article, we explored why a data-only approach creates risk from the very start of shareholding disclosure monitoring. But real strain rarely appears on day one.
It surfaces later - when portfolios expand, instruments become more complex, and regulators begin asking not just what decision was made, but how it was reached.
At that point, many firms discover that the challenge was never just data alone. It’s defensibility.
Shareholding disclosure extends far beyond straightforward equity positions. Exposure can arise through derivatives, convertibles, warrants, structured products and ETFs - and jurisdictions treat each of them very differently.
Some regimes aggregate economic exposure, while others focus only on voting rights. Some require a look-through into funds and indices, while others do not. Managing these differences quickly becomes complex, placing a growing operational burden on compliance teams.
Calculation methods introduce further hidden risk. Some regulators require delta-adjusted exposure, others use full notional values, and look-through obligations vary by market and instrument. An instrument that is reportable in one jurisdiction may be exempt in another, meaning exposure treatment can change simply by crossing a border.
A data feed cannot interpret those differences because it treats instruments uniformly. Regulation does not.
Monitoring may appear to function until exposure is challenged. And when it is, compliance teams must be capable of explaining not just the numbers, but the legal reasoning behind them, too. Data alone offers no defence.
It’s one thing to have monitoring frameworks in place, and another to demonstrate how they operate. Regulators are interested in the latter.
When a threshold is crossed - or worse, missed - firms are expected to demonstrate:
These expectations fall under the broader obligation for financial firms to maintain effective ‘systems and controls’, and this is where data-led models begin to strain.
A data feed may indicate a threshold, but it does not encode jurisdictional interpretation, document legal rationale or produce audit-ready evidence of how decisions were made. When a filing is missed or submitted incorrectly, pointing to a data provider offers little protection. Without clear logic and defensible documentation, firms are left explaining numbers they cannot fully justify.
For compliance teams, the risk is not just financial. It is reputational and personal. Being unable to explain a filing decision under review is a position no team wants to be in.
Legal interpretation is not a reporting layer. It must sit inside the monitoring logic itself.
That means that regulatory nuance must shape how exposure is calculated in the first place. Aggregation rules, attribution logic, exemptions and instrument treatment can’t be applied after the fact. A data feed might tell you a threshold exists, but doesn’t show you why it applies, how a derivative should be treated, or whether an exemption changes the obligation.
This is why shareholding disclosure frameworks need to embed jurisdiction-specific legal interpretations at their core. At FundApps we work alongside aosphere, whose RuleFinder service draws on specialist lawyers and local counsel in more than 100 jurisdictions. Our regulatory team translates that analysis into algorithms that power our rule engine, so monitoring reflects legislative nuance by design - not by manual patchwork.
Defensibility is not about having the right number. It’s about being able to explain how you reached it. When regulators ask questions, firms need more than data. They need logic, traceability, and a clear legal foundation behind every alert and decision to file or not file.
When firms rely solely on data, they inherit the responsibility for building and operating their own monitoring infrastructure. Aggregation logic, corporate structures, instrument classification, alerts, audit records, testing and hosting all become internal obligations.
Reporting multiplies the effort. Templates, submission channels and filing formats differ across jurisdictions and change regularly. Monitoring exposure is only half the job. Firms must also produce and submit filings accurately and on time.
What begins as a data shortcut often becomes internally maintained compliance Jenga. Each regulatory update adds another piece to balance. Over time, ownership costs expand and fragility increases. And every Jenga game ends with collapse.
Monitoring logic improves when it is tested across multiple markets and firms. Discrepancies surface faster. Interpretations evolve. Controls strengthen. Nearly 200 firms globally rely on FundApps’ monitoring logic, creating a network effect that no single firm could realistically replicate on its own.
A data-only approach isolates firms. Each team must validate assumptions independently and resolve issues alone, often only after they become visible under scrutiny.
At the same time, disclosure rarely exists in isolation. Short selling, takeover panel requirements, issuer limits and exchange restrictions often sit in separate systems across different teams. Fragmentation reduces visibility and increases reconciliation work.
Without a unified framework, firms are left stitching together multiple tools themselves, creating blind spots and duplicated effort. Compliance becomes less about managing exposure and more about stitching together systems that were never designed to work together.
Shareholding disclosure cannot be reduced to thresholds and feeds. Instrument complexity, jurisdictional nuance and reporting obligations require interpretation, structured monitoring logic and operational workflows.
Across the market, firms are moving away from stitched-together processes and toward consolidated monitoring frameworks that bring related obligations under one roof. This shift is less about convenience and more about control.
FundApps is an example of this shift, combining regulatory interpretation, automated monitoring, task-based workflows and audit transparency in a single platform trusted by leading asset managers, banks, and hedge funds around the world.
If your current approach relies on disconnected data feeds and internal workarounds, it is worth asking whether that model can support your next phase of growth.
Speak with our team to see how FundApps can help you bring compliance monitoring into one place.