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Don’t Try This At Home (Automated Shareholding Disclosure)

Posted by Jonny Bradshaw on Jul 31, 2014

I speak with many financial organisations about shareholding disclosure. Most meetings start with a description of an existing in-house system and plans to make a “build vs buy” decision. Usually, firms are considering whether to continue investment in a proprietary platform or purchase an off-the-shelf alternative. Others are working out how to move beyond an Excel problem.


In some cases when business users “go-to-market”, a firm’s business process is so niche that no viable product exists. Decision made easy. BUILD.




In other cases, vendors, usually the large ones who like a fat kid at a party can’t resist their fingers in all the blancmange, lay claim to an almost-ready-solution (watch out for product roadmaps with scheduled delivery dates in upcoming quarters); or worse, claim that an existing product can be “easily configured” to match requirements. Cue vapourware demonstrations, blindness from PowerPoint and death by Gantt Chart. Ignore the false promises of vendor stability and proven track record. If vendors don't have much to show you and are making money elsewhere, it is unrealistic to assume that they will divert sufficient resource without significant funding and even then, you still don't represent core business! BUILD.


In the best case, a vendor not only understands your problem but has already built a business around a solution for it. Such vendors are able to demonstrate a product with everything you need and even go further to describe features for problems you haven't even considered yet. Such vendors have an existing reference client base and a transparent charging model. They have done this before and they will do it again. BUY.


Gladly, FundApps falls into camp number three. The service has been developed specifically for financial organisations to manage shareholding disclosure. It is the most advanced product on the market, has an ever increasing client base, is built on a modern web-based architecture and is available for a simple annual charge. Buy! And most do. However, whilst clearly the right choice, I am always amazed at the agony that can be evoked by deciding not to build a shareholding disclosure system in-house. The following reasons will help take away the pain:


1. COMPLIANCE IS NOT A COMPETITIVE DIFFERENTIATOR: Compliance does not represent your firm’s secret sauce. It is not the reason for outperforming the benchmark. It is not the reason that you get investment (though having a robust compliance process helps). There really is no reason why you should develop systems to manage shareholding disclosure in-house. Your compliance process isn't special or different unless it's deficient. Sure, monitoring disclosure requirements to avoid filings might help a “short squeeze” investment strategy, but we do it so you don't have to.


2. PROPRIETARY BUILDS COST MORE: One firm publicly reported that they had spent in excess of $10m developing a shareholding disclosure system and continue to invest multi-millions per year to keep it running. The average annual cost of FundApps for very large firms is low in comparison. FundApps is just as good and probably better than that really expensive proprietary platform. Save your money for the stuff that adds value to your business and avoid the trap of throwing good money after bad. Political investment and saving face is an ugly and impractical thing.


3. PROPRIETARY BUILDS TAKE A LONG TIME: Recently, I spoke with a project manager at a large investment bank intrigued by our service. Ultimately, the bank were unable to change course and elected to continue with their internal development. After all, they were already halfway there and with only THREE YEARS left to go-live, felt obliged to tough it out… One client implemented FundApps from purchase to go-live in TWO WEEKS.


4. KEY MAN RISK: We were asked to demonstrate FundApps to a London based asset manager. When we arrived we found that the bloke responsible for shareholding disclosure had been knocked off his bike on the way to work. Nobody else knew enough about the internal system to evaluate it properly against FundApps. The meeting was cancelled though our value proposition was made clear.


5. OPERATIONAL RISK: Doing it wrong holds risk. Recently, Deutsche Bank were fined by Hong Kong’s Securities and Futures Commission (SFC) for “regulatory breaches and internal control failings”. Despite already having an in-house electronic position monitoring system in place, the bank failed to send all the required data to the system for monitoring and hence missed required disclosures. Hopefully food for thought for those who still believe that shareholding disclosure monitoring can be done adequately in an Excel sheet. If a large bank with a sophisticated in-house system can miss things, how comfortable are you that your process is capturing all the varied nuances of shareholding monitoring? Read more here.


6. REGULATION CHANGES: Do you really want to monitor all of the regulatory changes in 90+ jurisdictions worldwide, code and test those changes? No, that’s why we do it for you.


7. USE INTERNAL RESOURCE TO BEST ADVANTAGE: Your internal technology team isn't best suited to the development of a new compliance system. They are suited to the sourcing and aggregation of your internal position level data. You produce the file, we provide the checks. Simples.


8. YOU'LL NEVER WALK ALONE: Some of the world’s largest financial organisations have contributed to the development of FundApps. Moreover, the same regulatory rules contained within our service are used by the entire client base. Don’t rely on your own interpretation of the regulation. Disclose in the knowledge that you conform to an industry standard.


9. GET EVERYTHING IN ONE BOX: FundApps has rules, reporting, workflow and filings. Don’t suffer protracted internal development in either phase 2, 3, 4 or 5. It’s done. Now. Ready to use.


10. REGULATION CHANGES: We receive ca. 200 regulatory updates from our legal information provider every year. Let us take the strain.


11. YOU DON'T WANT TO WRITE THE RULES: Really you don’t. We will do it for you. We’ll even create bespoke rules for you too.


12. REGULATION. ALWAYS. CHANGES: You get the idea.


13. LIMITED DOWNSIDE: Lucky number 13, but seriously; we can turn the service on for you when you want it, and if you don’t, we can turn it off just as easily. Our flexible charging structure mitigates any potential downside. BUY!