21 December 2023

How To Navigate The Complex Terrain Of Annex IV Reporting?



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An Alternative Investment Fund Manager ("AIFM") which markets its funds ("AIFs") in the UK or Europe is required to report information (referred to as ‘transparency information' or ‘Annex IV reporting')...
Jersey Compliance
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Who is required to complete an Annex IV report?

An Alternative Investment Fund Manager ("AIFM") which markets its funds ("AIFs") in the UK or Europe is required to report information (referred to as 'transparency information' or 'Annex IV reporting') to the Financial Conduct Authority ("FCA") and other EEA regulators.

We have detailed below a summary of the key challenges in providing accurate and timely Annex IV reports to regulators and how Newgate Compliance can help combat them.

What is Annex IV reporting?

'Transparency information' provides detailed information to regulators about the AIFM itself and the AIF(s) it is managing. Regulators see this information as key to their supervision strategy and compliance with requirements is therefore essential. Receiving accurate information from firms on time enables regulators to focus their supervisory resources appropriately, protecting and enhancing the integrity of their financial systems and secure an appropriate degree of protection for consumers.

What are the top five challenges faced in Annex IV reporting?

1. Complex data gathering:

Annex IV reporting necessitates the collection of some complex financial data. This includes risk factors, exposure values, holdings, turnovers, investor breakdowns and so on, which can be a large task.

2. Data quality:

Ensuring the accuracy and integrity of the data is also a challenge. Systemic errors can lead to regulatory non-compliance, potentially resulting in fines and reputational damage.

3. Resource intensiveness:

Annex IV reporting can be resource-intensive, requiring specialist knowledge and, at scale, technological sophistication and infrastructure.

4. Cross-border issues:

Many AIFMs market across international boundaries, necessitating compliance with jurisdictional interpretations of reporting requirements and practical challenges around validation and submission. Ensuring compliance and consistency in reporting across these different regions can be complicated.

5. Cost implications:

Complying with Annex IV reporting regulations can be expensive, particularly for smaller financial institutions. The costs may include investment in reporting systems, staff training, and ongoing maintenance.

How can Newgate Compliance help with Annex IV reporting?

Newgate's Regulatory Reporting function provides a cost-effective solution to all of the challenges highlighted. Newgate will populate the data for transparency reports from source files, convert the data into XML formatted data files and submit these to the relevant jurisdictions and authorities as required. If you are keen to learn more about Newgate's Regulatory Reporting services, please reach out to the team.

About the authors | Meet our compliance experts

Liz Taylor-Kerr, Head of Regulatory Reporting

Liz is Head of Regulatory Reporting and Disclosures in the Regulatory Reporting team at Newgate Compliance. Liz is an experienced Corporate Governance professional with over twenty-five years' experience in financial services covering a wide range of areas, particularly regulatory reporting, company secretarial and business operational improvement. She has worked across both open and closed ended funds as well as Trust and Corporate Services.

At Newgate, Liz is responsible for ensuring the various regulatory reporting is undertaken and completed in an efficient manner across all services lines and jurisdictions, working closely with all parts of the business.

Liz has been an Associate of the Corporate Governance Institute for over 15 years as well as holding a BSc degree.

Matthew Hazell, Managing Director – Newgate Compliance

Matthew joined Newgate Compliance from inception in May 2014 as Director of Consulting. He has over 20 years of regulatory experience at the UK regulator and other further compliance consulting roles in the UK.

As a regulator, Matthew performed a variety of roles and gained a specialism in regulatory transactions where he was responsible for assessing and making recommendations on applications for corporate authorisation and individual approval. On the corporate side, Matthew dealt with applications from a wide range of market sectors including asset managers; brokerage firms; corporate finance advisers; large and complex insurance companies; e-money issuers and mortgage lenders. On the individual side, Matthew was a member of interview panels charged with assessing the fitness and propriety of key individuals applying to carry out senior management positions in the UK's largest financial institutions.

Matthew's role at Newgate has been focused on assisting clients in the investment sector implement their three lines of defence compliance model utilising Newgate's Gateway compliance solution. As part of his tenure at Newgate, Matthew has played a key role in preparing clients for regulatory change and deploying Newgate's suite of products to help meet their obligations including AIFMD, GDPR, MIFID, SMCR, IFPR and most recently the Consumer Duty.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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