Asset managers wary of potential new regulatory reporting regime

Asset managers express concerns over additional regulatory reporting burdens in addition to current requirements for MiFID II and AIFMD.

Regulatory efforts to review the current regulatory reporting framework has European asset managers worried that it would result in potentially increased costs and a greater operational burden.

The next European Commission has highlighted there will be a review of certain aspects of regulations including MiFID II and AIFMD, particularly around the reporting process. However, one asset manager speaking at the InvestOps Europe conference raised concern that while the intent from the regulators is good, the outcome could be damaging.

“After the review, we may end up with additional elements of reporting, on top of the already heavy burden of AIFMD and MiFID transaction reporting to regulators,” said Stephane Janin, head of global regulatory development, AXA Investment Managers.

“In this case, we would prefer to keep the existing reporting regime. We are concerned that if it will lead to new fund reporting requirements, it will generate a significant amount of cost at a time where we want to keep fees low. It presents a significant danger.”

Patrick Pearson, head of financial market infrastructure and derivatives at the European Commission, highlighted that the body is underway with a project to map out how data is reported to each national regulatory authority, and identify ways to streamline the process and make it more efficient. However, there is some contention between the EU27 on what areas of the reporting process should be scrapped.

“Each regulator has a different perspective on reporting in order to carry out their statutory requirements. There has been difficulty in agreeing over what to scrap. We intend to have a serious discussion on this, which we hope will come to fruition,” said Pearson.

Asset managers are already gearing up for a new set of reporting rules on their securities finance transactions under SFTR, which will go live for them in October last year. They will also have to prepare for money market fund reporting as of Q1 2020.

As buy-side firms mature their reporting processes to cope with these regulations, many are now considering ditching the delegated reporting model, in which they outsource the process to their sell-side counterpart.

“As we look closer at our governance process and at the quality of data that is required, that delegated arrangement becomes less satisfactory. Institutions are open to taking this in-house as there are more middle-wear solutions available to meet your reporting obligations,” said Darryl Cornelius, head of European regulatory projects at State Street Global Advisors.