Our RQC Advisory regulatory platform allows firms to provide investment advice and arrange deals in their own name, as well as marketing of investment services and funds to professional clients. Robert Quinn Advisory LLP is regulated by the Financial Conduct Authority (no. 548030).
Our CFM Hosting regulatory platform hosts financial services firms who wish to manage EEA and non-EEA alternative investment funds, UCITS and managed accounts. If you want to undertake discretionary investment management or wish to outsource your requirements under AIFMD, our platform can offer a solution to your requirements. Capricorn Fund Managers Limited is regulated by the Financial Conduct Authority (no. 505252).
As Regulatory Hosting and Compliance experts, at RQC Group we understand the benefits of a strong partnership between a Regulatory Host and a Manager and what it can bring to a firm’s operations and also to the ability to attract institutional capital. Regulatory Hosts with strong executive teams and dedicated experienced staff like ourselves can identify and continually manage your regulatory risk - leaving you to focus on the markets.
A new client, a new market or a new fund can all trigger new regulatory issues and new headaches. Taking a less proactive approach may exacerbate that headache and put the trust between you and your clients at risk. As an experienced, well resourced, independent Regulatory Host, at RQC Group we offer the perfect remedy for these types of headaches.
First on the FCA’s list of concerns at principal firms was a lack of effective governance arrangements and deficient risk control frameworks. Citing SYSC 4.1., the FCA states that firms must have:
- Robust governance arrangements;
A clear, organisational structure with well defined, transparent and consistent lines of responsibility;
- Effective processes to identify, manage and monitor the risks it is or might be exposed to; and
- Internal control mechanisms, including sound administrative and accounting procedures and effective control and safeguard arrangements for information processing systems
The FCA has expressed significant concern over inadequate and ineffective compliance monitoring. Platforms should have full-time, dedicated senior compliance practitioners robustly reviewing all aspects of a manager’s business, as well as the ability to monitor daily, weekly and less frequent trading strategies.
These arrangements should also include the supervision of recorded lines and e-comms. All of which requires the platform to employ individuals that have significant experience on the buy side, as well as systems that can adapt to and monitor its universe. Having this in place means a manager will have a compliance monitoring programme tailored specifically to their business.
Higher risk areas should be flagged and monitored with an appropriate frequency. As the FCA noted, monthly trading checks on a manager that trades daily are not acceptable.
Another point of concern raised by the FCA in respect of Appointed Representative (AR) platforms, is that platforms need sufficient financial resources to meet their obligations and the obligations of their ARs. How that arrangement is structured may be a commercial matter for the platform and its managers, but the obligation remains with the regulated firm.
It is also clear that platforms need to be on top of their fixed overhead requirements, liquidity assessment and the limitations of professional indemnity insurance. In addition, the FCA has found that revenue from regulated activities conducted by the AR was not being correctly reported.
A knowledgeable regulatory host will ensure that appropriate mechanisms are in place from the outset of the engagement to mitigate the risk of incorrect reporting. Does the regulatory AIFM have the ability to monitor capital requirements and mechanisms to deploy more when needed, for example on the receipt of investor capital into the fund?
The FCA has focused on the identification and management of conflicts for the past few years and MiFID II highlighted that this trend will continue, regardless of the potential disruption new regulations may cause.
Successful platforms will recognise that their business model has inherent conflicts which need to be appropriately identified, managed and monitored.
In order to thrive, platforms will need a corporate governance structure that facilitates team decision-making and withstands institutional level challenges.
Consistent with the FCA’s comments on diversity, a senior management team or board of directors with a range of different financial services experience can be well-placed to identify the risks and conflicts that each manager poses. Senior individuals are a product of their experience and lessons learned earlier in their careers.
Focusing on and using that diversity of experience will provide a platform with the tools to succeed, as it will have the ability to identify and manage a much broader set of risks. Having a single stakeholder make decisions that focus only on profit margin or sales can lead to an ineffective control framework.