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Harnessing the growing compliance burden

Keeping up with reporting regulations and requirements has always been a challenge – but as the industry becomes more complex and regulators signal they will continue to increase enforcement, this challenge presents a more significant risk.


Keeping up with reporting regulations and requirements has always been a challenge – but as the industry becomes more complex and regulators signal they will continue to increase enforcement, this challenge presents a more significant risk. 

“Compliance officers and teams cannot afford to have an incomplete picture of their firm’s activities,” explains Amy Kadomatsu, CEO of COMPLY. ”Siloed data sets, which often live in various Excel spreadsheets or disparate platforms, present significant challenges because compliance personnel must review multiple reports to achieve a comprehensive view of potential red flags.”

Furthermore, compliance teams are facing two countervailing trends. While most of the market is dealing with pressures to reduce the costs of their operations due to a muted M&A and IPO environment, the SEC is ramping up its regulatory and enforcement activities in a way that indicates compliance teams should be increasing their spending.

For example, the recently approved amendments to Form PF will require that new, detailed information be filed regularly and, in some cases, more frequently for certain fund stress events. In addition to the Form PF rule adoption, many proposed rules in the last two years are likely to be approved in the coming months. One such proposal targeted at private funds would, if adopted, require private fund advisers to send quarterly statements, undergo an annual financial audit, obtain a fairness opinion for adviser-led secondary transactions and implement a host of new prohibitions on commonly used practices.

Even before these changes, regulatory and compliance requirements have increased significantly as the financial services industry adopts innovative technology and communication tools, placing additional burdens on compliance officers and teams.

“Clients still need risk management and compliance tools, but they may struggle with inefficiencies,” Kadomatsu notes, “They have placed additional emphasis on the need to streamline reporting and monitoring capabilities without sacrificing accuracy. In addition, access to capital, counterparty risks and the ability to evaluate vendor/provider risks have taken on heightened importance in the current environment.”

As the SEC and other regulators increase the compliance obligations for private equity firms, including Form PF reporting, ESG disclosures, cybersecurity, custody protocols, digital assets, vendor due diligence and know-your-customer requirements, Kadomatsu highlights that the need for a trusted and comprehensive compliance partner, like COMPLY, will grow exponentially. “We’ve also seen interest in and access to alternative assets become more mainstream, which will become a higher priority for the industry,” she adds.

The ongoing regulatory focus on private fund advisers, expanding global regulatory requirements to protect consumers and the rapid advancement of technology is creating a perfect growth environment for firms that provide comprehensive tech-based solutions and are supported by in-house regulatory experts like COMPLY.

This growth will be further fuelled by a growing appetite for private capital. Kadomatsu comments: “As individual and institutional investors both seek higher yields and technology lowers the barrier for individual participation, I expect there to be more interest and activity in the private asset sector.”

She also notes that what remains to be seen is how regulators will react to the increased demand for these sorts of vehicles from investors who have traditionally stayed on the side lines due to perceived risks and lack of qualifications.

>Amy Kadomatsu, chief executive officer, Comply – Amy Kadomatsu joined the company as chief operating officer in 2018 and was named president in December 2019 and subsequently chief executive officer in October 2020. Prior to joining the company, Ms Kadomatsu’s entrepreneurial spirit led her to co-found Instabot, an enterprise chatbot platform which allows marketers to engage and convert their users through conversational bots, and ROKO Labs, a product strategy and technology consultancy company which works with global companies and VC-backed startups to accelerate business and deliver award-winning experiences. She has also served as a managing director at S&P Global, a Fortune 500 company, and the chief product officer at the, a consortium of the largest financial services firms, including Goldman Sachs, Morgan Stanley and Citi, which was acquired by S&P Capital IQ for $300 million. Passionate about innovation and diversity, Ms Kadomatsu remains on the ROKO Labs’ board and serves as co-board chair for MOUSE, a national nonprofit bringing coding curriculum and STEM programs to underserved youth. She is also an advisor to several start-up companies and an angel investor with HBS NY Angels. Since 2006, she has sponsored a scholarship for a deserving rising college student who excels in a Japanese cultural activity in honor of her dance teacher. Ms Kadomatsu holds a Bachelor of Arts from Harvard University and a Masters of Business Administration from Harvard Business School. 

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