PR OFILE


advice on regulatory reporting is an important aspect of the offering. Priya Mehta, an associate director, heads up the regulatory reporting and consulting service at Buzzacott, taking the stream of new regulation and working out exactly what applies to their various FCA-registered clients. Despite being a trained auditor, Mehta’s role is now much more the role of a consultant; she synthesizes all of the various regulations and negotiates the rubric to work out how to actually deliver what is required. This is something that, as Jarman says, “the smaller funds aren’t necessarily geared up to provide.” Mehta describes her role as offering “a holistic approach in terms of taking away the whole reporting burden from the fund manager.”


Mehta began her career at the erstwhile Ernst and Young (now EY), where she was “pulled into regulations”, working with some of the largest UK hedge fund managers, and being seconded to Fidelity Investments. However, even with this experience at the heart of a heavily regulated industry, she did not expect quite the pace of regulatory upheaval that has been evident since the financial crisis spurred policymakers. “Literally every three months there’s something new that has to be read, has to be comprehended, and looking for areas where clients need advice,” she says.


Buzzacott’s development of the regulatory consultancy service began with a five-year joint venture with the IMS Group (now rebranded as Cordium). Now the regulatory consultancy service is provided in-house, again aimed at completely removing the reporting burden for managers. Mehta concentrates on understanding what the end product of regulatory duties will look like, so that firms can comply with the minimum input of time or effort. “They have lawyers and compliance consultants giving them advice,” says Mehta. “At the end of the day that advice has to materialize into actual deliverables. My focus tends to be on making that process of getting the deliverable completed as easy as possible for them.” This simplification of the reporting process for managers adds value; the arguments for and against increased regulation are manifold, but what cannot be denied either way is that reporting is a drain on time and resources. Anything to remove that burden is looked upon positively by firms.


Overlapping regimes


It has become a truism in the hedge fund sector that regulatory change is constant, leaving little room for standing still. “My landscape keeps changing every six months,” says Mehta. This shifting landscape makes the regulatory consulting business extremely valuable for clients – particularly start-ups who would struggle to hire in the expertise Buzzacott can provide. It is also another reason that concentrating on being the first point of contact is important: they have found


46


that even clients who at first only asked for advice on regulation on a short-term basis quickly come to rely on Buzzacott in determining the precise impacts of new rules, and in how to determine what numbers actually correspond to what the regulators need.


This is particularly tricky given the various overlapping systems. FCA-regulated firms are subject to multiple different regimes and standards, each with their own requirements and idiosyncrasies which need to be queried and resolved. This process is all the more arduous in this system of overlapping regimes; querying the FCA can take a relatively long time in itself, but, as Mehta says, “Especially with AIFMD and CRD IV, both these regulations, the reporting side of it has come directly from ESMA or the EBA. To that extent there has been very little filtration or dilution from the FCA, and that has made things even more difficult, because you won’t get an answer straightaway.” Even an FCA response can take one or two months – too long from the point of view of service providers like Buzzacott to leave clients waiting. Without access to the extensive network of partners, including other service providers and the Alternative Investment Management Association (AIMA), clients might struggle to resolve problems which can have thoroughgoing implications for business.


These implications can even threaten a smaller fund’s future if they are not properly taken into account. Buzzacott is finding that the exemptions and exclusions from regulation on which many smaller managers hope to rely are sometimes not as sound as might be thought. Mehta comments that “Even a medium-sized or sometimes a smaller hedge fund manager may need to at least draft and think about remuneration restrictions. You may not implement, but you can’t completely scope yourself out of it.” Keeping track of regulatory compliance is not something that can be ignored or assumed. In the short to medium term, having come out of the other side of the 22 July AIFMD applications deadline, Annex IV reporting from AIFMs is particularly in focus now. “It’s sad that the whole application process was daunting enough,” says Mehta, “and just as you think, that’s it now, all done, it’s actually the beginning.” Alongside that, the implications of MiFID II are going to affect quantitative and high-frequency traders in particular, with the definition of MiFID activities itself coming under scrutiny.


While the increase in the regulatory burden has inevitably increased the need for the services which firms like Buzzacott can offer, the converse is also true: there are fewer firms in need of these services because of the downturn. There are far fewer people willing to take the risk of spinning out from the larger investment banks, and those who might take that risk are faced with much larger costs. “If you look at our


sweet spot,” says Jarman, “historically it’s actually smaller start-ups. Over the years it has gone through phases. The start-up market isn’t as buoyant as it was 10 years ago, obviously. 10 years ago everyone was jumping ship as well as the US guys coming in.” This has had the inevitable knock-on effect on Buzzacott, along with every other service provider, but it also proves the logic of judicious positioning. The start-ups might no longer be present in such numbers, but US inbounds – a key focus of the Buzzacott hedge fund offering – are still going relatively strongly.


Structures under scrutiny Changes and challenges to tax structuring provide more examples of the way in which regulatory change might affect Buzzacott’s clients. The implications of the recent LLP consultation, for instance, have forced many managers to justify or change the relationship that they have with key individuals in the ‘partnership’. Jarman, for his part, has been involved in advising those with LLP structures since their beginnings. “From day one, many advisers speculated that it would only be a matter of time before the substance of LLP members would be called into question,” says Jarman. “Obviously it took a lot longer but the impact of the consultation is much more intrusive than the industry predicted. Consequently, many US and UK managers find themselves facing a significant increase in their social security tax burden.”


Negotiating these inconsistencies and difficulties can be tricky, and it often comes down to an issue of trust. “A lot of our clients trust our opinions,” says Jarman. “If we’re not willing to do it ourselves as a firm, we’re not going to push it on our clients. It’s always being aware of what the average appetite for risk is for our clients – which actually can vary.”


Staying on top of these developments is obviously demanding, but it is also to be expected in the day-to-day work of advising clients. However, along with changes to laws or acceptable structures, new technologies are also promising to disrupt the traditional accountancy role. Accountants have had to move towards IT solutions for “deliverables”, the actual numbers which are sent through to regulators and HMRC. The possibility of automation changes the role of the accountant somewhat, potentially changing some parts of the business completely, leading Buzzacott, for example, to embrace cloud accounting more and more, which is particularly appealing for a small business. Smaller businesses are “moving towards automated cash accounting” says Jarman. “The bookkeeper’s role might look very different in a few years’ time when bank transactions feed automatically into the accounts which feed automatically into the tax return. That’s the way the profession is going worldwide.” This move is not just blue-sky thinking either; New Zealand and Australia


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72