Carne Group Financial Services http://www.carnegroup.com "Carne is a leading global provider of independent fund governance and oversight solutions for investment funds of all kinds. Tue, 19 Jul 2016 12:55:18 +0000 en-GB hourly 1 Carne Cayman announces appointment of new Cayman Islands CEO and strengthening of director team http://www.carnegroup.com/carne-cayman-announces-appointment-of-new-cayman-islands-ceo-and-strengthening-of-director-team/ Wed, 13 Jul 2016 15:17:10 +0000 http://www.carnegroup.com/?p=6535 Read More →]]>

‘Carne Cayman announces appointment of new Cayman Islands CEO and strengthening of director team’

The Carne Group, global leader in independent governance for the asset management industry, has announced the appointment of John Ackerley as Chief Executive Officer of their Cayman Islands business.

Mr. Ackerley is a permanent resident of the Cayman Islands having moved there in 1998 and is recognized as a leading Cayman director to funds managed by global investment advisors. Mr. Ackerley joined Carne in the Cayman Islands in 2011 and has just celebrated his fifth year anniversary with the firm.

Mr. Ackerley said “The past five years have been a time of tremendous growth for Carne’s Cayman and global businesses and I am proud to have been involved with that growth. I look forward to continuing to work closely with both our North American team of directors and the wider group across the world to build on what we believe is the most compelling offering in the investment fund governance industry. Our team have shown time and again over the years why we are trusted to provide reassurance to investors worldwide.”

Managing Director of the Cayman office, Peter Heaps, commented “John’s demonstrable ability in providing outstanding leadership has allowed us to strengthen our management team. His appointment as Chief Executive Officer signifies our intention to build upon our success to date and John is well equipped to lead the Cayman team into the next evolution of our business.”

Mr. John Donohoe, Global CEO of the Carne Group, commented “We are delighted to be able to recognize the work John has done since he joined us five years ago and we look forward to continued growth and success, in Cayman and globally. We continue to focus on building our team to deliver on our commitment to progressive governance and enhanced levels of stakeholder reassurance.”

Carne also announced today the strengthening of their team in Cayman with the addition of Mr. Julian Fletcher as an independent director in the Cayman office. Mr. Fletcher was previously a partner in the Investment Funds group at the international law firm Mourant Ozannes, based in the Cayman Islands and prior to that practiced with Shearman & Sterling LLP in New York and Toronto. Mr. Fletcher has over 17 years of experience as a practicing attorney and is admitted in New York, England, the British Virgin Islands and the Cayman Islands.

Commenting on Mr. Fletcher’s addition to the team Mr. Ackerley stated “We are delighted to have another outstanding addition to the team and more so someone of Julian’s caliber and standing in the legal community. This demonstrates our continued commitment to both serving the needs of investors by providing directors with high level expertise and to the continued growth of our Cayman team.”  Mr. Julian Fletcher’s Bio.

“I am delighted to join Carne and their global team of highly experienced industry professionals in providing elevated levels of governance to investment structures for managers globally. Carne’s reputation and ability to deliver global solutions to investment managers were key factors that led me to join the team in Cayman as I embark upon this new chapter in my career.” Commented Mr. Fletcher.

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Carne is chosen to provide independent management company services to Luxembourg domiciled DIAM UCITS fund http://www.carnegroup.com/carne-is-chosen-to-provide-independent-management-company-services-to-luxembourg-domiciled-diam-ucits-fund/ Tue, 05 Jul 2016 15:37:35 +0000 http://www.carnegroup.com/?p=6514 Read More →]]> Carne is chosen to provide independent management company services to Luxembourg domiciled DIAM UCITS fund.

LUXEMBOURG, July 05th 2016:

DIAM International, the London arm of Asian asset manager DIAM Co., Ltd., with over $148bn* assets under management globally, has partnered with Carne’s independent management company to support UCITS umbrella fund in Luxembourg, the DIAM UCITS Fund.

Carne is an established global provider of independent management company services with a decade long track record of working with UCITS funds in Luxembourg. Carne provides substance and independent risk management services to funds worth over EUR 20 billion in assets.

The DIAM Group is jointly owned by Mizuho Financial Group and the Dai-ichi Life Insurance Company. The DIAM UCITS Fund, the DIAM Japan Stock Pick Concentrated Equity Portfolio is DIAM International’s first UCITS-compliant fund, with plans to launch a series of UCITS funds over the coming months.

DIAM International has been servicing clients in the EMEA region for over 30 years and offers specialist Japanese and Asian investment strategies and liquidity solutions to pension funds, financial institutions, endowments and other large institutional and corporate investors in the EMEA region.

Martin Pattinson, Head of Relationship Management, DIAM International commented: “We partnered with Carne as our governance partner because of their recognised expertise in facilitating the launch of Luxembourg UCITS funds and the quality of the ongoing support services they offer. Carne has a first class team of professionals in place in Luxembourg, providing expert governance and oversight services.”

Steve Bernat, CEO of Carne in Luxembourg, said: “Carne has a global footprint, with offices in eight key locations around the world. Consequently, we can advise our clients on both local and global solutions for their governance needs. As independent oversight specialists, we are very pleased to have been chosen by DIAM to meet their requirements.”

Carne’s management company in Luxembourg is available for both UCITS and AIF funds. Carne provides clients with ongoing support for both management company-hosted and stand alone funds.

* As at 31st March 2016

Disclaimer:

DIAM International is authorised and regulated by the Financial Conduct Authority. This article is targeted at Professional Investors only.

Background on the firm:

DIAM International is the London arm of DIAM Co., Ltd, an Asian asset manager headquartered in Tokyo with over $148 billion assets under management* globally. DIAM is one of the largest Japanese asset managers of Japanese institutional assets, and also provides Japanese and Asian investment strategies to some of the world’s largest institutional and corporate investors. DIAM is a joint-venture between its two parent companies, leading global bank Mizuho Financial Group and the Dai-ichi Life Insurance Company Ltd, Japan’s oldest insurance company. 

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Des Fullam, Director in Dublin makes a valuable contribution to a recent ‘Custody and Fund Services Roundtable’ published in the Global Investor Magazine. http://www.carnegroup.com/des-fullam-director-in-dublin-makes-a-value-contribution-to-a-recent-custody-and-fund-services-roundtable-published-in-the-global-investor-magazine/ Fri, 01 Jul 2016 09:30:15 +0000 http://www.carnegroup.com/?p=6499 GIJune2016DublinRT

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Shock Brexit Result Leads to Uncertainty for Fund Managers and Investors in Funds http://www.carnegroup.com/shock-brexit-result-leads-to-uncertainty-for-fund-managers-and-investors-in-funds/ Tue, 28 Jun 2016 10:15:09 +0000 http://www.carnegroup.com/?p=6456 Read More →]]> ‘Shock Brexit Result Leads to Uncertainty for Fund Managers and Investors in Funds’

In the wake of the UK’s shock decision to leave the EU there is now huge uncertainty for UK fund managers looking to sell products in the European Economic Union (EEA) and for investors in existing and future funds.

Whilst politicians grapple with the impact of the vote it is vital that UK investment managers move swiftly to reassure their investors that they have a solution for a post-‘Brexit’ world.

Former Commissioner for Financial Stability, Financial Services and Capital Markets Union, Lord Hill – speaking on passporting opportunities post ‘Brexit’ – noted that ‘most approaches that offer access come with free movement of people and I can’t see that flying given the weight of immigration as an issue in the referendum’.

Uncertainty for Investors
If the outlook for managers is uncertain then so too is the outlook for European consumers of UK-managed investment funds, currently distributed under the UCITS or AIFM passporting regimes.

Many investors invested on the basis of its status as a UCITS or an EEA AIF fund. Such status may be a pre-requisite for investment or for investors such as insurance companies as it has the potential to offer a better capital treatment when compared to non-EEA product.

Whilst the UK is likely to remain as a member of the Union for at least the next 2 years, investors make investment decisions on longer time horizons. So will an investor who has purchased a UCITS or an AIF be happy to be a shareholder in a Non-EEA AIF in 3 years time?

UK managers need to move now to reassure and comfort existing and future investors who may now be asking questions such as how ‘future proofed’ is this fund, will there be further costs to me from this fund or will there be tax impacts to come as a result of the change?

Such uncertainty might delay investor decisions as a result of their need to feel that their investments are secured for the future and costs minimised as the ‘Brexit’ fall-out continues.

In addition to impacting funds domiciled in the UK, many UK investment managers will manage AIFs and UCITS domiciled in other EEA jurisdictions such as Ireland and Luxembourg pursuant to the relevant UCITS and AIFM passporting regimes. In a post “Brexit” scenario these management company passports may no longer be available to UK managers and a restructuring of these arrangements may be required.

As well as investors, distributors too will now be assessing the impact on funds as a result of the referendum and managers need to be ready and able to answer those questions.

Options for UK Managers
The world will not stop while the UK negotiates its exit from the European Union or reconsiders its decision to exit – so UK managers now need to consider their options for continued access to Europe and be well placed to deal with questions from existing and prospective investors who have the option to purchase competing products domiciled or managed in the remaining EEA states.

One option that UK managers could choose is to set up a permanent presence in the EEA. However this option comes with considerable cost implications and involves ‘putting boots on the ground’ (acquiring office space and seeking additional regulatory approvals in one of the remaining 27 member states) most likely in Ireland or Luxembourg. While the regulatory requirements today may well resemble those of the FCA today there are no guarantees that they will in 5 years time.

Each Way Bet
An alternative solution is to partner with a UCITS and/or AIFM manager domiciled in one of the remaining member states and operate in an investment management capacity under the manager’s UCITS/AIFM permissions.

Under this scenario the Fund simply appoints an EEA manager to act as the AIFM or UCITS manager and the manager in turn delegates investment management to the UK entity.

This is a structure that is popular with investment managers based outside the EEA in jurisdictions such as the US, Canada, Hong Kong and Australia. If the UK negotiates passport access to the EEA in due course then this structure can remain or be adapted but it will have been achieved at relatively little cost and time.

How Carne Can Help UK Managers to Manage Investor Uncertainty
Carne has vast experience in dealing with these issues and provides our clients with the strength, trust and reassurance that their needs are met even in the most challenging of times. We stand ready to provide advice to investment managers considering their options.

For example, Carne is the only company with established third-party UCITS and AIFM management companies in both Ireland and Luxembourg and can offer ‘plug and play’ solutions where the portfolio management function can be delegated to the UK manager.

Carne is a strong partner with 70+ staff in Luxembourg and Dublin dedicated to providing management company solutions and can assist with the set up of your own management company in both Luxembourg and Dublin and provide directors and designated directors for the substance you would need.

We are trusted to oversee funds for many of the world’s leading investment managers (including a number currently domiciled in the UK) meaning that we have the experience to support UK managers through these uncertain times.

With proper planning and support the future need not be as unclear as it currently seems. Working with the right partner it might even create hitherto unforeseen opportunities.

Any member of our team in Carne is happy to take a call or sit down with you and answer any questions you may have about how to manage the current uncertainty and build a more secure future for your investors.

There are no concrete answers to all of the uncertainties caused by the ‘Brexit’ result but Carne can help smooth the way when it comes to managers having conversations with existing (or new) investors in existing funds or new investors for new funds.

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Carne embraces an innovative future for our clients with an important new appointment http://www.carnegroup.com/carne-embraces-an-innovative-future-for-our-clients-with-an-important-new-appointment/ Thu, 05 May 2016 13:44:24 +0000 http://www.carnegroup.com/?p=6387 Read More →]]> Carne welcomes Pascal Dufour as Global Chief Technology and Innovation Officer. Pascal will have responsibility for Carne’s rapidly evolving technology platform and for innovating new and exciting products designed to meet the growing needs of our global asset management clients. Through this appointment Carne continues our commitment to the highest standards of service and our values of Trust, Strength and Reassurance for our clients.

Pascal is yet another example of Carne attracting the best of senior talent in the industry for our growing team of global experts. Pascal joins from Lemanik Asset Management where he was Managing Director and Member of the Executive Committee. Prior to that he held Management positions in Multifonds and RBC where he focused on product strategy, processes and technology.

John Donohoe, CEO of Carne Group, said: “Pascal and Carne’s mission is to assist our clients with their on-going challenges including increasing global distribution, extending their product ranges into higher margin alternative products and cost effectiveness. In a rapidly evolving asset management industry, Pascal’s experience will be invaluable.”

Pascal Dufour added: “I’m so pleased to join the only Fund Governance provider with a truly global footprint. I firmly believe that only providers who deliver multi-asset and multi-jurisdictional solutions to the asset management community will be able to succeed in today’s global business.”

Carne was established in 2004 and is the pre-eminent provider of independent fund governance and Management Company solutions. Carne employs 100 people worldwide, serving 400 clients.

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Gender diversity on fund boards – addressing the gap http://www.carnegroup.com/gender-diversity-on-fund-boards-addressing-the-gap/ Wed, 25 Nov 2015 14:32:34 +0000 http://www.carnegroup.com/?p=1773 Read More →]]> The issue of a lack of female directors on corporate boards has risen up the regulatory and political agenda recently, and managers of public money in particular are focusing on the issue of diversity on fund boards. A recent article published by FT Ignites has pointed out that women currently hold just 10% of the directorships on the boards of Europe’s 30 largest cross-border funds (this figure rises to 13% when the directors of management companies are included).

Analysis by BoardIQ of 1,098 directors on 145 fund boards found only 20% of boards had a female director. Carne’s own experience of board composition broadly supports this finding.

To continue the debate, Carne recently hosted an interactive and lively seminar in front of a full house in Luxembourg, where a panel of senior executives addressed some of the core issues facing fund boards and their stakeholders when it comes to tackling the widening diversity gap between the corporate boardroom and the fund sector.

Initiatives to increase female board representation are varied, including voluntary targets, quotas, and more corporate transparency. Gender diversity also varies widely from jurisdiction to jurisdiction, with the Scandinavian countries leading the way. In some important offshore fund jurisdictions data is still currently unavailable and it remains difficult to build an accurate overall picture of gender diversity on offshore or cross-border fund boards and management company boards.

Barry O’Dwyer, Head of EMEA Funds Governance at BlackRock, told the Carne seminar that “a fund is a product with a fully delegated operating model and is therefore not comparable with a corporate trading entity. Diversity in a fund board context is more about competencies and skills than just gender. From a pure governance point of view, what is needed for a fund board is a structured analysis of the competencies and skills required for that particular product. Diversity of thought is paramount for an effective fund board.”

It was generally felt that expanding the size of the board to accommodate female directors smacks of tokenism and does not help to improve good governance. Instead, turnover of directors and succession planning should be used as tools to increase diversity.

Susanne Van Dootingh, Head of European Regulatory Strategy at State Street, said that it was important for fund management organisations to address gender imbalances, particularly at senior levels: “It will take time to achieve, but if you don’t actively promote it, it won’t happen. Internal talent is key, as we have a fiduciary duty to ensure we get the best candidates on boards. If we can increase the number of women in the pool of potential directors, we will go some way to fixing board imbalances.”

What are the advantages of a more diverse board? In short, larger investment managers and investors regularly note that a more diverse board is a more effective board, encouraging more debate and helping to strengthen corporate governance.

“Mixed boards work better,” ALFI Chairman and Conducting Officer at Franklin Templeton, Denise Voss, told the seminar in Luxembourg. “It is hard to prove quantitatively, but they contribute to a more balanced, mature discussion.”

The fact remains, however, that women are underrepresented on fund boards, despite a more diverse gender composition within the asset management industry overall. This is not, sadly, reflected at senior levels.

Tracey McDermott, Director of Carne and Independent Fund Director said: “It seems that no-one here is a fan of quotas, but there is an issue, or questions need to be asked, when the graduate hiring take-on is split 50/50 but then the percentage of women in the workforce starts to taper off as we move through the echelons of the organisation to senior management and executive level.”

Fewer women are attaining the most senior executive roles and it was felt that asset managers need to review their own talent pipelines as not enough women are reaching or staying with the company long enough to reach, top level management positions.

“Women are technically competent, but the asset management industry has a strong male bias,” said Kerry Nichol, Asset Management Partner with Ernst & Young in Luxembourg. “We need CEO buy-in here. The status quo is changing, for example with more women on the boards of management companies, but women need to make more noise if they are to get noticed at senior levels within the industry.”

Rita Knott, Director of the Female Board Pool Initiative for Luxembourg and Germany, added: “Directors on existing fund boards can help to be agents of change within their organisations, but more women must put their hands up for these roles. Women need to move away from this ‘imposter syndrome’ and aspire to more senior stretch roles within organisations in order to enter the pool of potential directors.”

Unconscious bias also prevails in the appointment process for fund directors, where directors of a similar background and personality to senior executives will be chosen for board positions. Invariably, most if not all will be male. The fact that one woman might be available on a menu of 10 potential directors already stacks the odds.

This is not to argue for positive discrimination, but to point out that CEOs and product development managers do need to be aware that their choices can be influenced by other factors than just the quest for the best skill set on a board. It was generally felt that most are indeed aware, and that perhaps the next step is hold them accountable – this is where the contentious issue of quotas comes to the fore. What was universally acknowledged however was that while female directors should be chosen first and foremost for their ability as a director and the skillset that they can bring to the board, the need to step back and objectively address the current make-up of boards needs to be addressed and that the advantages of board diversity cannot be ignored.

For further information, please contact Tracey McDemott or call Carne +352 2673 2333.

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Central Bank of Ireland Report on Anti-Money Laundering/Countering the Financing of Terrorism and Financial Sanctions Compliance in the Irish Funds Sector http://www.carnegroup.com/central-bank-of-ireland-report-on-anti-money-launderingcountering-the-financing-of-terrorism-and-financial-sanctions-compliance-in-the-irish-funds-sector/ Fri, 20 Nov 2015 14:51:19 +0000 http://www.carnegroup.com/?p=1770 Read More →]]> On 18th November 2015, the Central Bank of Ireland (the “Central Bank”) published a report on Anti-Money Laundering/Countering the Financing of Terrorism (“AML /CFT”) compliance following its AML themed inspections in the Irish funds sector. The Report sets out the expectations of the Central Bank in relation to AML/CFT and Financial Sanctions (“FS”) for Funds and Fund Service Providers in Ireland.

The Report is based on on-site inspections carried out by the Central Bank over the course of 2014, supplemented by Risk Evaluation Questionnaires completed by Funds and Fund Service Providers and submitted to the Central Bank for assessment.

Head of Anti-Money Laundering at the Central Bank Domhnall Cullinan said:

Latest figures show that Irish domiciled funds have a net asset value of almost €1.8 trillion, making the Irish funds industry a significant part of the Financial Services sector. Any business with such a large variety and amount of customers, high values and volumes of transactions and a cross border nature is attractive for money laundering/terrorist financing.

The Central Bank acknowledges that many firms had responded positively to previous Central Bank communications but, as the report identifies, more work is required by firms in Ireland to effectively manage money laundering/terrorist financing risk. The Central Bank expects all Funds and Fund Service Providers to carefully consider the issues raised in the report, and to use the report to inform the development of their AML/CFT and FS frameworks.

Following the publication of this report we recommend that Funds and Fund Service Providers carry out a gap analysis between their existing practices, policies and procedures and the recommendations of the Central Bank.

Outlined below are some of the key observations that may impact Funds and/or Fund Service Providers.

Risk Assessment

An assessment of Money Laundering/Terrorist Financing risk exposure should be carried out and include all relevant risk categories (such as country/geographic risk, industry risk, customer risk, product risk and channel/distribution risk). The risk assessment should be reviewed and approved periodically (at a minimum annually). Appropriate controls should be put in place to mitigate any risks identified.

Monitoring of Service Providers

While a Firm may outsource certain parts of its AML/CFT activities, the Firm remains ultimately responsible for ensuring compliance with the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 (“CJA 2010”). Oversight should include a review of the service provider’s full policies and procedures and appropriate assurance testing of any AML/CFT functions performed. The service provider should provide the Fund Board with quantitative and qualitative data including

reports on the functions carried out and regular management information.

Investor On-Boarding

The Central Bank identified a number of issues relating to investor on-boarding including:

  • Appropriate evidence to support the application of SCDD not being retained on file.
  • Fund Boards not retaining adequate control over approval of new PEP relationships.
  • Deficiencies in the on-boarding process of PEPs, including the failure to sufficiently identify, verify and document Source of Funds and Source of Wealth.

 Ongoing Monitoring of Customers

Section 54(3)(c) of the CJA 2010, requires that designated persons adopt measures to keep documents and information relating to customers up-to-date. A risk-based approach must be documented and adopted to define refresh cycles to determine the frequency at which Customer Due Diligence (“CDD”) information must be renewed.

Discontinuance of a business relationship

The Central Bank expects that policies and procedures set out the circumstances under which a Fund would discontinue an existing business relationship due to an investor’s failure to provide the required or updated CDD documentation or information, within the required timeframe. The report makes a clear distinction between Section 33(8)(a) (ceasing the provision of services) and Section Section 33(8)(b) (discontinuation of a business relationship) of the CJA 2010.

Reliance on Third Parties to Undertake Due Diligence

When placing reliance on third parties to undertake due diligence, policies and procedures should set out an approach with regard to the identification, assessment, selection and monitoring of third party relationships, including the frequency of testing of activity performed by such third parties. Where routinely relying on checks carried out by a third party, regular assurance testing should be conducted to ensure data can be retrieved quickly and without undue delay and that the quality of the underlying documents obtained is sufficient and that there are no gaps in customer records which cannot be readily explained.

AML/CFT and Financial Sanctions Systems

The Report refers firms to the “Report on AML/CFT and FS in the Irish Banking Sector” which states when utilising systems in certain areas to facilitate the management and monitoring of Money Laundering/Terrorist Financing risks and Financial Sanctions, the Central Bank expects that firms to conduct regular IT assurance testing to include general controls on automated AML/CFT/FS systems, screening and filtering systems and data sources used to feed AML/CFT and FS systems. It further states that procedures commonly fail to contain sufficient detail with regard to the grounds for discounting a potential FS match and the level of investigation required for each match.

How Carne can help

The report states the MLRO is responsible for ensuring that measures to combat Money Laundering/Terrorist Financing within the firm are effective. The MLRO should have sufficient AML/CFT knowledge and sufficient seniority, to ensure the independence and autonomy of the role is maintained regardless of whether the MLRO also acts as PCF 15, Head of Compliance with responsibility for Anti-Money Laundering and Counter Terrorist Financing Legislation.

Carne has a team of professionals that hold the position of Money Laundering Reporting Officer (MLRO) for a large number of funds serviced by the leading administrators in the Irish market place. Where acting as MLRO, Carne performs a number of key tasks on behalf of the Fund including the following:

  • Preparing MLRO reports for each board meeting outlining details of any suspicious transactions, stopped accounts, regulatory changes etc.
  • Working with the Fund to ensure its AML framework and procedures are aligned with legislative requirements and Central Bank expectations.
  • Assistance with drafting an AML Policy for the Fund and coordinating its annual review.
  • Completing an annual on-site visit to the Administrator to review their AML policies & procedures and review a sample of investor files. A report is produced for the Board highlighting any issues identified.
  • Keeping the Board informed of legislative/regulatory updates relating to AML/CFT.
  • Delivery of annual AML training to the Fund Board.
  • Providing the liaison between the Company and the Irish Police and the Irish Revenue Commissioners, including and concerning the submission of any suspicious activity report where required.

Below is a link to the full report.

http://www.centralbank.ie/regulation/processes/anti-money-laundering/Documents/Report%20on%20Anti%20Money%20Laundering%20-%20Nov%202015.pdf

For further information on the above or the Carne MLRO and AML Compliance Services, please contact Dave Burns: dave.burns@carnegroup.com, TEL: +353 1 489 6829.

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Why fund boards must develop a response to cyber security and financial crime threats http://www.carnegroup.com/why-fund-boards-must-develop-a-response-to-cyber-security-and-financial-crime-threats/ Tue, 13 Oct 2015 09:36:51 +0000 http://www.carnegroup.com/?p=1764 Read More →]]> A recent SEC action has highlighted how concerned regulators have become about data intrusion risks in the asset management sector.

By Chris Day, Director, Carne Group

Last month the Securities and Exchange Commission settled charges with an investment adviser that the regulator alleged had failed in its duty to protect client data from hackers, in this case thought to be based in China. The SEC claimed the St Louis-based firm did not conduct regular security assessments, failed to encrypt sensitive data and did not install a firewall. Consequently, the hackers were able to access details of more than 100,000 clients.

This marks the first enforcement action of its kind for the SEC. Although no actual direct financial loss seems to have been caused, the fund manager settled charges with a fine of US$75,000. If any loss of money had been inflicted on the firm or its clients by hackers, the fine could have been far higher.

In addition, on 15 September, the SEC issued an alert which outlined the steps it would be taking in its examinations to assess cyber security risks and preparedness in its security industries inspections. It includes a governance and risk assessment, and indicates that the SEC will now be focusing on proper implementation and operation of cyber security policies and procedures. It has made it clear that this will be one of its key inspection priorities.

According to Marshall Sprung, co-chief of the SEC Enforcement Division’s Asset Management Unit, “Firms must adopt written policies to protect their clients’ private information and they need to anticipate potential cybersecurity events and have clear procedures in place rather than waiting to react once a breach occurs.”

The Hedge Fund Standards Board has recently published added a cyber security memo to its Toolbox for fund managers, which highlights some of the quick win solutions that will enable asset management firms to speedily implement solid security solutions. In addition, AIMA has published practical guidance for hedge fund firms, setting out practical steps for defending member firms against cyber security threats. It emphasises that boards have an important role to play as stakeholders in this process, including ensuring that cyber security risk management is tabled for discussion as a board agenda item.

Regulatory scrutiny

Regulators are increasingly focusing on the readiness of asset management firms to resist cyber security threats. The SEC’s Office of Compliance Inspections and Examinations published its own guidance for asset managers in this area this month.

Other regulators are also developing their own requirements for cyber security. For example, the Central Bank of Ireland has stressed that fund boards should have proper oversight of cyber security readiness and that this should not be left to the purview of the IT department. Effective corporate governance, it argues, has a role to play in the development of robust cyber security procedures. The Central Bank has also said that where there is non-compliance with regulatory requirements, it will have regard to its cyber security recommendations when exercising its regulatory and enforcement powers.

In the Cayman Islands, the Information & Communications Industry Technology Authority has been working with other Cayman Islands government agencies on a threat and infrastructure assessment that has been extended to a series of reviews, in which representatives of the financial sector have been involved and which will likely result in action items to be published next year.

The role of fund boards

Fund boards and their directors should be aware of the current cyber security and financial crime risks they currently face, and their own responsibilities in the eyes of regulators. Directors can play a proactive role in helping funds to not only meet minimum regulatory requirements, but also build an enhanced security oversight function, with a better risk management and assessment regime in place. This will require regular updating as cyber security risks will evolve on a continuous basis.

Boards should consider including a policy document that lays out what the fund’s board, service providers and investment manager should be seeking to achieve in terms of expected security standards. A proportionate response may be needed for managers with smaller funds, but all boards should be visiting this issue as a matter of urgency.

It is important that fund directors remain properly informed about the levels of security pertaining to the fund delegate level, including the investment manager, and that this is revisited on a regular basis as an agenda item.

Carne and CalQRisk have developed a risk application designed for fund boards that are interested in the building an improved risk oversight framework, focused on cyber security and financial crime issues. This application covers both the fund entity and its delegates, and is based on ISO 31000 Risk Management standards and ISO 27001/2 Information Security and Technology standards. Carne CalQRisk should help funds to produce a comprehensive gap analysis, measurable against regulators’ requirements. The application can also provide fund boards with continuous visibility on the status of risk assessment and management processes for each fund delegate.

For more information, please contact Chris Day on +44 (0) 207 936 9692 or email chris.day@carnegroup.com

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Carne Group and CalQRisk launch cybersecurity and financial crime solution for investment fund boards http://www.carnegroup.com/carne-group-and-calqrisk-launch-cybersecurity-and-financial-crime-solution-for-investment-fund-boards/ Wed, 23 Sep 2015 15:19:42 +0000 http://www.carnegroup.com/?p=1757 Read More →]]> Carne Group, one of the leading global providers of governance and distribution support services for asset managers, and CalQRisk, a developer of enterprise-wide risk management technology solutions, are pleased to announce the launch of a technology-driven solution for fund boards. This new Carne CalQRisk product has been tailored to the requirements of fund boards and fund directors facing increased risks and responsibilities in the areas of cybersecurity and financial crime.

Carne CalQRisk aims to provide fund directors with a comprehensive and holistic assessment of cybersecurity and financial crime risks for the fund entity and its delegates. This includes a risk management framework for fund directors to assist in identifying where gaps exist in relation to policies, procedures, systems and controls, and which specifies the necessary actions required to close those gaps.

The process is based on the ISO 31000 Risk Management standard and ISO 27001/2 Information Security and Technology standards. It includes access to a real-time register, evidencing the controls in place at the fund and within each delegate, as well as recommended additional mitigation options.

Boards of directors will also be able to see an assessment of the compliance position of the fund and its delegates against international standards of best practice, as well as a single view on cybersecurity and financial crime risks.

Said John Donohoe, CEO of Carne Group: “The increasing complexity of the challenge facing fund boards, coupled with the delegated operational model, mean that the traditional ‘thumbs up’ briefing on the issue from each of the delegates may fall short of what is actually required. This could still leave funds significantly exposed to loss of client monies, potential reputational damage, and increased regulatory scrutiny.”

Paul O’Brien, Managing Director of CalQRisk, added: “This new offering will help funds to establish an over-arching framework that will facilitate a comprehensive gap analysis, measurable against regulators’ requirements. It includes those recently highlighted by the Central Bank of Ireland’s thematic questionnaire and its recent Dear CEO letter on fund frauds. Fund directors will be able to use this to provide continuous visibility on the status of risk assessment and management processes for each delegate. Boards will need this assurance that all identified risks are being addressed at the delegate level.”

The Carne CalQRisk offering is the result of a joint exercise to develop a solution that will bring real value to fund boards. CalQRisk has already developed successful risk management and reporting solutions within the wider financial services and other sectors, including, pension and investment, credit unions, healthcare and the aviation industry.

For more information, please contact John Skelly – john.skelly@carnegroup.com or call +353 1 489 6806

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New opportunities for funds in the Channel Islands http://www.carnegroup.com/new-opportunities-for-funds-in-the-channel-islands/ Wed, 12 Aug 2015 15:24:39 +0000 http://www.carnegroup.com/?p=1754 Read More →]]> By Mark Hodgson, Managing Director, Carne (Channel Islands)

July has been a busy month on the legislative and regulatory front for funds in the Channel Islands. In particular, we would like to draw attention to new legislation that could prove of benefit to UK private equity and real estate funds, and the recent advice to the European Commission from ESMA (European Securities and Markets Authority) which has considerable implications for the passporting of funds from Jersey and Guernsey under the European Union’s AIFM Directive.

ESMA

On 30 July ESMA published advice on the passporting of non-EU AIFMs and AIFs and an opinion on the functioning of the National Private Placement Regime (NPPR). Critically the Advice considers whether the EU passport granted to EU AIFs and AIFMs should be extended to non-EU entities currently using the NPPR regime. The announcements followed a country-by-country assessment, with Jersey and Guernsey named as the only jurisdictions where ESMA feels there are currently no obstacles to the extension of the passport (Switzerland awaits the enactment of pending legislation to remove further obstacles).

The Advice and Opinion are now before the European Commission, the European Parliament and Council. At the moment a decision has yet to be made on whether the AIFMD passport will be extended to Jersey and Guernsey funds. While other jurisdictions are still being reviewed, from a current practical standpoint, Jersey and Guernsey now offer the most likely option for a non-EU AIFMD solution that could bring with it a passport for AIFs.

Jersey General Partnerships

New legislation enacted by Jersey on 14 July allows English or Scottish Limited Partnerships that have a Jersey-based General Partner (GP) to seek authorisation by the Jersey Financial Services Commission (JFSC). This will help them to demonstrate that they exist as established, Jersey-regulated entities, and should therefore be treated as non-EU AlFs for the purposes of managing AIFMD compliance costs and operational requirements.

Jersey’s new Alternative Investment Funds (Amendment of Regulations No 2) (Jersey) Order 2015 broadens the range of entities that can seek authorisation as AIFs. This is an important step, as it means limited partnerships can avoid being unregulated if they nominate Jersey as their principal place of business and acquire further substance as regulated AIFs in Jersey.

Under Article 37 of the AIFMD non-EU AIFs are required to seek full authorisation from a future date, which has yet to be specified by ESMA, regardless of whether the AIF has been marketed within the EEA. For many limited partnerships in Jersey, the operational and compliance burden could be considerable.

Guidance from the UK regulator, the FCA, has demonstrated that a UK AIF structured as a limited partnership and not regulated by the FCA, could make use of a Jersey GP, and use Jersey as its principal place of business. Local regulation by the Jersey Financial Services Commission (JFSC) of the GP will provide yet further non-EEA substance for the AIF, particularly if some of its LPs are located in other EEA member states than the UK.

How Carne can help

● Carne has a regulated, AIFMD-compliant management company established in Jersey, fully regulated by the JFSC.
● We are able to provide the necessary local substance and oversight for English LPs seeking the additional regulatory traction of a non-EU presence in the Channel Islands by offering an existing regulated Jersey company as general partner.
● This includes, where required, locally resident independent directors with lengthy experience in the alternative funds industry, and additional independent risk management and compliance capabilities.
● Our solution provides a combination of expertise and substance that will help limited partnerships to meet their AIFMD obligations as Jersey-regulated entities while preserving any non-EEA status that is required.

For further information, please contact:

Mark Hodgson
T: +44 (0) 1534 511786
E: mark.hodgson@carnegroup.com

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