The document summarizes new hedge fund regulations in Singapore that will require larger hedge funds to register. Specifically, hedge funds above S$250 million will be classified as Fund Management Companies (FMCs) and will need a license, facing enhanced requirements around independent custody of assets, independent valuation, and undergoing independent annual audits. However, the article argues these new rules do not go far enough and raise several questions. It suggests the requirements have vague definitions and could still allow self-custody and self-valuation practices. Overall, the regulatory changes are a step forward but the Singapore authority has more progress to make in implementing true oversight.
Business Development and Investing in Kazakhstan, Vienna, Austria, on April 19, 2012
Lawyers of “Linkage&Mind” Law firm: Ms. Aizhan Karzhaubayeva and Ms. Aigerim Seifullina will take part in Business forum on “Business Development and Investing in Kazakhstan” speaking on the topic: “M&A deals in Kazakhstan”, which takes place in Vienna (Austria) on April 19, 2012 and organized by the Commercial Section of the Austrian Embassy in Kazakhstan.
Business Development and Investing in Kazakhstan, Vienna, Austria, on April 19, 2012
Lawyers of “Linkage&Mind” Law firm: Ms. Aizhan Karzhaubayeva and Ms. Aigerim Seifullina will take part in Business forum on “Business Development and Investing in Kazakhstan” speaking on the topic: “M&A deals in Kazakhstan”, which takes place in Vienna (Austria) on April 19, 2012 and organized by the Commercial Section of the Austrian Embassy in Kazakhstan.
An Analysis of the Limitations of Utilizing the Development Method for Projec...kylemrotek
Abstract: The rise and fall of subprime mortgage securitizations contributed in part to the ensuing credit crisis
and financial crisis of 2008. Some participants in the subprime-mortgage-backed securities market relied at least
in part on analyses grounded in the loss development factor (LDF) method, and many did not conduct their own
credit analyses, relying instead on the work of others such as securities brokers and rating agencies. In some
cases, the parties providing these analyses may have lacked the independence, or at least the appearance of it, that
would have likely better served the market.
A new appreciation for the value of independent analysis is clearly a silver lining and an important lesson to be
taken from the crisis. Actuaries are well positioned to lend assistance to the endeavor.
Mortgages are long-duration assets and, similarly, mortgage credit losses are relatively long-tailed. As casualty
actuaries are aware, the LDF method has inherent limitations associated with immature development. The
authors in this paper will cite examples of parties relying on the LDF or similar methods for projecting subprime
mortgage credit losses, highlight the limitations of relying exclusively on such methods for projecting subprime
mortgage credit performance, and conclude by offering general enhancements for an improved approach that
considers the underwriting characteristics of the underlying loans as well as economic factors.
Future lending strategies will need to account for CRE risks that result from both an expanding economy and recession. View the 5 biggest CRE challenges according to the “2017 Industry Insights: Perspectives from the Front Line” by RMA’s Credit Risk Council
Grant Thornton - IFRS News Special Edition Grant Thornton
Many commentators have long held the view that consolidating the financial statements of an investment entity and its investees does not provide the most useful information. Consolidation makes it more difficult for investors to understand what they are most interested in – the value of the entity’s investments. [December 13, 2012]
Before the financial crisis, the primary role of the bank underwriter was to make good decisions in deploying the bank’s resources to help loan applicants achieve their goals. Learn how this role in changing in the industry.
SEBI - Consultation paper on review of the regulatory framework for debenture...Venkatesh Prabhu
To secure the interests of debenture holders of listed debt issues, Sebi Wednesday proposed a slew of measures to strengthen the regulatory framework for debenture trustees, including raising minimum net worth requirement for registration of such entities to Rs 10 crore from the current Rs 2 crore.
The DT can directly enforce the security without obtaining any consent from the debenture holders.
Dodd-Frank Compliance and Technology Summer Meeting 2013Jeffrey C.Y. Li
Atlas Communications Technology recently co-sponsored the Dodd-Frank Compliance and Technology Summer Meeting. The presentation was an introduction to the complexities of the Dodd-Frank Wall Street Reform and Consumer Protection Act, what firms need to do to bring themselves into compliance, and the technology that can help enterprises meet the stringent demands of the act.
For more information about this conference, or to learn about our Fall meeting in September featuring one of the authors of the act, Congressman Jim Himes, please call 1-855-Dodd Frank (1-855-363-3372) for any questions, or if you wish to talk to one of our presenters today to talk about taking the next steps towards Dodd-Frank Compliance
Atlas Presentation 2013 07-09 dodd-frank summer meeting v1-0 (for online)
"AIFMD & Private Equity Managers - An implementation checklist" - Global Pe...GECKO Governance
The new European AIFMD regulations will significantly impact the private equity (PE) industry. The regulations were primarily designed for hedge funds but are being applied wholesale to the private equity industry. Compliance will present a challenge for many PE managers.
In this white paper we will look at the main impacts of AIFMD on private equity managers and what they should be doing to comply
You can sign up for all our Global Perspectives white papers here:- http://lnkd.in/BthCg4
An Analysis of the Limitations of Utilizing the Development Method for Projec...kylemrotek
Abstract: The rise and fall of subprime mortgage securitizations contributed in part to the ensuing credit crisis
and financial crisis of 2008. Some participants in the subprime-mortgage-backed securities market relied at least
in part on analyses grounded in the loss development factor (LDF) method, and many did not conduct their own
credit analyses, relying instead on the work of others such as securities brokers and rating agencies. In some
cases, the parties providing these analyses may have lacked the independence, or at least the appearance of it, that
would have likely better served the market.
A new appreciation for the value of independent analysis is clearly a silver lining and an important lesson to be
taken from the crisis. Actuaries are well positioned to lend assistance to the endeavor.
Mortgages are long-duration assets and, similarly, mortgage credit losses are relatively long-tailed. As casualty
actuaries are aware, the LDF method has inherent limitations associated with immature development. The
authors in this paper will cite examples of parties relying on the LDF or similar methods for projecting subprime
mortgage credit losses, highlight the limitations of relying exclusively on such methods for projecting subprime
mortgage credit performance, and conclude by offering general enhancements for an improved approach that
considers the underwriting characteristics of the underlying loans as well as economic factors.
Future lending strategies will need to account for CRE risks that result from both an expanding economy and recession. View the 5 biggest CRE challenges according to the “2017 Industry Insights: Perspectives from the Front Line” by RMA’s Credit Risk Council
Grant Thornton - IFRS News Special Edition Grant Thornton
Many commentators have long held the view that consolidating the financial statements of an investment entity and its investees does not provide the most useful information. Consolidation makes it more difficult for investors to understand what they are most interested in – the value of the entity’s investments. [December 13, 2012]
Before the financial crisis, the primary role of the bank underwriter was to make good decisions in deploying the bank’s resources to help loan applicants achieve their goals. Learn how this role in changing in the industry.
SEBI - Consultation paper on review of the regulatory framework for debenture...Venkatesh Prabhu
To secure the interests of debenture holders of listed debt issues, Sebi Wednesday proposed a slew of measures to strengthen the regulatory framework for debenture trustees, including raising minimum net worth requirement for registration of such entities to Rs 10 crore from the current Rs 2 crore.
The DT can directly enforce the security without obtaining any consent from the debenture holders.
Dodd-Frank Compliance and Technology Summer Meeting 2013Jeffrey C.Y. Li
Atlas Communications Technology recently co-sponsored the Dodd-Frank Compliance and Technology Summer Meeting. The presentation was an introduction to the complexities of the Dodd-Frank Wall Street Reform and Consumer Protection Act, what firms need to do to bring themselves into compliance, and the technology that can help enterprises meet the stringent demands of the act.
For more information about this conference, or to learn about our Fall meeting in September featuring one of the authors of the act, Congressman Jim Himes, please call 1-855-Dodd Frank (1-855-363-3372) for any questions, or if you wish to talk to one of our presenters today to talk about taking the next steps towards Dodd-Frank Compliance
Atlas Presentation 2013 07-09 dodd-frank summer meeting v1-0 (for online)
"AIFMD & Private Equity Managers - An implementation checklist" - Global Pe...GECKO Governance
The new European AIFMD regulations will significantly impact the private equity (PE) industry. The regulations were primarily designed for hedge funds but are being applied wholesale to the private equity industry. Compliance will present a challenge for many PE managers.
In this white paper we will look at the main impacts of AIFMD on private equity managers and what they should be doing to comply
You can sign up for all our Global Perspectives white papers here:- http://lnkd.in/BthCg4
"Hedge Funds & AIFMD - what you should be doing to comply" - Global Perspect...GECKO Governance
The AIFMD regulation comes into force in the 27 countries of the European Union in July 2013. The main tenets of this wide ranging legislation are now well known throughout the industry.
Put simply, AIFMD will change the alternative investment industry forever.
This is the first in a 2 part "Global Perspectives" white paper examining what fund managers should be doing right now to ensure they are ready for AIFMD. We will publish Part 2 of this white paper next month (June 2013).
Email shane@globalperspective.co.uk to receive this free white paper.
Currently fund managers should be completing a detailed impact assessment to ensure they are ready for AIFMD.
Global Perspectives (www.globalperspective.co.uk) can assist in completing your AIFMD impact assessment and implementing its requirements.
Sign up for all free monthly Global Perspectives White Papers here:-
http://www.globalperspective.co.uk/aifmd#!whitepapers/c1a4e
or email:- shane@globalperspective.co.uk
AIFMD Depositary - Developing an Operating ModelGECKO Governance
This whitepaper is co-authored by Shane Brett, Managing Director at Global Perspectives, an Asset Management and Hedge Fund consultancy and Alan Meaney, Director at Fund Recs, a specialist software provider to the Funds Industry.
During the past six months Shane and Alan have held discussions with 30+ depositary firms around their plans for implementing AIFMD and how their framework for day to day activities might look.
This document covers AIFMD from the perspective of a depositary and discusses some of the practicalities in setting up an operating model in order to comply with the directive on a day to day basis.
What you'll learn
•The difference between Full Depositary and Depositary 'Lite'.
•Each of the Directives requirements that apply to depositaries.
•The operational considerations a depositary must look at.
Forward-Looking Practices in Wealth ManagementCognizant
To keep up with growing regulations in wealth management sector, firms need to future-proof their operations with a robust risk-control system and transparent trading practices.
Corgentum, twitter, hedge fund operational due diligence, hedge fund, operational due diligence, operational risk, fund of hedge funds, family office, fraud, ponzi, pension, endowment, foundation, risk, operational risk
Originally posted at the hedge fund operational due diligence blog www.Corgentum.com/blog an overview of FAS 157 reclassification and negotiation between hedge funds and auditors
Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the what's app number of my personal pi vendor to trade with.
+12349014282
What website can I sell pi coins securely.DOT TECH
Currently there are no website or exchange that allow buying or selling of pi coins..
But you can still easily sell pi coins, by reselling it to exchanges/crypto whales interested in holding thousands of pi coins before the mainnet launch.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and resell to these crypto whales and holders of pi..
This is because pi network is not doing any pre-sale. The only way exchanges can get pi is by buying from miners and pi merchants stands in between the miners and the exchanges.
How can I sell my pi coins?
Selling pi coins is really easy, but first you need to migrate to mainnet wallet before you can do that. I will leave the what'sapp contact of my personal pi merchant to trade with.
+12349014282
5 Tips for Creating Standard Financial ReportsEasyReports
Well-crafted financial reports serve as vital tools for decision-making and transparency within an organization. By following the undermentioned tips, you can create standardized financial reports that effectively communicate your company's financial health and performance to stakeholders.
when will pi network coin be available on crypto exchange.DOT TECH
There is no set date for when Pi coins will enter the market.
However, the developers are working hard to get them released as soon as possible.
Once they are available, users will be able to exchange other cryptocurrencies for Pi coins on designated exchanges.
But for now the only way to sell your pi coins is through verified pi vendor.
Here is the what'sapp contact of my personal pi vendor
+12349014282
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the what'sapp number of my personal pi merchant who i trade pi with.
Message: +12349014282 VIA Whatsapp.
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the what'sapp information for my personal pi vendor.
+12349014282
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the what'sapp number.
+12349014282
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just what'sapp this number below. I sold about 3000 pi coins to him and he paid me immediately.
+12349014282
Lecture slide titled Fraud Risk Mitigation, Webinar Lecture Delivered at the Society for West African Internal Audit Practitioners (SWAIAP) on Wednesday, November 8, 2023.
1. Elemental Economics - Introduction to mining.pdfNeal Brewster
After this first you should: Understand the nature of mining; have an awareness of the industry’s boundaries, corporate structure and size; appreciation the complex motivations and objectives of the industries’ various participants; know how mineral reserves are defined and estimated, and how they evolve over time.
1. Elemental Economics - Introduction to mining.pdf
Operational Due Diligence Insights - Corgentum Consulting's Newsletter
1. August 2012
Operational Due Diligence Insights
In This Issue
Welcome to Our Summer Issue
- Regulatory Focus: Singapore’s Failed
Attempt at Hedge Fund Regulation Welcome to the summer issue of Corgentum Consulting's Operational Due
Diligence Insights. This newsletter serves as a resource for news, opinions
- Business Continuity Corner: Is the
and insights focused on issues related to operational risk and operational
Cloud a Viable Hedge Fund BCP/DR
due diligence on fund managers including hedge funds, private equity funds
Solution?
and traditional managers.
- Private Equity: LP’s Are Utilizing
Operational Due Diligence to Make
Their Voices Heard Singapore’s Failed Attempt at
- IT Hub: Does Your Hedge Fund’s
Hardware Matter?
Hedge Fund Regulation
- Service Providers: The Importance of Recently Singapore announced a major change in its approach to hedge fund
Prime Brokerage Due Diligence regulation - and the hedge fund community celebrated.
-Term of the Month: Shadow Equity Previously in Singapore hedge funds were not required to be licensed as long
as they were classified as exempt fund managers. As long as they only
- Fraud Spotlight – Another Day, marketed themselves to so-called qualified investors and met some other basic
Another Hedge Fund Fraud In NJ criteria, there wasn't much oversight or regulation of their activities. All hedge
fund managers had to do was provide notification to the Monetary Authority
- The Importance of Understanding of Singapore ("MAS") of their choice as to whether to be licensed or not - and
FATCA most chose the latter.
- On the Calendar ...continued on next page
www.Corgentum.com
3. August 2012 | 3
Regulatory - Continued from page 2... has unfortunately stopped short in its attempts to
implement real oversight and reform. By setting
artificially low limits for hedge fund transparency and
statements are extremely valuable to investors during
independence, the MSA has demonstrated that it is still
due diligence. If a hedge fund manager is not audited -
partially a captured regulator in the shadow of the
investors should move on.
hedge fund industry it seeks to regulate.
If on the other hand the "independent annual audit"
One of the more concerning themes of the recent MSA
language does not imply that a financial statement
reforms is the shifting of the onus towards hedge funds
audit will not encompass the "independent annual
themselves. It is up to hedge funds to ensure adequate
audit" language of the MSA, will FCM hedge funds now
risk management procedures are in place and that
be required to have a separate audit performed in
assets are independently valued. Yet, the MSA stops
addition to the financial statement audit?
short of saying how it will police these items.
Requirement to have an adequate risk management
Effectively, the MSA is hoping the largest hedge funds
framework commensurate with the type and size of
play by the rules and will likely utilize these new
investments managed by the FMCs
regulations as a fee generation tool to issue technical
fines. Unfortunately, pomp and circumstance seem to
Once again, this is perhaps so vague as to be useless.
have won the day, and little actual ongoing oversight
Many logical well-intentioned hedge funds may take
will be performed. With this new regulation the MSA
different approaches, some less conservative than
has asked investors to shoulder the burden of hedge
others, in regards to the definition of the word
fund oversight and due diligence.
“adequate”. Certainly, it would be considered adequate
to have an independent dedicated risk manager, but
While the recent MSA reforms are a step in the right
other fund managers may feel that non-dedicated
direction, it is unfortunate that meaningful hedge fund
oversight is sufficient. How will the MSA regulate this?
regulation has yet to come to Asia. Hopefully, it will not
take an Asian Madoff to sound the alarm and cause
Conclusion:
regulators to take meaningful action.
On the surface investors’ initial reactions to such
enhanced regulatory reforms may be that more
regulation is better for investors. However, it is
important that investors take measures to not only
understand the technical requirements of new
regulatory requirements but also whether these
Is the Cloud a
additional requirements will be effective.
Viable Hedge Fund
Singapore has grown as an Asian hedge fund center in
the past few years and is increasingly nipping at the BCP/DR Solution?
heels of Hong Kong for hedge fund business.
Additionally, despite recent efforts to create a more Cloud computing based information technology and
hospitable environment for hedge funds in other Asian business continuity and disaster recovery ("BCP/DR")
countries, scandals such as the AIJ fraud in Japan and solutions have becoming increasingly popular in recent
continued concerns related to fraud in mainland China, years among the hedge fund and private equity
continue to push Singapore to the forefront ahead of communities. Indeed, many investors seeking to
other Asian jurisdictions. perform operational due diligence on fund managers
may have come across more and more funds utilizing
In the case of recent MSA measures to further regulate the cloud as of late.
the domestic Singapore hedge fund industry, the MSA
…continued on next page
www.Corgentum.com
5. August 2012 | 5
Business Continuity- Continued from page 4... So consider for example, an LP who is considering
making an investment in a private equity fund. This LP
has wisely decided to perform operational due
While the increased use of the cloud may be the hottest
diligence on the GP. After the review, the LP has a list of
trend among hedge funds for BCP/DR data storage and
several operational deficiencies and areas in which the
application development. Investors should take care to
LP feels compared to their peers the GP could improve.
understand if a hedge fund has carefully evaluated their
use of this new technology, or if they are simply
Continuing our example, let us assume that from the
jumping on the bandwagon.
LPs perspective none of these items are so serious as to
preclude him from investing, but rather he would feel
more comfortable if the GP took corrective action on
PE LP’s Are Utilizing these matters. At a minimum, the LP feels it is
important to make the GP aware of these issues.
Operational Due
While previously a GP may have politely listened to such
feedback and taken little corrective action, more LPs are
increasingly monitoring how well GPs respond to this
Diligence to Make feedback. This includes performing ongoing operational
due diligence to both monitor process improvements,
Their Voices Heard as well as to detect any new operational risks.
Clinging to their old ways, however, many GPs aren't
frankly interested in this ongoing LP operational due
Increasingly, private equity investors, commonly diligence process or receiving any such feedback from
referred to as Limited Partners or LP's, are performing LPs that have already committed capital. To facilitate
operational due diligence prior to allocating to private this lack of dialogue, GPs utilize a structure whereby
equity funds. It is good to see that LP's have taken cues
they have so-called advisory boards upon which
from their hedge fund counterparts, and are
increasingly recognizing that private equity funds typically sit the largest investors in a particular fund. As
present just as many, if not more, operational risks to such, smaller LPs effectively become squeezed out of
investors as compared to hedge funds. the process. More LPs are beginning to realize the flaws
in such arrangements and have decided to become
Unfortunately, private equity fund managers, proactive not only in their due diligence efforts, but in
commonly referred to as General Partners or GP's, have
engaging with GPs in more frequent dialogues
been slower than their hedge fund portfolio manager
concerning both investment and operational issues.
counterparts in listening to LP feedback. This is to be
expected as GP's have long capitalized on the long-term
A program of initial and ongoing operational due
nature of private equity investing to insulate themselves
from frequent interaction with LPs. diligence for private equity can help ensure that an LP
detects operational issues before committing capital,
In the past, after an LP committed capital, there were and is alerted to any new potential problems before
little if any updates from GPs outside of prescheduled they spin out of control. As this trend continues, LPs
updates, generally quarterly, on portfolio performance. that do not engage in such programs may increasingly
Such an arrangement has effectively robbed LPs of their find themselves to be the exception rather than the
voice as partners in the investing process. More LPs
norm.
have come to acknowledge this fact, and are
increasingly pro-actively sharing feedback with GPs
after the initial and ongoing operational due diligence
processes.
www.Corgentum.com
7. August 2012 | 7
Hardware - Continued from page 6... Evaluating a fund's hardware infrastructure can provide
valuable insights beyond just the specifics of the
hardware. By asking more detailed questions during the
(in conjunction with evaluating hardware capabilities),
operational due diligence process investors can glean
investors may be able to make more fully informed
information as to how the firm approaches other
decisions when evaluating the overall strength of the
operational issues, such as business planning and
information technology function.
scalability as well.
How much is enough?
Returning to our question of how much storage space is
enough - there is no definitive answer. Each fund
During the operational due diligence process investors
manager's situation will be different. However,
will often take a tour of a fund manager's information
investors should ask themselves if during the due
technology closet. This room is often loud (due to the
diligence process they are asking the fund manager
buzzing of cooling fans), and cold (so that the
questions such as:
equipment does not overheat). When many investors
walk into these rooms they often see large columns of
How do you evaluate how much storage space
equipment in racks with numerous flashing lights and
you need?
wires running between them.
How much space do you currently have?
Many investors may not be able to distinguish between
different types of hardware, because they may not be
aware of what these different pieces of hardware Have you taken measures to plan ahead so that
actually look like. Putting this aside, investors seeking to the firm's storage architecture is scalable?
evaluate the strength and scalability of a fund
manager's information technology function may also be By digging deeper into the hardware evaluation process
unable to answer a more basic question - how much during operational due diligence on information
hardware is enough? technology, investors will not only have a much more
detailed picture of a fund manager's overall information
This question is perhaps most easily thought of in terms technology framework, but also a better understanding
of data storage space. Consider the following two fund on how those in charge organize their business.
managers: Fund Manager A is a small fund manager
who has five employees and has been in business for
three years. Fund Manager B is a larger firm with 35 Service Providers: The
employees and has been in business for eight years.
Which Fund Manager is likely to need more data Importance of Prime
Broker Due Diligence
storage space?
The answer is obvious when such a stark comparison
among organizations is in place. Although it is clear that
Fund Manager B would require more data storage
space, the next logical question is - how much is A recent Corgentum study has demonstrated that in the
post-Lehman environment investors have increasingly
enough?
and somewhat dangerously downgraded the roles of
prime brokers. The majority of those surveyed ranked
Consider a prospective investor who is considering
fund administrators and auditors as being more
making an allocation to Fund Manager A. During the
operational due diligence process, they take the tour of important than prime brokers. Specifically, only 17% of
the aforementioned standard clean, cold and loud those investors surveyed indicated that they felt that
server closet. To most investors, unfortunately, if
everything looks and sounds good this is where they
stop their hardware due diligence. …continued on next page
www.Corgentum.com
9. August 2012 | 9
Shadow Equity- Continued from page 8...
This issue's word:
Fraud
Shadow Equity (also known as Phantom Equity) Spotlight:
Defined: Another
Shadow equity refers to a type of compensation scheme
for hedge fund investment professionals. Employees
Day, Another Hedge
compensated via a shadow equity scheme are not
compensated as if they were direct owners of the hedge Fund Fraud in NJ
fund (i.e. - General Partner), but are effectively treated
as investors of the fund.
According to authorities, another classic Ponzi scheme
What investors should know: has hit the state of NJ.
The way in which a fund manager compensates its Daniel Dragon of Lebanon, NJ and Carmelo Provenzano
employees can provide useful insights into how it values of Garfield, NJ have pleaded guilty to wire fraud in a
and retains its professionals. Shadow equity schemes Camden, NJ courtroom. This guilty plea comes on the
are compensation schemes that seek to align the heels of accusations of fraud against a Jersey City, New
interest of personnel with those of investors. The Jersey based fund and Osiris Partners.
theory is that this so-called skin in the game helps to
generate harder working investment professionals who In this case, Dragon and Provenzano told investors that:
will act in the best interest of investors. Employee
compensation schemes can also contain vesting The firm had created a proprietary black box
components which facilitate the retention of employees computer algorithm that had produced returns
through financial incentives for remaining at a firm. of 170% from 2009 to July 2011 in the FX
markets.
During the operational due diligence process investors
should analyze not only the management and Investors could get their money back at any
performance fees generated by a fund manager, but time with only one day’s notice.
also the ways in which these fees are distributed to
employees via internal compensation structures, such When some investors started asking questions the duo
as shadow equity. Funds that have carefully structured emailed investors screenshot of fictitious investor
employee compensation to incentivize employees and account statement from a completely made up investor
retain talent often have lower turnover. named Mel Tannenbaum.
The entire operation was a fraud and investors lost
more than $3.5 million. Dragon and Provenzano used
the money they stole to furnish an extravagant lifestyle,
which included giving a $4,000 tip on an $18,241 bar bill
in a Los Angeles nightclub. The two men face up to 20
years in prison and $250,000 in fines.
A third co-conspirator named George Sepero is
currently awaiting trial.
www.Corgentum.com
11. August 2012 | 11
FATCA- Continued from page 10... (iv) Classify investors into FATCA groups and
ensure FATCA compliant documentation on
each investor is maintained
For instance a hedge fund may be required under
FATCA to make FATCA related disclosures to the
During the operational due diligence process investors
Canadian regulators. Under Canadian privacy it is
should take measures to effectively vet the approach
unclear whether such disclosures may be
their fund managers take to FATCA before the IRS
mandated or voluntary in nature. Furthermore, a hedge
shows up at their door.
fund manager which makes such disclosures may be
subjected to potential liability for violating privacy
concerns.
Investors can often obtain some guidance in regards to
how their hedge funds and private equity funds
approach FATCA by asking their fund managers how
they plan to develop a plan to comply with FATCA.
Typically, most fund managers seeking to develop a
plan to comply with FATCA will work with external
accountants and legal counsel to address this issue.
Some key questions investors can ask to gauge if a fund
manager has thought about FATCA and has developed a
plan for compliance include:
Does the fund manager, or operations
personnel, understand what FATCA is?
Do they understand the timeline by which they
need to comply?
Has the fund spoken to their accountants and
lawyers about FATCA?
What advice did they give the fund?
Has the fund begun to think of the specific
details of FATCA compliance including:
(i) Identifying so-called "Responsible Officers"
who must certify FATCA compliance
(ii) Developing a plan for fund offering
memorandum and subscription documents with
FATCA disclaimers
(iii) Analyze internal AML/KYC procedures as
well as the work with the fund's administrator
to ensure AML/KYC procedures will be
appropriately in compliance with FATCA
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