Kate Maryniak at Confluence Technologies talks to FTF News about the multiple compliance fronts that firms will face in 2022.
Kate Maryniak
(Regulatory and industry standards compliance concerns are hitting home for many securities firms, and Kate Maryniak, head of product management for Revolution at Confluence Technologies, spoke with FTF News about them in the second half of our recent Q&A. Maryniak, who originally joined StatPro in 2001, has served in many client-facing roles to help deliver risk, performance, and fixed income attribution solutions to customers. She now oversees product managers who are responsible for the performance, risk, and reporting offerings within the Revolution platform.)
Q: How does Confluence help clients prepare for their GIPS verification and compliance? How have the roles evolved for Confluence and its clients?
A: Confluence has been a recognized market leader in this area for over two decades now. We will soon approach the 25th anniversary of the Composite solution being introduced to the investment community globally.
Our Composites platform allows the gathering of all relevant numeric, descriptive, and verbose information, in one place and then the generation of the GIPS reports.
This is achieved with a maximum of process standardization to ensure consistent, robust, and simple production. Automation is a must-have for some of our largest clients managing extremely high volumes of composites on the platform.
At the same time, we offer a high degree of flexibility and customization. This means that clients can integrate our solution into their workflows and implement controls and reporting processes in line with their expectations and needs while benefiting from the built-in controls and report templates that have been added in, over time, based on the feedback from many clients and verifiers. Our offer delivers a truly complete solution by combining the composite management and data warehouse with the reporting capabilities.
The beauty and efficiency of the solution is that even with the very basic and minimal data input, a client can already achieve a lot, and, provided that their data is correct and complete, they can become GIPS compliant quickly. It must be seen as enough of an incentive for many firms to ditch the spreadsheet-based management of composite information.
This simplicity of data requirements, the robust and proven calculation-engines, and mature report templates take away a lot of donkeywork like checking raw data and basic number-crunching from the client, as this is done by our engines. The client can focus on what matters the most which is the correctness of their inputs and processes. The fact that one can also attach all relevant documents in the application makes preparation and execution of the verification process easier.
Being in the market for such a long time we have established good relationships with many verifiers globally. Many of them understand the product very well. Confluence dedicated time to engage and run workshops with various verifiers to keep them up-to-date with the evolution of the product and collect their feedback.
We also have a good and long history of clients that our support team accompanied from implementation through their first and then subsequent audits.
Besides pure implementation work, Confluence/StatPro has proven to be a helpful partner not only in basic functional support and process optimization but also offers expertise to assist in the preparation and execution of the verification process.
As mentioned above, many verifiers seek our input and advice during the audit process, so we are a recognized point of contact and can speak with authority far beyond the pure functional questions for both, users, and verifiers.
Additionally, we help to integrate the software packages further into clients’ processes to add value far beyond or completely independent from GIPS requirements. Once again, our extensive experience in different markets and with different types of clients helps here.
Q: What have been the major client concerns on the regulations below and how has Confluence responded to them?
A: Clients usually share similar concerns regarding the cost associated with the data, tools, and change management required to onboard any new regulatory regime or some additional requirements to the existing process.
- SEC Rule 18f- 4: This is the SEC’s regulation of funds’ use of derivatives and certain other transactions. Confluence’s solution combines the Revolution platform and Unity NXT Regulatory Reporting capabilities into a cost-effective offering for clients who need to meet their US SEC 18f-4 filing requirements.
Clients leveraging Unity NXT Regulatory Reporting and Revolution can utilize existing data pipes for complete positions data and there is no cost associated with the integration into the SEC Form N-PORT. We have built the solution for automation and scale and to help our customers reduce the risk of inaccurate or inconsistent filings.
Starting with the collection of data, through the calculation and monitoring of risk [Value at Risk], stress testing, back-testing, running reasonability checks against third-party sourced data, and liquidity assessments, and finally the approval and submission of the filing, ours is a collaborative environment with configurable workflows and intuitive and flexible user interface access.
Confluence’s experts are also available to assist and guide our clients throughout the risk monitoring process. Confluence’s goal was and still is to provide our existing and new customers with fully integrated N-RN and N-PORT reporting technology.
- SEC Rule 22e-4: This rule requires funds to disclose information about the operation and effectiveness of their liquidity risk management program to shareholders.
Many clients who now also must comply with the SEC 22e-4 liquidity rule face additional costs related to the acquisition of market data. Getting access to market data for illiquid assets poses yet another challenge. Moreover, they need to face new reporting requirements regarding the redemption analysis, liabilities scenarios or investor concentration.
Confluence’s solution for liquidity rule reporting is available in a single platform — Revolution — addresses those key challenges, and again is integrated with Unity NXT Regulatory Reporting. The solution uniquely combines quantitative and qualitative modeling for the assets and liabilities of portfolios and allows our customers to adopt a different approach across various asset classes for the daily definition and monitoring of time to liquidate, based on the best of market data available.
To provide greater flexibility, we also offer an option for clients to upload third-party sourced time to liquidate metrics and liquidity scores. The solution can deliver true value-add with its capability to measure liquidation costs across different market conditions as well as monitor time-to-liquidate trends.
Furthermore, Revolution helps clients capture investment fund resilience and simulate redemption coverage ratios across different liquidation strategies. It is also worth mentioning that clients can build their personalized output using Revolution’s reporting tools as well as customize their liquidity monitoring alerts.
- And the E.U.’s Sustainable Finance Disclosure Regulation (SFDR) means that asset managers are now legally obliged to monitor their exposure to ESG risks.
With the increasing demand for sustainable investment products, identifying risks and integrating ESG into the investment lifecycle quickly became a top priority for many investment managers.
SFDR regulation places ESG firmly on the list of the regulatory requirements in the European Union, similarly to Market Risk and Liquidity Risk.
Interestingly, the SEC, the US regulator, is now also looking into evaluating their climate change disclosure rules and is currently seeking public input on that matter. Confluence’s ESG solution via our Revolution platform provides investment managers with a framework to monitor ESG-related analytics, improve managers’ operational efficiency and help address the risk of greenwashing.
Leveraging Revolution’s platform multi-source data structure, we can provide our clients with access to multiple ESG datasets acquired from leading data providers globally (including our own proprietary ECPI research data). Our clients can screen and assess their portfolios through various models and/or exclusion lists that are usually developed by NGOs.
Revolution offers several configurable dashboards and views to make the process of monitoring ESG risks, controversial activities, and climate-related risk simple and efficient. We are currently enriching Revolution with additional data points and analytics to support TCFD and Paris Agreement alignment monitoring.
Q: Gathering ESG data is proving to be a challenge for clients and providers. How is Confluence helping clients find ESG data?
A: Unfortunately, it is true that the companies’ current reporting practices on ESG data lack consistency and comparability, and this situation does create a problem for investors globally.
There are however various international initiatives underway to introduce ESG and climate risk disclosure frameworks and reporting standards and we expect the whole system to evolve significantly over the next few years.
In the meantime, we see that our clients like to rely on ESG research and ratings being gathered from multiple trusted specialist providers. Confluence’s ESG offering helps clients fulfill regulatory ESG risk monitoring obligations, provides independent portfolio ESG screening/assessment, as well as an option for a regulatory reporting service.
All these capabilities are based on the multi-source approach to the acquisition and usage of ESG data and other related information with the ECPI research and index solutions taking the center stage in this process.
ECPI Group’s acquisition by Confluence and subsequent integration of their data with the Revolution platform gave our clients access to ESG analytics derived via the proprietary research model and methodologies and covering thousands of issuers (both in equity and fixed income space).
We have also partnered with other external leading providers of data related both to sustainability and climate change to deliver greater flexibility and customization options for clients wishing to rely on the ESG information combined from various sources in their investment decision-making process.
Our goal is to provide clients with rich data and analytics to help them meet their own goals when it comes to sustainable investing and regulatory reporting.
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