A few months ago Tom Sandy (Rice Dairy), Jerry Nolan (County Cork) and I discussed some ideas for the topic of this panel. Tom is involved in operations, Jerry in marketing and I’m involved in research. The one overlapping component for all of us is compliance and operations. The topic of the panel discussed marketing managed futures from a compliance and operations perspective. This topic is probably a different perspective from marketing managed futures as you may frequently hear at events.
A CTA may be successful at raising assets. However, if it wasn’t done properly, you may get a call from the regulators, lawyers or your internal compliance. It may cause investors to leave. If someone is doing due diligence on the manager, they may spot some of the compliance issues and say “thank you, but we are not interested” and they may not tell you why they were not interested.
The panel was a very accomplished and experienced lineup:
-Michael Coglianese, Michael Coglianese CPA, PC
-Carl Gilmore, Integritas Financial Consulting
-John Brand, National Futures Association
-David Reyna, RJ OASIS
-Brian Clark, Ascent Technologies
Moderator: Mark Shore, Shore Capital Research LLC, Adjunct Professor, DePaul University
Each panelist brought a different perspective to the discussion including, auditing, compliance & legal, regulator, allocator/ due diligence and technology/ process.
Some of the takeaways from the discussion included compliance is not a single person or department. It should be considered a shared responsibility of everyone in the firm as pointed out by Brian Clark. David Reyna indicated that understanding the manager’s processes is very important during due diligence. “We are in a zero tolerance compliance environment” as noted by Carl Gilmore.
Some of the topics discussed included:
-How can the auditing experience impact a manager’s ability to raise assets and maintain clients?
-From a technology/ process standpoint, what is it that firms are missing or could improve upon?
-A “heat map” that scores the likelihood of topics to be discussed during a regulatory exam.
-From the investor’s perspective, a few primary issues regarding compliance/ regulation of CTAs.
-The NFA’s approach to examining CTAs and CPOs regarding marketing & some of the common deficiencies seen in recent exams.
-The possible impact of the SEC’s potential regulation to cap leverage on 40 Act funds.
-As social media is used for marketing and branding, it was discussed from a compliance perspective.
The auditorium was nearly sold out with a very engaged audience asking a lot of questions and I noticed a fair amount of attendees were taking notes during the panel discussion. I look forward to the 2017 NIBA/ DePaul University event.
By Mark Shore
Shore Capital Research LLC / DePaul University
Twitter: @shorecap
