In an increasingly complex regulatory environment, fund administrators have the opportunity to add tangible value for their clients by offering a more proactive and tailored service that is attuned to market developments, says Laura Hazzard, Director – Listed Funds, Apex Group
The Channel Islands have long been an important centre for open and closed-ended funds. As the industry evolves, Jersey and Guernsey remain key jurisdictions for administering funds listed on London Stock Exchange.
Europe as a whole has become an increasingly complex regulatory environment and, as such, the role of the fund administrator has been elevated in its importance.
Keeping pace with the plethora of governance requirements and new regulations is a must for listed fund boards. Service providers able to support funds in navigating this landscape have substantially enhanced their value.
Recent changes to corporate governance codes, together with the intensifying gaze of the investor requiring ever more detailed due diligence and transparency, make an already competitive landscape a complex place to operate within.
These factors combined highlight the crucial role the fund administrator plays in supporting funds and their boards. To be a competitive partner, administrators must be proactive and attuned to market changes, able to tailor their service offering appropriately as regulation and governance requirements evolve.
Cross-jurisdictional compliance
The cross-jurisdictional nature of the asset management space means funds are often subject to compliance in a number of jurisdictions. For example, funds domiciled in Jersey and listed on London Stock Exchange must comply with both the Jersey-regulated fund regime as well as the UK rules and governance standards.
When it comes to compliance, unlike for other Jersey-domiciled funds, where the administrator performs the customer due diligence on investors, a listed fund’s relationship with its investors sits with the receiving agent, registrar and regulated broker.
This poses different considerations when monitoring compliance within the Jersey anti-money laundering framework and means compliance officers may have to expand the scope of the fund’s compliance monitoring programme, tailoring it to reflect the specificities of listed funds.
The requirements of the UK Corporate Governance Code apply to all companies admitted to the Financial Conduct Authority’s official list with a premium listing.
Listed funds generally adopt the Association of Investment Companies (AIC) Code as it is tailored to recognise the fact that corporate governance within the closed-ended investment company space differs from other industries.
This is where an administrator can add tangible value, by benchmarking these requirements against existing governance arrangements. As a steward of the board, it can embed those requirements into the fund’s policies and procedures and ensure relevant disclosures are made in the annual report.
Increasing shareholder engagement
There must also be a focus on increasing shareholder engagement. Market uncertainty, continual changes to the regulatory and governance landscape and the rise of environmental, social and governance (ESG) factors affecting the asset management space, mean engagement with shareholders has never been more important. Boards should be more attuned to shareholder views and sentiment and the increasing demand for transparency.
A proactive service provider can provide support by keeping abreast of proxy voting agency policy trends and working with the fund’s advisers to gauge the impact these might have on shareholder voting at general meetings.
Knowledge share through leveraging economies of scale is also highly beneficial. Large global administrators with the ability to share their insights into market trends and provide technical input into the preparation of annual report disclosures provide additional comfort to fund boards.
They can even assist in drafting policies and establishing board committees designed to address emerging areas of investor interest.
Looking forward to 2020 and beyond, administrators will continue to play an increasingly important role in supporting listed fund boards in developing the tools they require to navigate the changing fund landscape and helping them to digest, simplify and adhere to compliance requirements on a local and cross-jurisdictional basis.