Two-thirds of alternative fund managers hit with fines over governance failures
Two-thirds of alternative fund managers have been hit with fines or sanctions in the last two years due to governance failures, new research has revealed.
Alternative funds managers, which focus on markets beyond stocks and bonds such as property, private equity and infrastructure investing, are increasingly under pressure to up their governance ability, Bovill Newgate found.
Almost all senior leaders and senior compliance and risk executives surveyed at alternative fund manager firms said their board and senior management were already taking governance seriously.
Despite this, 65 per cent of those surveyed said they’d been subject to governance related fines or sanctions in the last two years, with a further 12 per cent receiving an information request or visit from the regulator.
Organisations have been ramping up their efforts to prevent this though. 70 per cent of alternative managers said they’d increased focus on governance during the past two years.
Why? Precisely because of these fines and sanctions. 90 per cent of those surveyed said these would likely lead to an increase in focus on governance in the future, with 30 per cent saying it will increase dramatically as a result.
Paul Ford, head of regulatory and governance at Bovill Newgate, said: “The alternative fund managers we surveyed have always taken governance extremely seriously, but the regulatory landscape is constantly changing and becoming even more complex, particularly for the global firms.
“For almost all firms, the survey demonstrated the importance to use an independent specialist risk and compliance company. An independent company not only brings specialist skills and experience that is very difficult and time consuming to recruit to in-house, but also technology, software and processes to manage complex frameworks and structures.
“As alternative fund managers and other clients look to increase their focus on governance, we recommend following a three lines of defence approach to protect their businesses – firstly, implement robust procedures, policies and training; secondly, comprehensively monitor these; and finally, review and challenge through independent audit.”