Hedge Fund Intelligence Navigating Derivative Regulations | Page 3

PREPARING YOUR FUND TO MEET THESE REGULATIONS

For fund managers who are contemplating how to meet these new requirements, the first step is to engage
a good law firm to help determine your obligations, which regimes you fall under, and what entity type(s)
your firm manages. Understanding the growth of your corresponding regulatory obligations is the first
step toward gauging its impact to your operational model and trading strategy.
Second, you will want to consider how, from an operational standpoint, you will comply with the
requirements. Firms that outsource their back and middle office will want to assess the breadth and
depth of their providers regulatory compliance capabilities, particularly as it relates to central clearing
and connectivity with industry middleware providers, as well as support for trade repositories and other
regulator messaging globally. Many firms that manage operations in-house are looking at regulatory
change as a catalyst to evaluate outsourcing opportunities more broadly. Choosing the right partner(s)
can free you to focus on your core responsibilities for investment strategy and attracting capital while
still meeting your regulatory obligations and helping to alleviate your operational burdens.
Lastly, regulatory considerations are not a one-time decision – due diligence, review of requirements
and planning for future regulations are ongoing needs. In the new regulatory environment, managers must
consider not only the demands of today, but of tomorrow as well – what are the regulatory implications of
expanding into new strategies, markets or products? Are my compliance capabilities positioned to handle
new requirements as we grow? The result is that, in the same way managers conduct initial and ongoing
due diligence on operational service providers, they must now expand that diligence to incorporate a
regulatory lens, making sure the compliance programs they have in place can support their needs across
markets, regulatory regimes and legal entities.

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