How To Maximize your PE firm's Compliance with RegTech

The increased regulatory complexity and the emergence of ESG as a strategic imperative make private equity firms seek new ways to implement and embed evolving requirements. In the constantly changing regulatory landscape, private funds are actively exploring regulatory technology (RegTech) to leverage corporate data, manage risks and ensure compliance. 

Emerging from FinTech, regulatory technology provides PE firms with substantial value by helping to manage compliance, increase confidence in their ability to implement regulatory changes and save costs. Below, we discuss in more detail the challenges addressed by RegTech, outline the benefits of regulatory technology for PE firms and map out a roadmap for adoption.

Challenges Faced by PE Firms

The historically less-regulated private equity market has already got on the radar of regulating authorities. In the United States, the Securities and Exchange Commission (SEC) has been continuously initiating new proposals in an attempt to enhance transparency and promote competition in the industry, controlling trillions of dollars. 

For the moment, there are several SEC proposals related to the PE firms that are still under development, including the Safeguarding Advisory Client Assets Rule, Conflicts of Interest Predictive Data Analytics Rule, and Outsourcing Rule, just to name a few.

In addition to SEC proposals, private equity firms face several other novel compliance and reporting requirements, including:

• FinCEN's new proposal applying to PE and VC firms on implementing risk-based AML/CFT programs, reporting suspicious activities and maintaining record keeping.
• Requirements of international regulators applicable to PE firms operating across jurisdictions, for example, GDPR when collecting personal data of EU residents.
• ESG-related disclosures.

In ensuring compliance, private funds need to run due diligence on their portfolio companies to manage risk and meet regulatory and investor expectations. Needless to say, this level of demand has a significant impact on private equity firms calling for more resources and new processes.

Don't let regulatory complexities hinder your PE firm's growth; discover how to streamline compliance and mitigate risks with a proven RegTech solution.

Value of RegTech for PE Firms

Seeking improved controls and enhanced regulatory compliance, private equity firms are exploring RegTech with an expectation of adding efficiency, reducing costs and implementing regulatory changes. Specifically, private funds leverage RegTech to automate mundane compliance tasks, improve data processing times and reduce risks of non-compliance.

RegTech is capable of providing these values by creating a Single Source of Truth (SSoT) for all corporate records to help PE firms leverage their data as assets. By empowering their teams with RegTech, private funds cut the time and cost of due diligence of portfolio companies, improve their compliance work and tackle regulatory uncertainty and complexity in a systematic and manageable way.

Benefits of RegTech for Private Funds

Beyond the above values, RegTech solutions have demonstrated a number of extensive capabilities, including:

• Global entity governance,

• Due diligence automation for portfolio companies,

• Streamlined investor reporting,

• Anti-money laundering (AML) and know your customer (KYC) capabilities,

• Compliance automation,

• A cloud-based central corporate database accessible from anywhere on any device.

Compared to traditional solutions, RegTech excels in achieving its goals by offering greater agility, efficiency, speed, integration and better analytics to unlock data's true potential. By integrating AI and analytic tools, regulatory technology can help PE firms assess the impact of new regulations, automatically categorize data and provide proactive compliance alerts.

Today, most RegTech tools are cloud-based, offering the benefit of outsourced maintenance, management and backup. Regulatory technology solutions provide PE firms with the flexibility of accessing and sharing their corporate records, data safety and security and cost efficiency.

The RoadMap to RegTech Adoption

Private equity firms aiming to fully explore the potential of RegTech need a clear roadmap to ensure adoption. Such a roadmap can start with building awareness among senior management regarding available RegTech solutions and their benefits to ensure support for investment into new technology. 

With budget constraints and organizational resistance among the biggest barriers to adopting innovations, maintaining a continuous dialogue with key stakeholders is a prerequisite for introducing RegTech in any organization.

Private funds seeking to select the most relevant RegTech solutions can benefit by starting with assessing their current compliance processes, risks and regulatory exposure to focus on priority areas. 

In many cases, PE firms would prioritize technology offering customized regulatory filing software, due diligence automation, full traceability of data, and an investor relations platform, addressing the most critical aspects of their operations.

Centralized, Automated Compliance: Athennian for PE Firms

With regulatory compliance and ESG being top of mind for global businesses, RegTech platforms that automate reporting compliance offer the most value to private equity firms seeking to empower their teams with technology. 

Specifically designed around compliance and reporting challenges faced by global organizations, the Athennian regulatory filing software enables PE firms to realize the full potential of RegTech.

Athennian offers private funds with rich functionality, including customizable reporting, capabilities of a central cloud-based corporate database accessible from anywhere on any device and automation tools. For more information on RegTech and capabilities available for PE firms with Athennian, please do not hesitate to contact our team to request a free demo.

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