Easing the strain of regulatory compliance

Transcription

1 Regulatory spaghetti Regulator ready Easing the strain of regulatory compliance INVESTOR PROTECTION PRIIP TAX FATCA IRS 871(m) RISK PEP AML Sanctions REPORTING CRS Solvency II

2 At a glance We offer data and services for a wide range of regulatory, tax and risk compliance topics TABLE OF CONTENTS Investor Protection Page 3 UCITS PRIIPs Product Information Bulletin (PIB) AIFMD FIDLEG / FinfraG Portfolio Risk Management (ImpaQt) Tax & Compliance Page 11 Automatic Exchange of Information (CRS / AEoI) Belgian tax regulations (TOB, VVPR) Canadian tax-saving plans (RRSP, RESP, TFSA) Danish tax types for investment trusts EU Solvency II French tax regulations Germany tax reporting Global PEP-Check Global Sanctions Hong Kong SFC-authorized products Italian Financial Transaction Tax Japanese restriction on foreign ownership OECD Country Risk Swiss BVV2 / SNB-Reporting / Taxable Securities / EUSD UK Stamp Duty Tax US IRS reporting / IRS 871(m) / FATCA / SEC Rule 22-C-2 Security Master Page 15 Our wealth of reference and pricing data fuels the innovative services for a wide range of regulatory, tax and risk compliance topics. Foreword Welcome to SIX Financial Information We are a leading global provider of financial information with core expertise inreference and regulatory data, especially corporate actions. With offices around the world, SIX combines the advantages of local expertise with global reach to serve the wealth and asset management industry as well as global financial institutions. A strong partner for regulatory compliance We help financial firms achieve compliance through a comprehensive range of value-added services. By leveraging our core expertise in reference data, we have developed enriched regulatory content for more than 60 European and global regulations. Our aim is to make the challenges of implementation easier for our customers by enabling automation and helping reduce the total cost of ownership. Our business-centric services are based on proactive discussions with customers; we take a collaborative approach to product development, featuring regular industry workshops to ensure our products are designed in line with industry needs. Industry-owned Around 130 institutions are SIX shareholders. The relationship with our shareholders ensures solid governance, proximity to clients, and competitive prices. Being user-owned and usergoverned means we can continuously reinvest in the quality of our data and product innovations. Innovation is in our DNA Innovation is a strategic cornerstone of SIX. We nurture new product developments and a culture of innovation through an employee-led internal program. SIX is an active member of the European FinTech community and closely follows the latest trends through key initiatives like the SIX Hackathon and the F10 Incubator and Accelerator. We look forward to hearing how we can help you grow your business. Phil Lynch, Global Head Markets, Products & Strategy SIX IN BRIEF QUALITY SIX is a registered and certified national numbering agency CONFIDENCE We have been in the business of financial information for more than 8 decades COMPLETENESS Covering over 60 regulatory initiatives and over 23 million instruments 1 2

3 Investor protection Regulatory challenges Investor protection and transaction and reference data reporting and the PRIIPs regulation represent a fundamental overhaul of EEA (European Economic Area) investor protection rules. Designed to enhance consumer protection, the regulations put a strong emphasis on the advisory process and transparency. Financial institutions will have significantly increased obligations regarding the production and transparency of execution, financial instrument, and client data. Global firms face the critical challenge of getting robust compliance measures in place to be able to continue doing business in the EEA market. PRIIPs The PRIIPs regulation focuses on standardizing transparency obligations and aims to increase competition by making it easier to understand and compare products. Under its rules, product manufacturers (including banks domiciled outside the EU, derivative exchanges and insurance companies) must produce a Key Information Document (KID) outlining the investment s risks and costs in a standardized format. Distributor firms which are responsible for handing out the document at the point of sale must be anchored within this process. This makes the management of data flows between manufacturers and distributors one of the key operational considerations. Investor protection is an all-encompassing package of reforms. Rules around trade transparency, reference data reporting, client on -boarding, record-keeping and information on clients will increase in number and complexity. Firms will face entirely new sets of rules relating to cost disclosures, mandatory customer and financial instrument identifiers, investment-product governance and transparency. This will make target-market assessment crucial to a common, uniform and consistent application of product governance requirements for firms. Establishing an adequate ongoing control framework to ensure that all reporting is complete and accurate will also be a key challenge. reliable auditable complete transparent Challenge The industry as a whole needs to start talking about how information is exchanged, particularly with key data now flowing both ways between manufacturers and retail networks. This is surely the only way to ensure the industry has the most up-to-date information at any given time in order to start seeing regulation less as a bureaucratic burden and more as an opportunity to drive new revenue streams. Phil Lynch, Head of Markets, Products & Strategy KEY CHALLENGES The consequences of all of this is likely to be increased strain on data and technology infrastructure across firms. Key characteristics demanded by solutions will be accurate data quality and coverage from reliable sources. Challenge represents one of the most pressing and important financial markets reforms and is anything but an incremental change. As a result of expanded asset class coverage, structural market reform and its applicability to firms previously exempted, will dramatically change nearly everything about the marketplace as we know it. Alexander Dorfmann, Senior Product Manager accurate uniform Do I have the right data and is it consistent across all asset classes and regulations? Can I make sense of my data intake? Can I integrate data and use it to report accurately and consistently? Am I certain that I can trade confidently and in compliance with regulation? 3 4

4 Investor protection The SIX value proposition One consistent data source for a complex set of requirements The SIX approach Addressing the regulatory challenge by resolving complexity for and PRIIPs Investor protection Investor protection rules for, PRIIPs and UCITS require information to be sourced from manufacturers, including prices, terms and conditions, KIDs and KIIDs. One transaction can trigger obligations under multiple regulations, so firms on both sides must be able to easily and accurately link all regulatory data to an instrument. For example, is the instrument eligible under and is a KID required? As a result, there is significant overlap where the same data is needed for PRIIPs and at different levels of granularity. We have analyzed the complexity of the linkages between PRIIPs and MiFID II data requirements to help you align your investor protection efforts and approach compliance strategically. We provide all regulatory, reference and instrument data required to support the suitability and appropriateness test, including target market assessment or cost & charges information in one lean and consolidated data feed We source, process and enrich data from many sources, including manufacturers, trading venues or ESMA SUPPORTING YOU WITH ALL MAJOR REQUIREMENTS: Full visibility of the instrument s identifiers, classification and life cycle Timely and accurate data delivery Product disclosure Intended market We offer a platform to enable process standardization, automation, documentation and scalability for client reporting, regulatory reporting and sales reporting (i.e. multi-lateral exchange of information) Traceability and reconciliation of data from source Complex products Target market Product disclosure Complex alerts Intended market PRIIPS Scenario analysis Costs and charges Summary risk indicator Performance scenario Cost disclosure POINT OF SALE DISCLOSURE (CLIENT) Appropriateness test / suitability check (including report) Product documentation (e.g. PRIIPs KIDs, UCITS KIIDs) Cost transparency - itemized cost breakdown (cost sheet) upon request PRODUCT UNIVERSE Define product universe based on - Types of clients - Service offering - Target market & aspects like (non-)/complex & (il)liquid Define target market in more detail PRE-TRADE SUSTAINABILITY ART 25, 54 DECISION POINT TRADE? BEST EXECUTION ART 24/27, 65 COSTS & CHARGES ART 24, 25 PRODUCT GOVERNANCE ART 16, 24 Distributer to report amount of sales outside target market (Art 24) BEST EXECUTION Ensure best possible execution Make best execution policy public EX-POST COST & CHARGES Periodic reports towards the customers PRODUCT GOVERNANCE Ensure products and services still fit target market Manufacturer to define and maintain target market (Art 24) 5 6

5 Investor protection Tailor your investor protection response with SIX Choose single data packages or a complete end-to-end investor protection service. SIX provides a suite of services for investor protection compliance. Stay in control with our modular approach, which gives you flexibility to choose the service package you need for an accurate, scalable regulatory response. Document generation Document distribution for product issuers Search, download, archive and report on all regulatory documents on demand using a single tool. SIX data and analytics Investor Protection Rely on SIX to meet product governance obligations, efficiently match your client base to your investment universe and keep your client advisory processes compliant. Our data service delivers the full range of content required for target market assessment and cost breakdown at the instrument level across all asset ISINs, CFI & FISN Classifications (including complex / non-complex) Regulatory flags (, PRIIP) Transparency, Transaction and Reference Data Reporting Investor protection Generate and upload regulatory documents in multiple languages and local legal jurisdictions across EEA markets. Automated generation of KIDs to standardized templates 10-year storage and archiving of all document retrievals Create an ISIN for my product Manufacturers Multi-lateral exchange of regulatory data and documents between manufacturers and distributors Distributors Our data service helps you automatically identify MiFID-reportable instruments and provides the reference data you need to fulfill trade and transaction reporting obligations confidently. We also help you fulfill trade reporting (transparency) obligations in a lean and efficient way with static data provided by ESMA and venues. Is this instrument reportable? yes / no Our value for distributors Our value for manufacturers Faster on-boarding into front office made possible Access to complete regulatory information sets: ISIN assignment for OTC products made easy thanks to our connection with the ANNA s DSB Access award-winning regulatory data Independent valuation audit made available A single platform to reach distributors Develop your distribution channels Generate and distribute regulatory docs ANNA Service Bureau 7/1/17 Target market Costs Investment docs Regulatory docs OTC Term sheets Easy compliance with regulatory requirements, especially reporting (e.g. sales reports) 7 8

6 Investor protection Join a connected regulatory community through SIX A trusted partner for investor protection Investor protection Complaints Instrument data Client data Product data FIRMS REGULATOR Transaction-specific data Sell-side (manufacturers) Product data Buy-side (distributors) Transaction-specific data RETAIL INVESTORS INNOVATION FOR THE FINANCIAL MARKETPLACE SIX has innovated to help the market respond to the scale of investor protection compliance and change the regulatory burden into infrastructure optimization and business opportunities. Our business-ready services are based on proactive discussion with customers and regulatory follow-up; we offer tailored content for every aspect of the business process. Take advantage of a single connection, coupled with easy integration into your core banking software or access via an online interface, to reduce your data management burden and help you industrialize your regulatory response. Our systems are also scalable for future regulatory advancements, allowing you to future-proof your compliance programs. 1,500 DATA SOURCES Industry-owned 23.7m INSTRUMENTS Hosted regulatory communities 23 COUNTRIES Engaged with regulators 2,500 CUSTOMERS Organic growth AIFMD The EU directive on alternative investment funds hinges on the EU passport, which alternative investment fund managers (AIFMs) must acquire for themselves and their funds (AIFs) to operate within the EU market. AIFMs must also regularly report on the liquidity, risk profiles, and concentrations of their portfolios. SIX provides the information you need to apply for the EU passport and helps you calculate the correct asset and risk values for reporting to the local supervisory authority. Our service helps investment consultants and financial advisors provide competent advice to their clients and fulfill their legal obligation to protect investors. UCITS The Undertaking for Collective Investments in Transferable Securities (UCITS) directive aims to allow collective investment schemes to operate freely throughout the EU on the basis of single authorization from one member state. SIX provides the data that firms need to measure the risks involved, including data describing how the derivatives are linked to the relevant underlying, how the financial instruments are linked to the issuers and how the issuers are linked to their ultimate parents along with various UCITS-relevant instrument classifications. PIBS Under German law, product issuers and their distribution partners must provide investment advisory clients with Product Information Bulletins (PIBs) and Key Information Documents (KIDs) for investment funds. Closed-end funds providers must also publish an Investment Factsheet (IF). SIX provides extensively automated reports and factsheets for standard and OTC products. We offer efficient, flexible document management, supported by customized, detailed view statistics and 10-year archiving to ensure audit compliance. 9 10

7 Tax & compliance Regulatory challenges The volume of tax and risk data that critical business decisions hinge on When looked at as a whole, the stream and complexity of new regulatory requirements for tax and sanctions placed upon financial institutions completely change the game for compliance teams with regards to data requirements. New compliance risk is being taken on in the context of data relating to instruments, entities and individuals - data that is notoriously hard to capture and validate. Critical business decisions will depend upon, not only getting this data right, but having it available at precisely the right time - tax and regulatory data has never been more crucial. NEW STRUCTURED PRODUCTS OPENING WITH ISSUER IRS 871(M) STATUS Source: SIX Connexor 6-month average LAUNCH OF IRS 871(M) GLOBAL SANCTIONS Nov 16 Dec 16 Jan 17 Feb 17 Mar 17 Apr 17 Investors are not shying away from U.S. equities as underlyings Tax & compliance KEY CHALLENGE Gathering, cleansing and analysing enormous volumes of data Global sanctions regimes, including Russian sanctions, represent a new and pressing risk for financial institutions, as they are high-profile, politically sensitive areas of regulation. This has been an area of substantial growth in recent years in the context of both the number of regimes and the length of regulatory enforcement. Sanctions apply not only to jurisdictions, entities and individuals but also to financial instruments issued or entities controlled by them. The data challenges in the area of sanctions regulations are manifold, but a crucial one in fast-moving financial markets is the timeliness of key data sets in a landscape of complex, intertwined yet disparate regimes. This will require vast new tracking and monitoring efforts for compliance teams. US TAX REGULATION ON EQUITY-LINKED INSTRUMENTS Challenge Many sanction-affected securities are traded under a variety of different names, and determining beneficial ownership can require significant detective work. As securities constantly change hands and names, how can banks determine when a sanctioned individual is benefitting from a sale? Adrian Hutzli, Head Value Added Services The U.S. Internal Revenue Service 871(m) regulation requires a 30 percent withholding tax for non-u.s. investors on dividend-equivalent payments under derivatives in which the underlying instruments are U.S. equities. This has left financial institutions scrambling to establish the appropriate monitoring, withholding and reporting processes for transactions falling under the jurisdiction of this new regulation. The rule applies to situations where the ratio of change in value of the instrument vs. the value of the underlying security (what is known as the delta ) is equal to or greater than 0.8. Don t get caught with skeletons in your closet. A breach of sanctions is an ongoing risk. 420 new sanctioned instruments are issued every quarter and there are currently over 4,500 sanctioned securities listed on exchanges. 4,500 sanctioned securities listed on exchanges GOOD TO KNOW Challenge For investment firms with heavily weighted 871(m) relevant instruments in their portfolios, this all adds up to an intricate operational puzzle to solve. Compliance with 871(m) demands a vast degree of data coverage, research, record-keeping, monitoring, calculations and reporting obligations. Jürg Stalder, Senior Product Manager SIX draws upon years of expertise in the areas of entity and instrument data to provide a suite of products which provide reliable, accurate and timely data to meet these requirements. Single database and domain masters for reference and price data: Eliminate data redundancy Eliminate data duplication Eliminate data sourcing complexity Ensure on-going monitoring of the regulatory landscape 11 12

8 Tax & compliance The SIX value proposition Award-winning innovation to overcome compliance and risk challenges SIX GOLD COPY REGULATORY DATA AND MANAGED SERVICES Audit the data to ensure consistency and completeness Normalize into granular details while eliminating redundancy and sourcing complexity Tax & compliance SIX unravels complex regulations with consistent and precise corporate actions, reference and pricing information and services. FATCA and IRS 871(m) service flags in-scope securities and delivers critical data points for effective withholding and reporting. Sanctions Securities Monitoring Service identifies sanctioned domiciles, entities and all their issued securities to avoid significant fines. FACTS & FIGURES FLAGGED 13,500 sanctioned or potentially sanctioned securities Security cross-referencing linking instruments and issuers across borders, reducing errors and facilitating consolidation for exposure, limit monitoring and regulatory reporting AUDIT NORMALIZATION SECURITY CROSS-REFERENCING DELIVERY CONNECTED COMMUNITIES Connected communities supporting multilateral exchange between manufacturers and distributors PEP-check enables firms to efficiently check their potential and existing clients against sanctions lists as well as screening transactions. OVER 850,000 Delivery via our high data-volume processing or our range of managed services AEoI/CRS service identifies reportable income by flagging relevant corporate actions, easing resourceintensive data cleansing and alleviating the annual reporting burden for organizations. IRS 871(m) relevant instruments marked to date VALUE-ADDED EXAMPLE Sanctioned Securities Monitoring Service - Sourcing and analysing reference data, corporate actions and beneficial ownerships for comprehensive sanctions reporting Solvency II data service provides the data consistency and granularity required to ensure accuracy, completeness and appropriateness for calculating the Solvency Capital Requirement (SCR) and Minimal Capital Requirement (MCR) and producing Quantitative Reporting Templates (QRTs). +60 additional data & services for international & national regulations. Confidence to transact. With SIX, your securities portfolio is always up-to-date with the latest sanctions, tax reporting and withholding requirements. new IRS 871(m) relevant structured product openings a month SANCTIONS AWARDS 1 Solution OVER 10,000 Systems in the City Awards Best Compliance # IRD/IMD Awards Most Innovative Regulatory Solution 50%+ Sanctioned individual 50%+ 50%+ 50%- Indirectly owned company Not to be traded 35%+ 35%+ Comprehensive Sanctions List You receive data to match against your portfolio and pre-trade screening Sanctioned Not Sanctioned / Watchlist Not Sanctioned, but high residual risk 13 14

9 Security master Regulatory services built on data you trust Robust regulatory services need a strong foundation. SIX provides a single database and our domain masters for reference and price data. The highly structured SIX data model features intelligent cross-referencing to enriched regulatory content to help our customers identify and consume the right data for compliance tasks. Our consistent and precise corporate actions, reference and pricing information helps you unravel complex regulations, increase automation and reduce the significant cost and effort of compliance, allowing you to focus on your core business. IDENTIFY THE RIGHT DATA, LETTING YOU FOCUS ON YOUR CORE BUSINESS Premium fuel for your security master Our security master services facilitate fast global trading by making high-quality reference data and corporate actions available across the entire trade life cycle, from pre-trade activities such as investment decisions to post-trade clearing and settlement services. TRADE SECURITY MASTER SERVICES Security master Reference data & corporate actions IRS 871(m) PRE-TRADE PREMIUM FUND REFERENCING & PRICING DATA CORPORATE ACTIONS TARGET2 SECURITIES POST-TRADE PRIIP FATCA 90,000+ FUNDS Premium Fund Data SIX provides an automatic flag to certify fund data that is enhanced with additional tax and regulatory content. Up to 150 data fields must be complete and up-to-date for a fund instrument to be certified as premium. The service offers you the comprehensive and granular fund content you need for regulatory compliance and allows you to rely on a single source to make confident investment decisions. Award-winning corporate actions since 2010 SIX provides corporate actions data to keep you informed on the latest stock splits, spin-offs, IPOs, redemptions and dividend payments to support your cash flow management, income distribution and time-critical portfolio and risk management activities. SIX corporate actions can reduce operational and reputational risks by helping you automatically monitor ownership structures for sanctions compliance and keep on top of your tax reporting and withholding obligations. AWARD - WINNING Solvency II Sanctions CRS Target2 Securities SIX provides flags for financial instruments that are eligible to be settled via the T2S platform. The service covers all key markets and enables clients to automate correct settlement instructions and achieve straight-through processing thanks to easy integration through one data source

10 Security master Committed to the highest data quality To ensure consistently high standards, SIX has developed a quality check life cycle covering the entire process of data aggregation and delivery. The process is constantly monitored and data quality controls are performed throughout. We cover all global asset classes and legal entities, reflecting international market standards. COVERAGE ACCURACY We ensure accurate data by normalizing and enriching financial information and adding value for clients. 1,500+ sources worldwide The SIX data factory Adding value to help you grow Once data reaches our data factory, we carry out additional plausibility checks and enhancements. Data deliveries contain analysis of data usage statistics and benchmarking data such as KPIs for completeness, correctness and timeliness. We collect and aggregate raw data Reference, market, pricing, tax, regulatory, corporate actions and news data are our inputs. Security master CONSISTENCY CONFORMITY & We deliver our data in standardized formats, definitions and delivery channels. TIMELINESS By updating information in 15 min intervals, we provide near-real time data to the market. What happens in our data factory? Data consolidation Data normalization Data cleansing Data completion & correction Data analysis Data storage Data updates Data value change GLOBAL DATA PRODUCTION LOCATIONS The core of our data offering is our source management process. Our rigorous quality controls combine data quality analysis, assessments and research with tolerance checks. We also detect and eliminate mismatches to improve quality and consistency. Stamford / CT Paris Zurich Tokyo Singapore Poland India DID YOU KNOW 23.7m INSTRUMENTS 100 TERABYTES 1,916b PRICE UPDATES Flexible data delivery As a file ready to be processed As a feed ready to be integrated On a screen ready to be used Via intuitive desktop and mobile GUI ready for the business user Rely on accurate, complete and consistent data to help you Report reliably Reduce manual error and optimize front-to-back operations Ensure tax and regulatory compliance Achieve efficient securities administration Make confident investment decisions Focus on your core business 17 18

11 Powered by Innovation. Reference data & corporate actions IRS 871(m) PRIIP FATCA Solvency II Sanctions CRS Our reference data fuels our innovation. Based on award-winning corporate actions and enriched regulatory content, our data services simplify the complexity of compliance. From developing new rulesets to simplifying delivery mechanisms, our innovative approach will help you respond to new regulations with ease and confidence.