Launching a Real Estate fund – how to use regulatory hosting platforms to your advantage
21st July 2020 3807 - Blog Posts
On-going regulatory changes, particularly in relation to the AIFMD, have played a large role in the increasing attraction of regulatory hosting platforms, as they can offer regulatory and compliance solutions, while reducing the administrative and cost burdens for real estate firms in the early phases. A regulatory hosting platform enables investment advisers and real estate fund managers to carry out regulated activities without being directly FCA approved. In turn, the client will instead become the appointed representative (AR) of the host firm and is in a position to carry out regulated activities, under the regulatory umbrella of the host, using the regulatory permissions of the platform provider.
By using a knowledgeable regulatory host, this will ensure that appropriate mechanisms are in place from the outset of the engagement to mitigate against the risk of incorrect reporting. With the right controls and expertise, I believe that platforms will thrive and become the primary solution for new start-ups if they can pass the same due diligence as institutional investors.
The FCA raised some concerns at the end of 2019 around there being a lack of effective governance arrangements and deficient risk control frameworks in place. This led to the FCA insisting that firms must have the following controls in place moving forward:
- Robust governance arrangements
- A clear, organisational structure with well defined, transparent and consistent lines of responsibility
- Effective processes to identify, manage and monitor the risks it is or might be exposed to
- Internal control mechanisms, including sound administrative and accounting procedures and effective control and safeguard arrangements for information processing systems
Understanding the regulator’s concerns and putting in place controls to meet the FCA’s requirements and expectations will ensure that this pragmatic and cost-effective turnkey solution continues to grow in a post-Brexit environment.
How can Lawson Conner’s technology solutions help?
As regulatory hosts and compliance experts, Lawson Conner see the benefits that a strong partnership between a regulatory host and an AR can bring to real estate operations and ability to attract institutional capital. Regulatory hosts with strong investment, risk and compliance teams can identify and continually manage your regulatory risk from the off – leaving you to focus on the markets. Moreover, our leading compliance software solution, MaxComply enables start-up and emerging funds to streamline their compliance processing time, whilst reducing their risk, cost and resources. Please get in touch to discuss how we can get your real estate business launched and supported. Learn more: https://lawsonconner.com/client-segments/real-estate-funds/