Getting in that SEC Reporting Modernization State of Mind

Date: June 8, 2017

New Mindset New ResultsAs fund operations teams work through their SEC Reporting Modernization readiness, the most important task to execute, oddly enough, might be a shift in mentality. By and large, operations teams excel by executing a known process, executing it better than their peers and competitors, executing it today better than they did yesterday and with fewer resources. Then along comes SEC Reporting Modernization, taking operations groups out of their comfort zone. As you prepare for Form N-PORT, step one will be to change your mindset from process execution to process development.

There are three mentality adjustments that will allow you to successfully create a new process from scratch. First, get moving earlier rather than later. Second, get across the finish line with something – anything – as fast as possible. Third, be able to take general lessons from other similar processes and apply selected elements to a new process.

Do it when you can, not when you need to

When executing a known process, the delivery date drives your schedule. When creating a new process, set your schedule and your project plan based on when you can do something, which is right now, not based on when you need to do something. Don’t wait until you know the whole to execute the part. If you know a small piece well enough to take action, take action on that piece and leave the rest for later.

Don’t get caught up in the enormity of the process

When executing a known process, you are used to dealing with the whole. When creating a new process, deal with the part.  The items included in Form N-PORT are available today. Go item by item and work on something rather than waiting until you know everything.  Balance between your knowns and unknowns. If something is unknown, it is high risk, and high risk items should be done earlier so that you have time to react to all of those unknowns. At the same time, working through the known items will take you back to your strength, get you back to improving a process rather than creating a process.

Combine lessons learned from disparate times and places

While you can’t copy some other process in bulk, you can still learn from the past. And with all of the global regulatory change that has occurred over the past eight years, you are not limited to your own experiences. Utilize your network to collect lessons learned outside of your team – your regulatory systems provider, your private fund operations team, your European operations team. Identify the commonalities between filings. The data sourcing is the most time consuming, both the amount of effort and the span of time from beginning to end. Form N-PORT will require 20 to 30 data sources, and you might need up to a year to coordinate and put them all together. While the funds and the data versions might be different, the data model, many data sources, and a lot of data transformation will be the same.

The Form N-PORT schema will be first released with little time to prepare, and will likely change a lot in the first six months, with at least one known change in the queue for liquidity risk management. Build that into your process by having a filing system that can be modified quickly and safely. Along those lines, SaaS is a must. First, to accommodate all of those changes, something you can’t do with a high overhead, infrastructure heavy install solution, and second to safely collaborate between numerous people in multiple organizations.

In your daily work, you focus on executing and improving existing processes. Creating a new process for Form N-PORT requires you to deviate from the mentality that made you successful in fund operations. If you understand the differences and prepare for them, your SEC Reporting Modernization preparation work will be far less onerous and far more successful.

To learn more about 13f-2 watch our webinar replay Part 1: Unpacking the SEC's New Disclosure Rules for Shareholders
Join us for Part 2: Operationalizing the SEC's New Disclosure Rules, for Shareholders on December 12.