Fund Distribution for Asset Managers

Asset Managers typically have a distribution or sales team to distribute their funds. They generally focus on institutional investors such as pension funds, insurance companies, or sovereign wealth funds.

In most jurisdictions, marketing or offering financial services is highly regulated, even if these activities are conducted only vis-a-vis professional counterparties such as institutional clients. Therefore, the distribution teams need to clarify the regulatory rules applicable to such marketing/sales activities when approaching potential investors. However, the regulations are often unclear and maintained as text-based handbooks or policies, which can be difficult to understand.

Asset managers must ensure fully compliant sales processes to avoid significant legal, regulatory, and reputational risks, and distributing investment funds to non-permissible investors is therefore not an option. To clarify laws and regulations of a country before distributing to investors, asset managers often have to review lengthy handbooks manually. This method is inefficient, costly, error-prone, and carries a high risk of non-compliance. In addition, keeping these regulatory restrictions up to date and organizing annual compliance training and certifications on these topics is cumbersome and costly.

This guide explains how to integrate the relevant fund distribution restrictions via the Apiax Cross-Border API in existing tools and workflows, such as fund platforms, sales tools and travel management systems. Apiax has a separate guide available for marketing services and investment products via a financial institutions website. It shows how the Apiax API provides the automated regulatory framework around fund distribution activities. The integration of the Apiax rules ensures up-to-date regulatory rules, regardless of regulatory complexity, while minimizing maintenance in case of regulatory change.

Pre-requirements

Before starting, ensure that you have:

• A SaaS subscription to the Apiax API (optional subscription to the platform)
• An active subscription for the relevant digital compliance rules (content)
• A user account with access rights
• A ready to use API authentication and access
• A capable customer-facing solution to integrate

For more information, see Apiax initial account setup.

Use cases and studies

Apiax offers a series of use cases and studies to gain further insights into the business benefits of switching to embedded compliance rather than following traditional compliance approaches.
Refer to the use cases webpage on apiax.com or contact Apiax for more information and an overview of how you can move your business forward with ready-to-use solutions for embedded compliance.

Introduction

This integration guide provides step-by-step instructions of a business case, taking you through the process of embedding compliance into your environment, team or process. Make sure to follow these steps with your specific case and situation in mind. Adopt and extend rules, attributes and API requests where necessary.

Apiax offers test and live API keys and rule governance and versioning functions for you to test and validate changes before applying them.

Example to get started

Thomas works for Asset Manager Ltd. and is located in Great Britain (GBR). He and his team are responsible for distributing and marketing the funds of Asset Manager Ltd. to institutional investors. He interacts with investors all over the world.

In one specific case, Thomas has a potential investor, a pension fund established in Italy (ITA). The representative of the pension fund is located in Germany (DEU). With the Apiax cross-border rules directly integrated into the fund management platform, he can enter the relevant data points (such as client’s domicile/place of incorporation, client category, and other) into the tool containing all funds. He’s interested in offering the prospective client a European Mid Cap Equity fund established in Luxembourg (LUX).

The system then sends Apiax an API request with the relevant attributes. Thomas receives the answer on whether he can distribute investments funds at all. If yes, the system would filter the fund universe, hide funds potentially not permitted for distribution (for example, due to the registration status) and provide any additional requirements which he needs to consider. If the specific interaction or distribution of funds to the investor is not allowed, the workflow stops or a warning message appears with additional information. This embedded compliance step ensures that Thomas only performs compliant activities.