Microsoft Exchange 2010

President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act in July this year (2010). The Private Fund Investment Advisers Registration Act, Title IV of this Act removes the private adviser exemption that existed under previous legislation. This has ramifications for hedge fund compliance that everyone in the business needs to know.

The main changes to the lawisthe requirement of hedge fund, private equity and venture capital managers to have to register with the SEC as investment advisors. Up until then, they were excluded from the main SEC regulations regarding compliance.

The idea behind the changes to hedge fund compliance was to further the original goals of the legislation. To improve regulation and supervision of financial institutions and to establish adequate supervision of the financial markets. Both of these goals were designed with a view to protecting investors and customers from abuse.

The side-effect of these measures was to promote better international cooperation and seek to improve international regulation of financial markets. The reputation of Wall Street and our large financial institutions hasn’t been great for the past few years. That makes it necessary to bolster that with robust regulations to show the world we are getting our house in order.

There have been too many high profile financial failures over the past years. Add the fact that our banks caused the global recession, and we have a lot of work on our hands to rebuild confidence in the way we do business. This new Act is a small step on a long road, but a step in the right direction.

The changes mean that investment advisers need to produce financial reports on their funds. That includes information on how its managed and a risk assessment. This is to protect investors and improve transparency throughout the sector.

Specific requirements for archiving are listed below. These are all things needed to ensure hedge fund compliance but are already in the public domain. It’s just previously hedge fund managers didn’t have to comply.

• All incoming and outgoing information must be stored in its original form
• It has to be easily retrievable and searchable
• It has to be time-stamped
• All data has to be stored in the main office for the first two years
• Data has to be retained for five years but can be archived after two
• Data has to be put into tamper proof media
• Data has to be stored in a secondary, separate backup location
• Be able to access and provide archived data promptly
• Be able to provide data in its original format

Many financial institutions will have these measures in place already as they comprise existing law. However, those who specialize in hedge funds, or are regarded as separate entities will need to ensure they comply with these requirements.

Those listed above are just the highlights of the new law. For a complete copy of the requirements it’s important to contact an attorney or the SEC direct. As with other financial institutions failure to comply with hedge fund compliance rules is viewed very dimly indeed.

Company email has become a vital source of evidence in legal proceedings over recent years. As it became more important to the way businesses operated and communicated, both internally and externally, the more useful email became in litigation.

Email compliance soon became an important part of an IT department’s life, and plans were hurriedly drawn up so organizations could meet their obligations. While archiving email has been a part of the IT schedule for many companies, it was often on an unofficial or ad-hoc basis. Then along came a raft of legislation compelling businesses to create and maintain an effective, and compliant archive and retrieval system.

Fortunately, even during its infancy, there were two methods of email compliance. The first was to control everything in-house, on the organizations own servers. Then build in a secure storage function, efficient retrieval and processes to answer E-discovery requests.

The second was to outsource the operation to third party providers and let them take the strain. They would take the email information off Exchange servers or other email platforms, format it, compress it and then store it securely. They would then service any E-discovery requests made by the client or their legal team.

Both have pros and cons.

Keeping it in-house involved a hefty investment in time and money. Extra hardware, networking, staff and processes would be needed in order to build a coherent, and compliant process that would satisfy the needs of the legislation. The benefit was that the organization retained full control of the data, the systems and the process.

Having the email compliance hosted offloaded just about all of the initial outlay, the need for the hardware, extra staff and the infrastructure to support a compliant system. That would be in the hands of the vendor. The size of the solution could also be scaled according to seats. If the client company grew, bought other entities or got purchased itself, the outsourced service could be scaled to meet the new needs.

The downside was that it is a recurring expense that the business has to pay, but doesn’t own. The organization also has to rely on the professionalism of the vendor in order to ensure the data is safe and that they are completely covered in the event of litigation or E-discovery requests.

There is no right answer to the question of what method is right for which business. That comes down to the individuals involved. Both solutions lend themselves to different scenarios, and different situations. The decision whether to go in-house or outsource depends entirely on where the organization is now, and where they plan to be in a few years time.