Asset Manager Chooses Compliance System

Britannic Asset Management, a Glasgow, Scotland-based investment manager with $14 billion sterling under management, has made the decision to invest in Sentinel, a pre- and post-trade compliance system by LatentZero.

"The compliance environment has changed massively in recent years," explains Lindsay Gold, Britannic's head of regulation. "Systems are becoming more and more prevalent in being able to help firms minimize the risk of non-compliance to regulatory and client requirements."

Gold says that Britannic began searching for a compliance system about three years ago, when the firm realized that its periodic manual checks were not adequate to handle the volumes it was trading.

Britannic examined various compliance vendors, Gold says, but ultimately chose LatentZero based on its established service with other similar investment firms, noting the importance that the firm placed on finding pre-trade compliance. "Not all of the alternative systems had pre-trade compliance up and running," he says. "Some were working on it and others had prototypes with no clients. Sentinel was already implemented in a number of investment houses using pre-trade compliance, so it was a proven solution."

In addition, Gold says that he'd seen examples of Sentinel integrating with LongView Trading System, Linedata Services' order-management system, which Britannic already had in-house.

Sentinel allows Britannic's investment managers to set up portfolios, while the system takes into account three sets of rules, Gold says. These include mandates from the Financial Services Authority, the U.K.'s version of the U.S. Securities and Exchange Commission, Britannic's client's mandates, and in-house parameters.

Gold explains that LatentZero built rule libraries into Sentinel based on geographical areas; however, his firm has spent the last 18 months programming its own internal and client rules. He expects the implementation to be finished by August.

The pre-trade compliance aspect of Sentinel flags non-compliant trades as they come across the order-management system, and sends warnings to investment managers through their browsers, Gold explains. The browsers then allow the managers to drill down to whatever the breach may have been, make the appropriate change, and resend the compliant trade.

The system also performs post-trade compliance each night, in order to ensure that market movements have not created parameter breaches, Gold says.

Gold notes that Britannic's investment managers have been pleased with the solution so far, adding that the speed and scalability of the solution has been a success. "Time is of the essence for managers," he says. "The system can check a large number of parameters across a large number of trades, so it has been accepted warmly."

In addition, Gold says that the cost of the solution was comparable, if not better than its competitors, especially because Britannic allowed LatentZero to expand the vendor's reach into Scotland's investment-management market.

The investment is well justified in the current market, according to Gold. "Sentinel reduces our incidence of error and minimizes our risk from investment parameters," he says. "We anticipate that clients will become more switched on to risk management, corporate governance and compliance issues, so having Sentinel really works in our favor."