DEVLHON Consulting deciphers: Summary of SPOT Controls- October 2024

DEVLHON Consulting deciphers: Summary of SPOT Controls on AIFM, MMF, and ROSA Regulatory Reporting – October 2024

The Autorité des Marchés Financiers (AMF) has conducted a series of SPOT controls, as announced in its 2023 supervision priorities, to assess the quality of data transmitted by portfolio management companies (SGP) through AIFM, MMF, and ROSA regulatory reports. These controls take place in a context where reporting is an essential tool for overseeing systemic risks and monitoring the financial sector, particularly regarding alternative investment funds.

 Context and Objectives

The AIFM directive, implemented after the 2008 financial crisis, imposes reporting obligations on alternative investment fund managers. In 2023, this reporting covered 9337 funds, managing a total of €1219 billion. Additionally, money market funds (MMF) play a crucial role, with 2171 reports filed between 2021 and 2023. The ROSA platform, introduced in 2021, enables SGPs to submit various regulatory information to the AMF.

The controls focused on four key areas:

1. Organization and governance of the reporting systems.
2. Procedural framework related to report production.
3. Analysis of the operational processes of AIFM and MMF report production.
4. Internal control mechanisms in place.

 Key Findings and Observations

 Organization and Governance

The audited SGPs have largely outsourced part of their reporting production process to external providers. However, there is an increased risk of error when processes are not fully integrated, as manual steps are often combined with automated processing. Most SGPs have implemented independent control systems to validate reports before submission to the AMF, though some gaps remain, particularly in staff training and project governance.

 Operational Processes and Internal Control

Internal control is generally well-structured, but anomalies were noted in some SGPs, especially in the monitoring of management delegations. Issues were also identified in the formalization of contracts with external providers, which do not always include the necessary quality control measures.

 Recommendations and Best Practices

The AMF recommends:

– Separating the reporting production and control functions.

– Integrating the monitoring of reports into risk management committees to enhance coordination.

– Using key performance indicators (KPIs) to monitor the efficiency of external providers.

 Conclusion

The reliability of data submitted to the AMF remains a priority to ensure effective oversight of financial risks. The AMF will continue to monitor the quality of reports while encouraging the adoption of best practices within the sector.