The three regulators-turned-consultants at Newgate Compliance, who have long been helping to 'onboard' new funds into the UK, talk to Chris Hamblin about their experiences and the new software system that helps them to monitor their clients' compliance efforts.

The three regulators-turned-consultants at Newgate Compliance, who have long been helping to 'onboard' new funds into the UK, talk to Chris Hamblin about their experiences and the new software system that helps them to monitor their clients' compliance efforts. Theirs is a mixture of new technology and good old-fashioned regulatory experience that goes back to the fabled days of the Investment Management Regulatory Organisation.

Q1. First of all, why have you named yourselves after a notorious Medieval prison?

A: (All laugh.) Actually, we try to keep people out of prison. If you know your history, Newgate was also a gate and that's why we chose it – we are instrumental in helping people to come to London.

Q2. One of your specialities is 'onboarding' funds and fund firms that come into the UK. What are the pitfalls involved?

A: We've done 'onboarding' for over 500 firms, helping them through their regulatory applications. Typically, the problem is that they get bad advice and pay too much for it. You want to get someone who's done it before. We've all had 10 years' regulatory experience apiece.

Firms also don't leave themselves enough time to go through the process. It takes 6-9 months typically, especially at the moment. The FCA is taking 3 months just to allocate a case to a case officer. We concentrate on getting the applications off quickly and then building the compliance function [of the incoming fund] up in the meantime while we wait for that.

The firms also don't get too much tax advice at the start. This is crucial because they have to decide on the fund structure – you have to know whether you're going to have to set up a series of limited companies or not. We refer them to our affiliates for tax advice and other things such as prime broking. There's a network of different service-providers out there when you're setting up a hedge fund. We point them in the right direction.

We have in the past seen firms trying to deal with the FCA on their own and being told to go to a consultant! We were quite surprised the first time that happened. The FCA returned the papers to the client and said “come back to us another time.”

Q3. Why is Newgate better than other consultancies in helping customers conquer the pitfalls we've just discussed?

A: There's a number of things that we do. We're very experienced. We're diligent. We've got the knowledge to get their level of knowledge up very quickly. We can size them up quickly as well – we always start with a no-obligation chat and an hour's discussion will tell the tale. We look at them with the eyes of regulators, which is what we were. We all worked in the area where we decided whether firms could come into the UK, specialising in the asset-manager, investment advisor sectors.

Q4. 'Investment advisor' is an American term. Are you particularly experienced at guiding US firms into the UK?

A: (All) Oh yes definitely. Lots of our clients come from the US and the large ones typically set up small offices here.

Q5. What about your new software offering? Is it fully automatic or is it 'software meets consultants'?

A: It's software-meets-consultants, basically. It's a two-fold platform. One side is client-facing. It allows the clients to monitor their compliance procedures and policies. They can get employees to submit forms for gift requests etc. It has a repository area – the first part of this is the document side, in which you can put compliance manuals and documents about various compliance policies of the firm. The second part is the library, in which the firm might put information of interest, perhaps including an article we have written about, say, the AIFMD. The final part of the GATEway is the calendar side, the diary management part of it. It contains actions outstanding for us, or FCA returns that they need to do – that sort of thing.

The second side of the platform is for us internally. Our work is managed on it. It allows us to control things internally. If, say, Martin is ill for a week, we can see everything he's done for the clients over the last 2 months and pick up his work where he left off.

Q:6 Is it totally stand-alone software? I know that if you try to link it up to the clients' systems, you're in a world of potential hurt, especially as many of the typical clients' systems don't talk to one another.

A: That's very true! It doesn't link up with the clients' systems. It's totally stand-alone. There's a secured link online, so nobody can hack into it.

Q7: Is it fairly typical of the software that consultants use to help clients?

A: Yes but it's more comprehensive than most. Some do a bit on the broker's side, some do attestation letters – ours does every job in compliance. As a rough guide, these jobs are:

(a) Compliance monitoring – this is a series of questionnaires touching on your gifts policy, or your approved persons policy or whatever. It enables the firm to show the FCA that they have full oversight of their compliance effort.

(b) Forms and registers – so if an individual wants to do a personal transaction, he notifies the compliance officer for approval and the system builds up a register of all approvals and rejections.

(c) Documents – FCA correspondence goes here.

(d) Library – this contains training documents and the other things we've mentioned already.

(e) Diarymanagement.

As the consultants, we can then go in from the back end of the system and say “this is overdue – it's time to do it,” or give the client other advice.

Q8: So your system sits in the client's office and you use it to give advice. Do you offer different depths of advice? In other words, do you give 'light touch' advice to some clients but really 'heavy touch' advice to others who need it because they are totally inexperienced in this country?

A: Our fee structure allows for a light touch or a heavy touch. In fact, the IT system is a free part of what we provide. Fees are solely dependent on the level of service.

Q9: Have you ever experienced, or do you expect to experience, the FCA having trouble with a new fund firm and then coming to you and asking you to give it information about that firm?

A: No, the FCA never wants to involve third parties. We do help the client-firms with the answers to their questions, though.

Q10: What, then, is your unique selling-point? Why is Newgate good at helping clients in comparison with other firms?

A: Our system is new; and also I don't think anything else is as comprehensive. Many consultants who are on 'high-level retainers' will go in and review their files every 3 months. The way we work tends to be that people come to us because they have specific problems. We help them with their problem, and then a percentage of them go on to have us as permanent consultants and sign up to our system.

Q11: Your literature says that the size of firms that you serve ranges from $1 million in AuM (assets under management) to $15 billion in AuM. What happens with the very large firms? Do they just ask you to help with a small part of their operations?

A: Actually, the size of AuM need not be a sign that the firm is huge. Some firms have large AuM but their operations are scalable. A lot of them are just doing bigger trades than others. With some organisationally big firms, though, we just give their compliance departments advice and a safety net, sometimes acting like a library. Or they might want us to help them over a project or with an FCA visit. The technical side is where we come into our own.

* Newgate Compliance is to be found at www.newgatecompliance.com and on +44 (0) 207 947 4136.