SEC 18f-4: Use of Derivatives


  • VaR is COMPLEX
  • Daily COMPLIANCE is Hard
  • Failure is EXPENSIVE

NextGen Can Help Your Funds
Comply & Save Money

Contact Us

Your 18f-4 Implementation Resource

Deadline:
8/19/22

NextGen Can Help Your Funds Comply & Save Money

Click Here to Schedule a Free 15 Minute 18f-4 Diagnostic

SEC 18f-4: Use of Derivatives


  • VaR is COMPLEX
  • Daily COMPLIANCE is Hard
  • Failure is EXPENSIVE

Your 18f-4 Implementation Resource

Are You Ready for SEC 18f-4?


With the deadline fast approaching, many funds are discovering that the required level of effort is more detailed and more complex than previously estimated:

  • Do you have enough funding to achieve compliance?
  • Are the funds prepared to address the complexity of the new requirements?
  • Have you identified the technology and analytics solutions?
  • Have you validated your implementation plan and timeline with an experienced third party?

NextGen is helping clients understand their compliance requirements. Contact us to schedule a 15-minute diagnostic of your 18f-4 compliance program.

Click Here to Schedule a 15 Minute 18f-4 Diagnostic

Critical SEC Compliance Considerations


We can help you address these critical compliance considerations:

Scope

  • Identify which funds are in scope for 18f-4 compliance?

Complexity

  • How complex is implementing the Value-at-Risk requirement?
  • What permitted cash & derivative products are the in-scope funds allowed to trade?
  • What internal processes are in place to support trading in a new product for the fund?
  • What historical data does the fund have access to regarding positions and pricing?

Resourcing

  • Has funding been approved to support complying with the regulation?
  • How were the funding requirements determined?
    What Technology resources have been included? (IT platform, implementation and maintenance staffing?)
    Ongoing Compliance staffing?
  • What should you expect regarding implementation time and total implementation cost?

Regulatory Compliance Preparedness

  • Ability to perform daily VaR limits monitoring and reporting?
  • Designing SEC compliant risk reports?
  • Capability to make required SEC and Board of Directors VaR limit excess notifications?
  • Status of the required Risk Management Program and Policies & Procedures?
  • Implementing relevant portfolio Stress Testing capabilities?
  • Complying with Recordkeeping Requirements?

NextGen 18f-4 Resource Center

Our NextGen Resource Center has solutions to reduce expenses and implementation time:


NextGen Competitive Advantage


  • NextGen Senior Managers are Former Chief Risk Officers with Extensive Experience Complying with SEC Derivatives Requirements
  • NextGen Partners Have Deep Experience Implementing SEC Derivatives Requirements
  • NextGen Has Relationships with Senior SEC Staff and Commissioners
  • NextGen CROs Have Lived This Experience and Know How to Work with Regulators
  • NextGen Has Worked with Numerous SEC Regulated OTC Derivatives Dealers and Security-Based Swap Dealers

NextGen Competitive Advantage


  • NextGen Senior Managers are Former Chief Risk Officers With Extensive Experience Complying with SEC Derivatives Requirements
  • NextGen Partners Have Deep Experience Implementing SEC Derivatives Requirements
  • NextGen Has Relationships with Senior SEC Staff and Commissioners
  • NextGen CROs Have Lived This Experience and Know How to Work with Regulators
  • NextGen Has Worked with Numerous SEC Regulated OTC Derivatives Dealers and Security-Based Swap Dealers

Our Leadership


Gary Mandelblatt

Gary is a Managing Partner at NextGen Strategic Advisors with over 35 years of experience working with financial institutions in managing market, credit and operational risks, managing regulatory relations, implementing regulatory requirements, defining strategies and building businesses. Gary was the Chief Risk Officer for Nomura Americas and Chairman of Nomura’s Global Dodd-Frank Implementation program. Prior to Nomura, Gary was a Managing Director at the Lehman Brothers Estate where he was responsible for building the valuation capabilities for 1.2 million derivatives contracts and hedging open risk exposures. Prior to that, Gary was the Global Head of Fixed Income Strategy at Lehman Brothers and helped build the commodities and emerging markets businesses. Before joining Lehman, Gary was Managing Director at Smith Barney, Salomon Smith Barney and Citigroup and was a senior Market Risk Manager for Fixed Income and supported numerous regulatory efforts. Prior to that, Gary was a consultant with Coopers & Lybrand and First Manhattan Consulting Group.

Donna Parks

Donna is a Principal Consultant with 30 years of comprehensive risk management and banking experience. Donna’s global experience extends across the Americas and Asia in all aspects of risk management including enterprise, credit, market, and operational risks, managing regulatory relations, implementing regulatory requirements, defining strategy, building businesses and governance. Donna was Chief Risk Officer for Standard Chartered Bank (SCB), Americas and the accountable executive for the implementation of Section 165 of the Dodd-Frank Act. Prior to this role, Donna was Senior Regional Credit Officer for SCB, Asia based in Hong Kong. She was responsible, with her team, for managing 70% of SCB’s credit portfolio and supported the build out of the global commodities and hedge fund businesses. Before joining SCB, Donna was Managing Director at Citigroup and was a senior Credit Risk Manager for Banks and non-Bank Financial Institutions. In addition, she managed a Governance team that was responsible for regulatory relations and implementation of various regulatory projects.

John Monaghan

John is a Principal Consultant with over 25 years of experience working in the Financial Services industry in North America, South America, Europe and Africa. John has been involved in and managed most of the significant regulatory compliance initiatives including Basel II; Dodd-Frank; EMIR; MIFID II; FRTB; LIBOR transition and CFTC Swap Dealer and SBSD Rules. John worked at Royal Bank of Canada where he managed strategic initiatives which required cross-functional and multi-region coordination. Prior to RBC, he was at Morgan Stanley where he was Head of Operational Risk for Trading and Sales in the Americas. Prior to that, he spent 11 years at Barclays in increasingly senior roles. He managed the build out of a Front Office Risk and Supervisory Control function, Program Managed a multi-year program of work tasked with building out a new OTC Client Clearing business to align with the market structure changes imposed by Dodd-Frank and EMIR. Prior to Barclays, he was employed by Accenture as a management consultant. John has a B. Com degree in Law and Economics, an MSc in Finance and an MBA.

John Skrypa

John is leading the new client business development function for NextGen.  John has been responsible for similar functions at PWC, Deloitte, KPMG, and most recently at EY where he was part of the team that build their Managed Services business unit. He brings over twenty years of major account management experience, developing relationships related to consulting, managed services, and applications implementation to banking and capital markets clients. An innovative thinker with a strong history and a proven track record of business-focused solution sales, client relationship management, and experience developing relationships and managing teams in large scale and global accounts.

Our Leadership


Gary Mandelblatt

Gary is a Managing Partner at NextGen Strategic Advisors with over 35 years of experience working with financial institutions in managing market, credit and operational risks, managing regulatory relations, implementing regulatory requirements, defining strategies and building businesses. Gary was the Chief Risk Officer for Nomura Americas and Chairman of Nomura’s Global Dodd-Frank Implementation program. Prior to Nomura, Gary was a Managing Director at the Lehman Brothers Estate where he was responsible for building the valuation capabilities for 1.2 million derivatives contracts and hedging open risk exposures. Prior to that, Gary was the Global Head of Fixed Income Strategy at Lehman Brothers and helped build the commodities and emerging markets businesses. Before joining Lehman, Gary was Managing Director at Smith Barney, Salomon Smith Barney and Citigroup and was a senior Market Risk Manager for Fixed Income and supported numerous regulatory efforts. Prior to that, Gary was a consultant with Coopers & Lybrand and First Manhattan Consulting Group.

Donna Parks

Donna is a Principal Consultant with 30 years of comprehensive risk management and banking experience. Donna’s global experience extends across the Americas and Asia in all aspects of risk management including enterprise, credit, market, and operational risks, managing regulatory relations, implementing regulatory requirements, defining strategy, building businesses and governance. Donna was Chief Risk Officer for Standard Chartered Bank (SCB), Americas and the accountable executive for the implementation of Section 165 of the Dodd-Frank Act. Prior to this role, Donna was Senior Regional Credit Officer for SCB, Asia based in Hong Kong. She was responsible, with her team, for managing 70% of SCB’s credit portfolio and supported the build out of the global commodities and hedge fund businesses. Before joining SCB, Donna was Managing Director at Citigroup and was a senior Credit Risk Manager for Banks and non-Bank Financial Institutions. In addition, she managed a Governance team that was responsible for regulatory relations and implementation of various regulatory projects.

John Monaghan

John is a Principal Consultant with over 25 years of experience working in the Financial Services industry in North America, South America, Europe and Africa. John has been involved in and managed most of the significant regulatory compliance initiatives including Basel II; Dodd-Frank; EMIR; MIFID II; FRTB; LIBOR transition and CFTC Swap Dealer and SBSD Rules. John worked at Royal Bank of Canada where he managed strategic initiatives which required cross-functional and multi-region coordination. Prior to RBC, he was at Morgan Stanley where he was Head of Operational Risk for Trading and Sales in the Americas. Prior to that, he spent 11 years at Barclays in increasingly senior roles. He managed the build out of a Front Office Risk and Supervisory Control function, Program Managed a multi-year program of work tasked with building out a new OTC Client Clearing business to align with the market structure changes imposed by Dodd-Frank and EMIR. Prior to Barclays, he was employed by Accenture as a management consultant. John has a B. Com degree in Law and Economics, an MSc in Finance and an MBA.

John Skrypa

John is leading the new client business development function for NextGen.  John has been responsible for similar functions at PWC, Deloitte, KPMG, and most recently at EY where he was part of the team that build their Managed Services business unit. He brings over twenty years of major account management experience, developing relationships related to consulting, managed services, and applications implementation to banking and capital markets clients. An innovative thinker with a strong history and a proven track record of business-focused solution sales, client relationship management, and experience developing relationships and managing teams in large scale and global accounts.

The Securities and Exchange Commission finalized rule 18f-4, “Use of Derivatives by Investment Companies (including Mutual Funds and ETFs) and Business Development Companies."

 The Compliance Date is August 19, 2022.

Rule 18f-4 requires investment companies, mutual funds, ETFs and BDCs to implement Value-at-Risk based limits on the use of derivatives, develop a written Risk Management Program that defines the overall governance of the funds, and additional documentation and recordkeeping requirements.