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How Blockchain Technology will change the financial sector

blockchain-technology

Blockchain technology has been the guideline of many debates and evaluations about the future of the financial sector. It is clear that it is a concept with the potential to change the logic of the market and create new business opportunities.

Blockchain can be defined as a digital system of nodes that act in parallel and allow self-certification and exchange of information. Technically it is a process of adding cryptographically signed data blocks to form perpetual and immutable records.

blockchain-technology

That is to say, it is a chain system of blocks, used mainly in cryptocurrencies such as the famous Bitcoin or Ethereum, which allows online transactions without the need of an intermediary thanks to “smart contracts” guaranteeing an agreement between two parts. This system based on parallel and simultaneous processing of information is extremely safe.

The data of the transactions after registered cannot be falsified or deleted, and are stored in a history that contains all operations since its creation: a kind of digital account book that records transactions and information in a verifiable and permanent way.

The concept of blockchain arose to support the Bitcoin protocol, but is no longer limited to the monetary sector. The blockchain goes beyond the application to currencies, because it allows registering any type of financial transaction, which can be bonds, shares, transfer of property and any type of right or obligation.

Since the Blockchain technology was created primarily to support virtual currency transactions such as Bitcoin, its use was initially for the financial sector. However, over the years, the new technology has been developed and is now incorporated in most industries.

A 2018 study by Tactrica indicated that the 5 main sectors of the industry for the adoption of blockchain would be: finance, manufacturing, governments, health care and insurance. In 2019, those predictions are happening.

blockchain-transformation

It is expected that the top 10 business use cases for business blockchain will be:

  1. Trade finance
  2. International currency transfer
  3. Syndicated loans
  4. Post trade: compensation and settlement
  5. Automated compliance
  6. M2M IoT asset management
  7. Payments
  8. Crowdfunding + VC
  9. Supply chain management
  10. Patient registration management

For researchers Sander Duivestein and Patrick Savalle, bitcoin and blockchain technology are the third technological democratization of our era.

“The first came thanks to the internet, and enabled the democratization of information. The second democratization began with 3D printing, it is the democratization of manufacturing in which factories became obsolete. They are no longer needed to build a product Now we are about to meet the third democratizing force, the democratization of money and finance, there will be no more monopolies controlling our money or our business. “

That impacts the financial sector, generating new business opportunities. The big challenge of the companies is to adapt to this new scenario, with agility, but with a lot of security that is the key point of the sector.

Some relevant numbers of what the blockchain achieved and will achieve in the upcoming years:

blockchain-benefits

  • The financial sector has spent a total of USD 552M on blockchain in 2018 and the distribution and services sectors invested almost USD 379M.
  • 90% of North American banks and European banks are investing in blockchain to make their services more secure and transparent. According to Accenture, banks could save around USD 8-12 billion annually with this technology.

According to some Wintergreen studies, the global blockchain market was valued at USD 708M in 2017 and is expected to reach USD 60 billion by 2024.

In this image you can have an idea of the ecosystem that is around the blockchain and its main actors:

blockchain-ecosystem

The blockchain technology can and should be seen as a strategic ally and not as a competitor of financial companies. “This technology is not going to make banks disappear, but it will allow them to explore new niches and market areas,” says Antonio García-Lozano, consulting leader of Grant Thornton, in an interview with the newspaper.

The blockchain will remain during 2019 as one of the first ten strategic trends to consider in the industrial and government spheres globally.

A BBVA report from the end of 2019 indicates that the next steps and challenges for the blockchain in 2019 are summarized in 3 words: privacy, scalability and sustainability.

The third wave of Blockchain will have to solve the slowness of transactions, generating the capacity to increase transactions per second, maintaining security, and achieving scalability.

It is necessary on the other hand, the establishment of private channels between the different actors that make use of technology, granting privacy.

Sustainability will be centered on moving from the current financing model, based on ICOs in the past and exhausted years, towards a model in which companies receive a constant flow of money over time for the different services and operations, and thus be more sustainable.

Capital Markets Digitalization: Trends and Transformations

Given the significant changes that have occurred in recent years, financial markets are facing important transformations and new trends are emerging in the world’s financial system. The main cause: capital markets digitalization. It takes different forms around the globe.

More and more in Europe, stock exchanges get together and merge to ensure better cost efficiency and asset distribution. Even though those benefits have a huge impact on the acquisition decision, the main reason of the fusion is to compete with a new trend raised by new technological innovations. The increase of multilateral trading facilities (MTF), as an alternative to the traditional stock exchanges generated an important competition with the existing Stock Exchanges on the financial market.

Nowadays, with some exceptions such as BME and some peripheric markets, all European stock exchanges are concentrated in one of the 4 most important stocks groups: London Stock Exchange (LSE), Euronext, NASDAQ-OMX and Deutsche Börse.

Euronext is a good example of those fusions between stock exchanges, since it’s composed of the main stock exchanges of Europe such as Paris, Amsterdam, Brussels, Dublin and Lisbon, forming together the largest European stock exchange operator. Another important fusion that happened in 2007 is the London Stock Exchange formed by London and Milan’s stock exchanges.

However, this fusion trend started a few years ago, in 1998, when the Stockholm stock exchange was acquired by futures exchange OM and then merged with Helsinki stock exchange to form the OMX in 2003. The Swedish structure bought in 2008 Nordic stock exchanges and is now part of the NASDAQ operating under the name Nasdaq OMX Stockholm AB. Recently, NASDAQ and Euronext are battling to acquire Oslo Børs stock exchange. Even though Euronext’s offer is higher than NASDAQ’s, shareholders are still discussing both options since neither of the two buyers has a significant derivatives market capable to compete with other European stock exchange operators.

However, although those fusions are an increasing trend in the majority of Europe, the German stock exchange Deutsche Börse remains an exception. When the fusion trend emerged, Deutsche Börse preferred to offer their electronic trading platform, Xetra, to other stock exchanges in order to have certain control instead of acquiring them. Even if the group intended a fusion with LSE back in 2017, the European Commission blocked the bid and imposed certain conditions on LSE in order to avoid having a monopoly in Europe created by the fusion of the 2 main European market operators. However, the German group is in charge of the operations of Frankfort Stock Exchange as well as Xetra and Eurex.

Even though fusions are an increasing trend in Europe’s financial markets, the North American markets are going the opposite way. Lots of actors want to revolutionize financial markets, which is why we observe more and more the creation of “low-cost” stock exchanges such as MEMX (member exchange), Small Exchange and MIAX (Miami Equities Exchange). Their common objectives are to avoid the high fees charged by NASDAQ, CBOE Global Markets and NYSE for data feeds, transactions, listing, among other things, to create competition and to simplify the execution of equity trading in the United States.

We will review the different factors for capital markets digitalization. What are the factors that led to those trends in Europe and the United States? What are the effects of the technological upgrade on the debt/bond markets? What are the new technologies leading to new forms of capital markets digitalization?

 

 

Impact of regulation in Europe

Within the last few years, we observed a lot of movement in the area of European Stock Exchanges. They obliged markets and operators to innovate and implement new technologies to cope with the changing regulatory environment. Hence, it has been one of the main factors for capital markets digitalization.

The European directive, MIFID 1, that regulates the provision of investment services and aim to protect the client, had an important objective, which was to increase the competition among financial entities. As a result of the implementation of MIFID I in 2007, we observed an important increase in Europe of Multilateral Trading Facilities (MTF), technological structures with similar trading services as stock exchanges.

The removal of concentration rule allowed other trading platforms to compete with regulated markets. These regulated Markets and MTF were allowed to “bring together multiple third-party buying and selling interests in financial instruments” according to the directive proposed by the European Commission in 2004.

However, the implementation of MIFID I led to some issues that needed to be addressed, mainly regarding the regulation of those new markets. In the second version of MIFID (MIFID II) implemented in 2018, the law had to be stricter in order to ensure investor’s protection.  MIFID II reviewed the policy regarding the best execution, and specified that firms must take “sufficient steps” to ensure a favorable execution of client orders, as opposed to “reasonable steps” in MIFID I. As a consequence, the new policy regarding the best execution has had a noticeable impact on small and medium companies since it limits the access to stock market financing as well as the competition, and reduces the liquidity available for those companies. Therefore, small and medium firms will have to rely on electronic trading through main operators in order to survive. This major consequence leads directly to the capital markets digitalization.

Also, another important change related to MIFID II is that the information provided by the brokers to their client needs to be sold and not given in exchange of the order execution within the broker. Indeed, with MIFID II, asset managers are no longer allowed to attract an order flow by providing investment research, which benefits the investors and increases the capital market digitalization.  

Finally, in MIDIF II, the watchword is transparency. In order to stop the dark trading of shares and other equity instruments, strict rules have been implemented and limit over-the-counter trades. In MIFID II, the establishment of a new trading venue, the OTF (Organized trading facilities), will “replace” OTC trade in order to increase transparency in pre and post-trade.

Reduced costs of technology impulse new markets in the US

As mentioned above, North American markets are developing different strategies than the European ones, in order to create a competitive environment and reduce the monopoly of the main stock exchanges such as NASDAQ, CBOE Global Market and NYSE. Even though most of those trading platforms are not launched yet, shares of NASDAQ have significantly fallen (more than 2.5%) right after MEMX’s launch announcement, which predicts it will have an important impact on the current stock exchanges in the United States.

Furthermore, the emergence of these trading platforms reinforces capital markets digitalization. Since all those trading platforms provide or will provide trading support to investors through online support, the exploitation of the new trading form has a huge impact on the capital market.

The most important “low-cost stock exchange” that uses new technologies to compete with current Stock Exchanges on the US financial market is the MIAX, created by Miami International Holdings Inc. The MIAX offers three fully electronic options trading exchange: MIAX Pearl, MIAX Emerald and MIAX Options. The launch of trading operations took place on March 1st, 2019 and is now regrouping more than “80 % of the overall U.S. options market volume, representing a daily combined average volume of approximately 20 million contracts” according to the Senior Vice President, Head of Sales for MIAX.

Another emerging “low-cost” stock exchange arriving on the market is called Member Exchange (MEMX). The exchange will be composed of 9 banks, brokerages and other firms including Morgan Stanley and Fidelity plan. It has been planned to be launched in early 2019. As announced by the group during the official announcement, “MEMX will seek to offer a simple trading model with basic order types, the latest technology, and a simple, low-cost fee structure”. Furthermore, they commented that “participants in today’s equity markets deserve an innovative alternative that is aligned with their interests, which is why we are pleased to support the launch of this new trading platform”.

Moreover, during 2019 Q3, US financial market is expecting the arrival of Small Exchange between the “low-cost” stock exchanges in emergence. According to the Small Exchange official website, the online platform wants to deliver a wide array of offering focusing on self-directed investor in order to be accessible and simple. The products offered will have standard size and expiration date to facilitate trading and increase the transparency.

Furthermore, Turquoise intended to reproduce the US trends on the other side of the Atlantic. The multilateral trading facility, now owned by one of the European giants in stock exchange, London Stock Exchange, was at first created by European and International banks such as PNB Paribas, Citi Group, Morgan Stanley… It aimed to persuade exchange operators to reduce data fees by trading cross-border shares. However, the MTF did not succeed completely before it’s acquisition by LSE.

Corporate bonds Electronification

Only a few years ago, trading was mainly made over the phone and through emails. Prices were written on paper, information was stored in spreadsheets, and the interaction between parties was direct.

However, a technological trend is currently taking place in the corporate bonds asset class. This part of the capital markets digitalization is taking the name of Electronification in the current financial jargon. It covers the creation of new platforms to enable the exchange of information among actors in private placements and follow up (see article on PREF-X) and  trading solutions. With the emergence of new technologies on the global markets and the drive for cost efficiency, we observe an acceleration of the electronification.

Technologies are present at every stage of the trade lifecycle. During the first stage, collection of “raw” data from global stock exchanges and redirecting them to a broker’s order management system needs to be quick and cost-efficient in order to have the best order possible to propose to the investors. Technologies allow this process to be as efficient as possible and accessible to everyone around the globe.   

Furthermore, technologies are nowadays indispensable to establish the link between real time data or to follow the evolution of the data so that the decisions are based on complete data, reducing risks.

During the execution stage, dealer benefit of the opportunity to trade anonymously, which would be impossible without technologies. Even though some parties tend to benefit more than others, one of the advantages of anonymous trading is the reduction of the executing costs which makes technologies the cornerstone of capital markets digitalization. Another interesting new feature used during the execution stage is the automated intelligence execution, which allows the dealer to set pre-programmed executions rules to automatically execute trades meeting its parameters, which would be impossible without technology.

Finally, during the post-trade level, “electronification” continues. Technologies enable brokers and investors to confirm trades. Technologies perform an important role since they guarantee the efficiency of the operations.

 

 

New technologies such as smart contracts and blockchain

The blockchain technology and smart contracts are both new technologies that are part of the main factors of capital markets digitalization.

First of all, smart contracts have been designed to save time and money by reducing the parties involved in the transactions and decrease the length of the process. Indeed, it provides an automated contractual relation between parties without the presence of a third-party in charge of the legal paperwork. The smart contracts ensure trust between parties and guarantee that both receive the same information since it’s a direct communication. It also decreases the risk of document falsification since everything is made through the platform.

The use of DLT (digital ledger technology) and blockchain ensures a better transparency and decrease hacking risks. As well as the DTL technology, the blockchain consists in a decentralized database (log of records) that is managed by various participants. In the area of financial markets, the blockchain technology its greatly welcomed. However, people tend to be skeptical when it comes to valuable information stored in this new technology so few of them decide to trust it.

For the moment, in the US financial market, NASDAQ seems to be the one of the first to dive into this new world and proves us that capital market digitalization is an expanding phenomenon that is reaching global stock exchanges. NASDAQ partnered with blockchain services such as CitiConnect and Azure to provide end-to-end transactional process and improve it in order to offer secure and efficient services to its clients.

However, on the other side of the globe, Australia is already considered as a leader in distributed ledger technology. The Australian Stock Exchange (ASX) is planning to increment the first blockchain platform for equity settlement globally. Even though some people are skeptical regarding this new platform mainly because of the removal of a central reconciliation authority, others find that using blockchain technology within stock exchange could be a brilliant step in order to increase its efficiency. This innovation will put ASX on the forefront of innovation in the world financial area.  

Slowly but surely, capital markets digitalization is set to take off thanks to technological breakthroughs and is becoming a global phenomenon.

New forms of capital raising: ICOs, STOs, ITOs, etc.

Capital markets digitalization is also led by the crypto assets industry and the rising of Security Token. The Security Token Offering provides financial securities that are, contrarily to the ICO Token, regulated and backed by assets, profits or revenue of the company. In the case of the ICO (Initial coin offerings), they compare to the STO since they basically have the same uses. However, the lack of security and regulation in the area of ICO increases the investors risks at the time of the acquisition and restrain the rise of it.

By using the blockchain technology as well as the smart contract, the security tokens are becoming more and more popular. Even though there are a lot of regulations and limitation restraining the use of security tokens, they have lots of advantages which arouse people’s interest and eventually increase capital markets digitalization.

First of all, security token offering is cost-effective. Since they don’t require any administrative cost for buying or selling the tokens and eliminates third-parties that might be involved in the acquisition process with the smart contracts, security tokens offering is cheaper than traditional methods such as Initial public offering (IPO).

Furthermore, the fact that they can be traded 24/7 and all around the globe makes them more accessible and desirable than traditional models. Their accessibility is also highlighted by the fact that everything, from the acquisition to the trading and the selling, can be made from everywhere in the world as they are eligible for global trading.

Finally, with the high level of liquidity generated by these Security Token Offering, the capital markets digitalization has been boosted. People are more and more interested in the trading of those Security Tokens knowing that it generates important returns on investment.  

Recently, a French start-up called Kriptown designed a new form of investment, the ITO (Initial Token Offering). Based on the IPO, the traditional method mentioned above, the ITO was specially created to create liquidity when investing in a Start-up. Their method is an interesting innovation since it enables fundraising in a simple and fast way with reliability, transparency and ethics.

Innovation does not stop in capital markets digitalization.

Marine Bougeard

PREF-X, the digital platform for private debt placement markets

PREF-X, THE DIGITAL PLATFORM FOR PRIVATE DEBT PLACEMENT MARKETS: TECHNICAL SUPPORT FOR THE ISSUANCE OF A 130 MILLION EURO EURO PRIVATE PLACEMENT

After last month’s announcement of a successful capital increase in record time, the fintech PREF-X announced today that they have been the digital support for the implementation of a two-phased Euro PP issuance for a total of 130 million euros in debt instruments on behalf of GL Events.

The French FinTech has secured the sharing of confidential information and its processing as part of standardized debt origination processes, placed with several investors for the management of information flows in the private placement markets.

 

Arranged by two banks, Crédit Agricole CIB and CM-CIC, the private placement linked PREF-X, the borrower and its advisors, the advice of arrangers and dozens of potential investors.

 

Erick ROSTAGNAT, General Finance and Administration Manager for GL Events said: “GL Events is a regular issuer of Euro PP. Thanks to this issuance, we were able to appreciate the efficiency and ergonomics of PREF-X which made it possible to secure and simplify the exchange of information prior to fund raising. This is a highly welcomed innovation.”

 

Vivien LEVY-GARBOUA, Chairman of PREF-X Supervisory Board states that: “The first origination to which PREF-X has lent its technological support is large and has brought together many stakeholders. It demonstrates that we are an effective, accessible, safe, neutral and value-creating solution for all.

 

Marie-Hélène CRETU, PREF-X Executive Chairman, concluded: “For several months, PREF-X has been consistently providing digitalization of information exchanges between issuers of private placements and investors. The use of PREF-X as a support for the origination process of the GL Events private placement confirms the significant added value that the platform offers to market’s participants. PREF-X is clearly positioned as the infrastructure of choice for this market that expects to grow. We will help it, in France and abroad. This is the mission we are assigning ourselves.”

 

About PREF-X:

PREF-X is a French FinTech created in May 2017 by:

 

CoDiese, SAS, a company that assists financial entities in their adaptation to regulatory constraints and advises them in the operational development of innovative solutions.

 

DIIS GROUP, SAS, a company that supports all issuers of obligations, as well as investors, when new issuances of obligations are configured under the EMTN program, Standalones or in Euro Private Placement format. It acts as collateral agent, bondholder and organizer of bondholders’ meetings.

 

Finexpertis Partners, a Spanish corporate investment company that participates in fintech projects linked with its group. The PREF-X platform was developed by MedySIF, one of Finexpertis’ sister companies.

 

Spread Research, SAS, registered as a financial assessment agency within the European Securities and Markets Authority (ESMA) since July 2013, and as ECAI (External Credit Assessment Institution) with the EBA (European Banking Authority) and the European Insurance and Occupational Pensions Authority (EIOPA).

Corporate governance: its importance for unlisted companies

cabeceragobiernocorp
Based on “Recomendaciones de Buen Gobierno Corporativo para empresas no cotizadas” (“Recommendations for Good Corporate Governance for unlisted companies”), an excellent study realized by IE Business School and Grant Thornton, from Private Investments Network we want to point out several recommendations and best practices for unlisted companies that we have found most interesting.

 “All companies have to ensure an environment characterized by quality and integrity of information that is used by the Board of directors to take the best decisions”, claims Antonio Garcia-Lozano, Consulting Leader at Grant Thornton.

Listed companies follow corporate governance policies that are essential for the relationship with shareholders and, a logical question that the study sheds light on is: why not follow such policies in unlisted companies in order to achieve high performing boards of directors?

 “Unlisted companies make up 85% of the Spanish industrial landscape. Nevertheless, the majority of the legislation and recommendations in force, as far as good corporate governance is concerned, is directed exclusively to listed companies. Extending good corporate governance to more business segments implies strengthening the sustainability and development of our companies and, by extension, our economy and society”, says Tomas Garicano, director of Good Governance Centre, professor at IE Business School and Senior Advisor in Corporate Governance for Grant Thornton.

The study is aimed at unlisted companies with an annual turnover higher than 750 million euros or an average personnel of more than 1,500 workers. Following, we highlight the main recommendations:

  • The partners have to establish a corporate governance framework that, taking into consideration the regulations in force, adapts to their needs, their size and to the complexity of their operations
  • It is appropriate distinguishing amongst the governance activities, administration, approval and supervision, entrusted to the board of directors, and operational management activities, entrusted to the executive board and the organizational structure of the company
  • The members of the board of directors need to allocate the time needed to perform the tasks, meet periodically, assist to convened meetings and rely on timely information, the necessary advice and adequate training
  • To ensure the transparency of information, it is recommended that companies disclose in an official channel the required reports or volunteers (auditor independence, committee reports and audit appointments and remuneration, if any, related operations and corporate social responsibility)
  • There should be an information system that allows reviewing of topics prior to meetings and gathering, facilitating communication between members and optimizing meetings
  • It is advisable to maintain sufficiently comprehensive minutes. The minutes of the meetings of the board are a reflection of what happened in those meetings and the relevance and depth of the issues discussed. They should be broad enough to capture both the matters discussed, such as the views expressed by the directors and their decisions made, avoiding various communication versions.
  • It is important to have a system of relations with shareholders, allowing one to know their opinions, interests, and expectations; particularly when they are not all represented on the board. The system should have a continuous relations approach over time, aiming for a periodic relationship that goes beyond the meetings of the board of directors or holding the annual general meeting.
  • One should at least communicate: financial and non-financial information, internal and external, of the present and future; that includes at minimum the issues related to the present situation and financial prospects of the company, the strategic plan, and its implementation risks, regulatory compliance, market and competitors; and, aspects of internal management and human resources.

From Private Investments Network, we offer a tool that allows unlisted companies to follow these policies within a private and secure environment, providing solutions to enhance the relationship with shareholders and other internal stakeholders.

The features of our platform allow one to maintain a transparent, segmented, and secure communication, managing processes such as: meetings, tasks, metrics, documents and even capital increases.

If you would like to know more details about how Private Investments Network helps companies, click here.

 

Family businesses and the relationship with shareholders

Family Businesses
Family businesses are increasingly experiencing a lack of a formal, fluid channel of communication and disordered communication within their company. They encounter decentralized information and a lot of work in completing reports. This leads to difficulty managing meetings and completing their assigned tasks.

Based on a study from IESE, launched earlier this year, we decided to highlight some of the most relevant points concerning family businesses that influence the way they communicate and their relation to shareholders.

  • Family businesses represent 85% of all Spanish businesses and create 75% of private sector employment, based on data from the Instituto de Empresa Familiar en España (Institute of Family Business in Spain).
  • Nearly 80% of respondents considered that the existence of formal communication mechanisms promote family involvement within the business, strengthening the evolution and the growth of a company, helping them convey family values, contributing to the continuity of the company and improving the quality of family relations.
  • Almost 60% of respondents said that in their companies there was no formal communication mechanism intended for family businesses. In the majority of cases, there are no established processes, nor tools, nor channels to communicate with stakeholders of the company.
  • 64% of family respondents enjoy family meetings in order to convey corporate information. The majority of respondents acknowledge that the communications with partners and shareholders is not as fluid as it should be.

In this light, Private Investments Network presents a solution:

The Private Investments Network platform facilitates the use of a tool for managing corporate information by allowing family businesses to:

  • Have a formal and fluid channel of communication with the possibility to segment stakeholders into groups
  • Have centralized information with a historical record and the ability to conduct automated reports
  • Have a simple tool to manage meetings with a historical record of calls, documents, and assigned tasks
  • Display information about KPIs that are predefined and automated
  • Manage documents on the platform at any time, including controlling access to them, as well as modifying the documents and creating several versions
  • Identify the value of the business’s unlisted shares
  • Have the option to open for intentions to buy and sell shares between shareholders and potential investors, while limiting their access and determining specific period of time for buying and selling

Furthermore, Private Investments Network’s key features continue to add value to different users of the platform

Family members:

  • Have a straightforward family members’ forum system that allows users to open a topic and invite other users to see and comment on it
  • Determine limited access and the possibility to designate view-only access to documents
  • Have direct links with access to the meeting agendas and voting enablement
  • Click to call, allowing shareholders to automatically call a basic help line service open from 9:00 to 18:00 on week days, including 6,000 incoming calls

Corporate Administrators and Managers:

  • Enable voting with specific span
  • In the details of the agenda, one can report an issue, describe every article and specify assistants
  • Add documents and determine whether they are read-only or can also be downloaded and/or printed
  • Report, during the meeting, the number of those present and remote assistants
  • Have the possibility to create a new “Responsible” manager to validate changes of secondary managers
  • Have the possibility to indicate, for every shareholder, the number of any series of shares

Board of Directors:

  • Have a private portal created in the cloud in order to have a different server from the intranet for shareholders
  • Have classified information that is restricted to the board of directors in a distinct environment
  • Allocate one’s own corporate administration manager that can be the same or different from that of the general platform
  • Have each system with its own information independently, without unwanted synchronization

Managers of large volumes of information:

  • Intelligent search engine for the shareholders list
  • Possibility to export to Excel the information available on the screen (investors list, the list of assistants to a meeting, and more.)
  • More options to segment the permits of a manager

Are you in charge of managing corporate information in a Family Business? Tell us your experience by leaving a comment here.

Fdo. Helena Lopes y Sara Jokinen.

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What is RegTech?

RegTech

RegTech is a new concept derived from the definition of FinTech primarily signifying the technology applied to resolve issues regarding regulation within the financial industry. It helps companies to better manage and understand their legal risks as well to easily adhere to their regulatory obligations.

This is due to today’s new technologies giving rise to new regulatory necessities and the market’s legal framework often being slow in adapting to and accompanying the speed of these changes within the environment. After a disruption of the market, through new FinTech solutions arising, RegTech helps to adapt the regulatory, financial services and general professional services sectors to these changes.

Adapting to the speed of these changes is key for companies and the governments of any nation, guaranteeing that all those involved will benefit from the arising innovations within the financial industry. In this sense, the technology acts as an important frame of support to expedite, integrate, and automate this process of adaptation to regulations and even to create and audit, therefore offering security and reliability for these governments and companies involved.

The consulting company, Deloitte, announced in a report released in January this year that RegTech could already be considered the new FinTech, referring to companies that offer technology for the financial sector, a concept which is currently trending.

This roots to their belief that that there is a hole that is not being completely considered in the innovations and trends of the financial sector, simply described as the norms and regulations in place.

regtech
Similarly, an article released this March by RegTechFS discusses how regulators were often left out of the conversation of technological advancements, as they were not previously involved in how business is conducted. Filling this hole not only provides regulatory systems an opportunity to progress, but also allows other industries to move further along, not being held back by regulatory challenges.

According to the Deloitte report, “in the short term, RegTech will help companies to automate prevalent tasks of compliance and to reduce the operational risks associated with compliance and reporting obligations”.

Applying technology to issues of regulation is not particularly new, however some of the characteristics that bring and differentiate the concept of RegTech specifically are agility, velocity, integration and the possibility of analysis. According to the Deloitte report, RegTech “provides executives a higher level of opportunity to introduce new capacities that are designed to take advantage of the systems for the obtaining of normative data and the presentation of reports in a profitable, flexible, and timely manner, without running risks of replacing the existing legal systems”.

Examples of companies (according to Deloitte) that already can be considered to be within the RegTech sector include:

  • Fund Recs: Based in Ireland since 2013, Fund Recs focuses on providing a reconciliation platform to progress data management and processes in the Funds Industry. Not only does this allow data leveraging to become more efficient, powerful, and cost effective; but Fund Recs believes that day-to-day business softwares should be well designed and easy to use, making the overall platform applicable to any business. Fund Recs recently took the step forward to also launch their VELOCITY platform for Fund Administrators to develop valuations efficiently.
  • Silverfinch: Part of the MoneyMate Group, establishes connectivity between asset managers and insurers by providing fund data utility through a platform that is safe and controlled. As a self-service tool by design, Silverfinch gives the user increased control whilst still offering training, support, and establishing connectivity within Silverfinch. Through this secure platform, competitors have no access to proprietary information, while insurers can still keep up with their solvency regulation requirements through connectivity with asset managers,
  • Trustev: Based in Ireland, this RegTech company combines machine learning and human intelligence to look holistically at data from online transactions and events. Trustev then scans these transactions, all in real time, to catch potential fraud. Allowing one to reduce fraud allows one to stop fiscal leaks and operative challenges faced by fraud, whilst not affecting the genuine customers that one interacts with.
  • TradeFlow: As a platform operated by Expeditors, TradeFlow provides information on tariff data and regulations, compliance, expected costs of various operations, and much more, to assist both importers and exporters in combating challenges they may face when partaking in international trade. Tradeflow operates as a supply chain tool to make international trade easier, by making international regulations easier to follow, therefore allowing global trade to grow.
  • Vizor: Now operating in 30 countries, Vizor serves both companies and financial regulators. Through Vizor’s software, a company can see and understand all their financial regulatory requirements and have full knowledge of any gaps. Regulators can easily track companies and see which firms are meeting their regulatory obligations. Not only does this create ease in meeting obligations, but it also shows that greater trust within this industry can be built.
  • Corlytics: The Corlytics Financial Fines Database is platform of financial fines providing information on a global scale on financial institutions, regulators, fining authorities, fine parameters, and more. Using analytics technology, the database is further connected to global cases and regulators, allowing further insight. Corlytic´s database allows companies access to trends and analysis, as well as the opportunity to identify potential risks and loss estimations.
  • KYC3: Founded in 2013, KYC3 focuses on three themes: compliance, counterparty risk management, and competitive intelligence. Providing instant reports from compliance, to political risk management, to networks of influence, and much more, KYC3 allows one to complete all due diligence tasks, be efficient, meet compliance regulations, and discover further opportunities and threats. Using big data, KYC3 delivers data mining and analysis solutions to you.
  • TheMarketsTrust: Based in Luxembourg, TheMarketsTrust provides solutions to risk analysis through insights into the financial industry and offering advisory services through financial knowledge and by leveraging their expertise of technology. Through an in-house research team, TheMarketsTrust aims to be both unique and customer-centric, providing solutions to one’s specific needs.
  • AssetLogic: As a fund information network, AssetLogic allows one to aggregate all their data and information into an online location in little time. Through this tool, one can share information and data with whoever they like, allowing more efficient use of this data. Not only will compliance work more effectively, but all sides of an organization will benefit, from investor relationships, to marketing, and more.
  • FundApps: This RegTech platform allows one to automate their compliance monitoring by entering a collaborative community in which industry experts manage the community and help companies be aware of threats and opportunities. Combining high-end technology and experienced industry experts, FundApps aims to deliver quickly, efficiently, and effectively, by harmonizing technology and content.

The advantages of RegTech can be well applied tools of:

  • Analysis of gaps in legislation and regulation
  • Real-time information
  • Compliance and investor relations
  • Information management
  • Reporting of transactions and regulatory reports
  • Storages of risk data
  • Data aggregation, analysis, and sharing
  • Loss, profit, and risk estimations

RegTech represents an opportunity to companies that develop this type of technology, although the challenge currently is to know to apply it well and to do so with an agile manner with regards to technological changes, offering a real competitive edge for companies.

Private Investment Networks similarly shares this vision on RegTech, both fostering and advancing the world of FinTech that we experience today. Through its many roles, RegTech can act as a facilitator of compliance for companies, allowing them to meet regulatory obligations, whilst also fostering the investors’ relations tasks that a company may conduct, as it does in Private Investments Network.

As FinTech advances, the hopes are that we can take a step back and see if there is a missing link or hole in this chain of innovation, as these RegTech firms have done, and consider how compliance and regulatory obligations can be both met with ease, as well as advanced to help our companies innovate further.

Fdo. Helena Lopes and Sara Jokinen.

Private Investments Network is recognized by the French Finance Innovation Cluster

Finance innovation
Private Investments Network is extremely happy and grateful to have received the recognition from the Finance Innovation Cluster, the grouping of private/public competitiveness of the Paris Europlace that promotes technological innovation in the financial sector.

This recognition is given to projects with high potential at the European level and which are:

  • Innovation: Particularly with regard to techniques used, the implemented models, customer segments, the developed technologies and the covered risks;
  • Strategic for the French financial industry: Bringing new products or new customers, facilitating international competitiveness, meeting the needs of the economy and increasing employment support;
  • Credible: Verified partner skills, technical feasibility and financial viability of the project.

The selection of projects that are recognized is made by the members of the Finance Innovation Cluster, which is represented by major financial sector institutions in France.

Here you are able to view the pitch presented by the CEO and co-founder of Private Investments Network, François-Eric Perquel, at the Finance Innovation Cluster.

And here you can watch the video with the presentation (it is in French).

Digitalization: the greatest challenge for banks today

Digitalization is one of the greatest challenges for the banks at the moment. The modern banks need:

  • The ability to adapt to digital technologies and offer more comprehensive services to customers.
  • Have the information for the corporate clients and their various stakeholders well structured, in order to seek for new business opportunities.

“New digital banking technologies and business models continue to emerge, but most banks have yet to realize their promise”

Gartner Report: Predicts 2016 – Digital Banking initiatives will fail without strategic investments in emerging technologies

In this scenario, Private Investments Network provides an optimization solution that enables:

  • A simple and complete platform that automates the processes performed in banks related to companies and investors management, in an agile way and saving time and money.
  • Delivers organized and centralized company information, allowing a comprehensive view of all that is relevant to find opportunities.

Find out more in this video:

Other advantages for banks:

  • Positioning the bank as a true partner of financial companies to provide innovative tools that allow for easy management of their funding sources.
  • Possible positioning for the bank as a value-added partner in the risk analysis for operators of crowdequity and crowdlending. (business opportunity with the Basel III)

If you want to know more, send an us an email to: info@privateinvestmentsnetwork.com and you will be advised how to get the most out of this tool to support the challenges of banks.

Corporate governance tool

Law Firms are increasingly seeking tools to manage corporate information on behalf of their clients, as they normally do it in a decentralized/dispersed manner and often manually. When it comes to acting as secretary of the board of directors or managers of corporate governance, there is a lot of manual work to manage corporate information of the customers, few opportunities to innovate in the services offered and difficulties to facilitate the transparency of its customers with stakeholders in a safe and controlled manner.

In this scenario, we present the solution of Private Investments Network:

The platform of Private Investments Network facilitates the use of a tool for managing the corporate governance of law firms´ clients, by allowing:

  • Saving time and costs when they act as secretary of boards of directors, or when they manage information from different customers, such as startups, private equity and family businesses
  • Creating a new lasting bond with their corporate customers given that, through the platform, they gain control of a position in the middle of the relationship between the company and its shareholders and investors
  • Being seen as innovative by offering current and prospective customers a digital solution managing the relationship with their shareholders and investors that complements the traditional legal services
  • Provide a better service than the competition at all levels through a low-cost tool that can significantly increase revenues

In addition, good corporate governance allows offering advantages to different customer profiles:

Startups

  • Have a list of shareholders updated with all the information necessary for the company and all organized and accessible internal documents quickly and easily
  • Initiate relationships with investors from the incipient point of the creation of the company and facilitate management of their corporate operations

Mergers, acquisitions and private equity

  • A permanent data room which can be easily adapted to make a due diligence at a very affordable cost
  • Capital increases management in a private environment, with controlled access to information and a communication channel between the company, shareholders and potential investors

Family business

  • Permanent availability of specific information as, for example, family pact, family values, history and family structure, meetings, task management, voting, etc.
  • Facility in informing shareholders and the possibility of doing it with potential investors. All according to the values of the company, control, transparency, legal compliance and privacy
  • Facilitating the access to liquidity for these companies (capital increase management), for family shareholders and for potential investors (Matching tool)

If you want to know more, send us an email to info@privateinvestmentsnetwork.com and you will be advised on how to take full advantage of this tool for outstanding corporate governance.

You can see a video of some of the things you can do with the help of our web platform:

Are you on charge of corporate governance of a company? Tell us your experience by leaving a comment here.