DATA PROTECTION ISSUES FOR FUND MANAGERS
RC: To what extent should data privacy and protection issues concern fund managers? What are the emerging risks in the information age?
Lindsay: Global transparency and reporting initiatives mean that fund managers are now required to collect and store more client data than ever before. Somewhat ironically, this requirement has a second context: growing international disquiet about the exploitation of personal data. All of this means that the challenges for fund managers to manage client data have never been greater. The potential fallout for getting things wrong, both legal and reputational, can be significant. Fund managers should be very concerned to ensure not only that they understand their obligations and have in place practices and procedures to ensure the proper protection of data under their control, but also that a culture of compliance in relation to the collection and management of data permeates throughout their businesses. For hedge fund managers, a lot of the risk is mitigated by the engagement of third party administrators who have the scale and expertise to ensure that their policies and systems are sufficiently robust. In the world of closed-ended funds, where more of the compliance function is handled in-house, it is now commonplace for potential investors conducting due diligence to want comfort that their data will be properly protected.
Buksbaum: We live in an age where business transactions and exchanges of information happen primarily at the push of a button. As a result, these activities are susceptible to cyber attacks and other breaches of data security. Given that fund managers’ operational, trading and back office functions are mostly, if not entirely, digitised – and delegable to outside service providers – data privacy and protection issues should be part of any fund manager’s compliance checklist. Fund managers and other investment advisers have a responsibility to protect confidential information relating to their investors and investments alike, and should pay close attention to the increased industry developments and dialogue on this topic.
Jul-Sep 2015 Issue
Fondo de Fondos
Squire Patton Boggs LLP