In the spotlight: FundApps

FundApps, one of SEP’s most recent growth equity investments, is a global leader in regulatory technology – providing automated compliance solutions and expert insights that enable clients to comply with complex international regulatory requirements more easily and more efficiently.

The rapidly-expanding software company, in which SEP took a minority stake in May 2021, has developed an innovative business model in the ‘regtech’ (regulatory technology) sector. Its ‘Compliance-as-a-Service’ (CaaS) offering is used by more than 100 clients, including global investment banks, and some of the world’s largest hedge funds, asset managers and sovereign wealth funds, who collectively manage more than $13 trillion of assets.

It has a unique approach to solving costly and complex compliance challenges for financial services clients who would otherwise struggle to process huge flows of data relating to equities and derivatives transactions on global stock markets, each with their own set of reporting regulations.

“The risk of getting compliance wrong in the financial industry is high and, as the velocity of regulatory change increases, it’s becoming even harder to ensure you are fully compliant if you don’t have smart systems in place. FundApps helps clients mitigate that risk,” says Chief Executive Officer (CEO) Andrew Patrick White.

Over time, White has built FundApps into an organisation with significant subject matter expertise, and this knowledge is used to translate complex regulation into algorithms. The company’s comprehensive ‘Rule Library’ covers reporting rules in more than 100 countries, and its proprietary rules engine automates the checking of disclosure requirements across millions of aggregated positions for clients.

FundApps has also formed a unique community of more than 1,000 compliance professionals within its client base. These compliance professionals share insight on the interpretation of regulation, ensuring there is widespread understanding of regulatory nuances and how regulation should be applied in practice. Each new FundApps client benefits from and contributes to the company’s in-house knowledge of regulatory interpretation, augmented by the collective brain of the client community.

“The power of the community is that the same rule set is utlilised by every single client. That’s important in terms of compliance momentum and standardisation,” White says.

FundApps was founded in London in 2010 by White, who has spent a decade honing the products, establishing a trusted reputation among clients, and building a team of 90 highly skilled employees in London, New York and Singapore. He says monitoring data, keeping track of transactions, and correctly interpreting and complying with fast-changing regulatory requirements is challenging even for very well-resourced firms.

The stakes are high for companies that breach regulatory requirements. They risk hefty non-compliance fines, suspended operations, and reputational damage if they fail to keep accurate records and to report transactions and shareholdings in a timely fashion to the appropriate regulators. The challenge is particularly tough for institutions managing multiple portfolios and trading in large numbers of securities worldwide daily.

Traditionally, compliance work has been chiefly conducted in-house by increasingly large teams of compliance officers using manually maintained spreadsheets. In recent years some businesses have sought to tackle the problem by adding literally thousands more compliance staff. However, the enormous volume of regulatory requirements being imposed daily in different jurisdictions, and the speed at which regulations change, have conspired to make automated solutions the only really viable reliable option, says White.

“It’s boiling frog syndrome – people don’t realise the water is heating below them until it’s too late. If you’re still doing things manually you have to hire more and more people to keep up – but processes which are not automated fail,” White says.

Covid proved a watershed moment. “Some firms needed people going into the office every day to run spreadsheets as they were not automated but suddenly, they weren’t able to do that, so they needed to change – and fast. Our system can bring new clients on board easily and quickly,” White says.

“Shareholding disclosure involves dealing with very large amounts of data. It’s a hard problem to solve, not a commoditised problem. Clients come to us for answers and solutions they can trust.”

FundApps has leveraged its core expertise to add complementary products. Its flagship product automatically discloses major shareholdings and short selling positions to regulators. It also updates shareholding information required by takeover panels.

The second product involves ‘sensitive industries.’ Different nations have different regulations concerning thresholds for mandatory disclosure of foreign ownership of shares in ‘sensitive’ industries – these may involve banks, insurers, defence companies, media companies, airlines, telecoms firms, utilities, and strategic energy suppliers. The disclosure thresholds vary widely from country to country so automating disclosure makes compliance easier.

FundApps’ third product automates monitoring of exchange limits for derivatives contract positions, an issue which is attracting increasing regulatory scrutiny.

FundApps was already profitable and cash-generative before SEP became its first outside investor. White is confident SEP will help FundApps scale faster in a multi-billion dollar global market.

“Choosing SEP was about much more than finding an investor with a track record for growing global enterprise software businesses. We wanted a partner that would be culturally aligned, that we could meet up with regularly – not just see on flying visits from the States…and we really wanted a partner with the same moral compass.”

FundApps is the first of SEP’s investments to be a Certified B Corporation company – a business committed to balancing purpose and profit. B Corps are committed to building an inclusive sustainable economy and to having a positive impact on people and the planet. A number of highly successful global businesses are B Corps including the famous Ben & Jerry’s ice-cream business.

“There is nothing that says a B Corp can’t be a rocket-fuelled high growth company.” says White. “We are just held to a high standard of account on how we are governed and the impact we have on employees, clients, suppliers, community and the environment.”

White says being a B Corp can help attract and retain highly educated people who want to work for an ethical business with forward-thinking policies such as gender-blind parental leave. FundApps is punching above its weight in the global talent war with a 90-strong workforce of more than 30 nationalities.

SEP’s credentials as a signatory to the UN Principles for Responsible Investment and initiatives such as the SEP Women in Technology Leadership Network helped White decide that SEP would be a good cultural fit as an investment partner.

SEP Director Angus Conroy commented that the regtech market is starting to segment into serious and sub-scale players. “To be a serious player you need domain expertise, modern technology, pace of innovation and, most importantly, the ability to win and maintain the trust of the world’s leading financial institutions. FundApps ticks every box. Andrew built the market-leading company in this space without raising any capital – now we’re working together to take FundApps to the next level.”