4 Reasons Not to Deactivate Rules

FundApps allows users with Administrator rights to deactivate rules within the system. Stating the obvious, deactivating a rule will result in the rule not being checked whenever a positions file is uploaded to the system. 

The risk of deactivating a rule will always be potentially missing out on actual disclosure requirements triggering in the system. This article focuses on 3 reasons you may consider deactivating rules and explains the potential risks associated with them.

1. I do not trade securities in this jurisdiction

This is probably the worst of all reasons for deactivating a rule! There are many reasons why a security might be disclosable in a specific jurisdiction: listing of the security, incorporation of the issuer, or something third. There are issuers that are incorporated in Norway but regulated in Luxembourg and have their shares listed in Korea. Issuers like that would potentially trigger three disclosure requirements at the same time. If a user only holds European securities and hence thinks that only the European rules should be monitored, it is tempting to deactivate the Korea rule. However, as in the example above, deactivating this rule could very easily lead to a missed disclosure.

2. This rule does not apply to me

Deactivating a rule because it is believed that the specific regulation does not apply can be valid enough at a given moment in time. A rule might not apply because the specific user falls under a specific exemption or something similar. However, it can happen that the exemption no longer applies because the regulation changes or the firm has the exemption removed due to firm-side structural changes. This might not be something that the FundApps user will beware of immediately and valid disclosures might not be identified by FundApps because the rule is deactivated. 

3. I monitor this rule outside of FundApps

We believe that we have a very comprehensive service that spans wide in regards to a number of regulations we monitor but also captures a great number of nuances in these regulations. Having another system that monitors specific regulations is in essence fine, however, FundApps' evaluation on whether a disclosure is required is at least a good backup to have in order to identify potential filing requirements. Further, we would always be interested in hearing why another solution outside of FundApps would be preferred compared to our rules, which are used by all other clients.

4. The rule is producing Unknowns results

We appreciate that missing data items may cause a number of Unknowns to appear in the Result Dashboard. Whilst awaiting the resolution of these items clients should prevent the deactivation of rules as this will prevent FundApps from running checks on all the rules. A more prudent approach would be to ensure that rules are still activated as this prevents situations where rules may be turned off without all users being made aware, which may cause missed results once data issues are resolved and rules potentially not being reactivated. For more information on the Most Common Missing Data Problems please click here.

We generally do not advise that any rules should be deactivated, but should you still want to deactivate a rule and feel there is a valid reason to do, please give us a call and we will be happy to discuss the various risks the specific deactivation carries with it.

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