Related Parties & FinTech in the Exempt Market

BY EXEMPTEDGEINC | October 8, 2019 9:29 PM

In the Exempt Market there is a growing trend where groups are not only managing or issuing entity of capital but are the ones raising capital in the first place.

With the recent release of EdgeLink™, the team at Exempt Edge has made it simpler and more efficient to maintain clear compliance guidelines and ensure information flows from the appropriate entity. We have seen a substantial increase of firms choosing to set up two databases. An example of this would be utilizing Dealer Edge and Issuer Edge and then connecting them with EdgeLink.

One of most important reasons to set up separate databases is to maintain clear separation of where the capital is coming from. Capital can flow to the issuing entity three main ways. Through an external EMD, through a direct investment (FFBA), and through the connected party EMD. Of these three options, only one group should be reported on for CRM2 by the connected EMD, and that is the investors that entered the Issuer through it. By setting up both instances, clear separation can be maintained, and investors can be housed where needed.

There is also a need for a clear process to identify where information is flowing from. This information includes things like distributions, CMV/NAV and documents. Each of these items can be uploaded or created in Issuer Edge and dispersed to the corresponding connected EMDs. With EdgeLink in place, connected parties can ensure that information is created and uploaded in the appropriate place, and then transmitted with notes and supporting documentation for approval. Each step of this process is marked with who created the information, as well as a time and date stamp. Nothing is ever automatically updated without approval being granted.

Before the creation of EdgeLink and the ability to push and pull different database items, investor profiles, transactional information, issuer information and other vital data points would have needed to be entered into both instances separately. This would have created inefficiencies and the opportunity for human error. Now that information can be seamlessly entered once, then accepted and approved, the margin of error decreases and workflow processes actually stay relatively the same, while maintaining clear separation of business.

Overall, as the industry becomes more sophisticated and complex in nature, it will be important to implement processes, policies and controls to ensure that your business functions not only efficiently, but to the highest levels in every aspect. The team at Exempt Edge is always happy to help and demonstrate how our FinTech solution promotes the above ideas in addition to compliance.

Written by Chris Lindsay , Business Development Manager at Exempt Edge Inc.

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