In Conversation with Shane Brett (GECKO Governance)

Shane Brett from GECKO Governance talks through some of the pain points in the funds industry, issues around blockchain, and advances in technology that we can look forward to.

In this video, we see him In Conversation with Des O’Donohue from Fund Recs.

In Conversation with Shane Brett (GECKO Governance)

Hosted by Des O'Donohoe

Video Transcription

Des O'Donohoe: Hi, I'm Des and I'm here from Fund Recs. And today, I am joined by Mr Shane Brett from GECKO Governance. Shane, what are we going to talk about?

Shane Brett: So, Des, well, first off, thanks very much for having me. And what I thought I might do today is tell you a bit about what we do and the background for the company. And then maybe talk about some of the trends we've seen in the funds industry and some of the pain points, and also opportunities in the future.

Des O'Donohoe: Perfect. Let's go.

Shane Brett: Great. So, yeah, I set up the company about three years ago and I set it up on the back of having a consultancy in hedge funds over in London after the financial crisis.

Des O'Donohoe: Right.

Shane Brett: And that was really driven by a lot of the new regulation that was coming out, expensive to implement, complicated, contradictory in some cases.

Des O'Donohoe: Right.

Shane Brett: And so I would've had a number of major projects managing the implementation of FATCA and AIFMD, and all that good stuff. Really struggled trying to find a piece of software to help manage these 30 plus work stream projects. Complicated, that needed to give the updates to the sponsors regularly, and basically to be able to provide a live view of where you are in that process. So, when I moved back to Ireland a few years ago, we started to build out this solution GECKO, which stands for Governance Engine for Compliance Knowledge and Operations.

Des O'Donohoe: I was wondering actually what it stood for.

Shane Brett: Yeah, yeah. Exactly.

Des O'Donohoe: Yeah, yeah, yeah.

Shane Brett: And the idea around governance, and not even compliance, was that we felt there were a lot of good solutions in the market for specific pieces of regulatory compliance, like maybe used as reporting, or your form PF. But we felt something that was missing was a solution that sat above that and provided an overall governance view of every aspect of compliance.

Des O'Donohoe: Right. For all of us.

Shane Brett: And operations as well, specifically for the funds industry as well. So, we built that over about a year and on boarded our first clients probably about 18 months ago or so
.

Des O'Donohoe: Okay.

Shane Brett: And as that evolved, clients started to use it to launch new funds and then to do compliance monitoring when the funds were live. And then also to do things like operational due diligence and really to provide a detailed record of all the activity that they might need to show to an investor, or a client, or obviously, crucially, to a regulator as well.

Shane Brett: So, then about a year ago, we had a bit of a light bulb moment after we got some feedback from a client that they'd had a pretty intensive review by a regulator. They wanted a way not just to show they were compliant, but to prove it.

Des O'Donohoe: Okay.

Shane Brett: So, we built an additional module into the application which enables you to link our solution, which in essence, is a fund compliance workflow solution, into a blockchain.

Des O'Donohoe: Ah, I was wondering how far we'd get into it before blockchain came in.

Shane Brett: Yeah, exactly, exactly. And that means in plain in English is that what that does is... And we use a blockchain technology called Hyperledger, so that's backed by IBM and it's stable, and it's well documented. And their fabric technology basically... It timestamps all the different processes and all of the activities that are happening.

Des O'Donohoe: Right.

Shane Brett: It's irreversible and it's immutable, and it's secure, and it's live. So, from a regulator's perspective, if they want to log into to a client's GECKO blockchain, they can see what happened at each stage of the process.

Des O'Donohoe: They can see what's been going on.

Shane Brett: Exactly.

Des O'Donohoe: Right. Yeah.

Shane Brett: And what we can do is we can set any external entity, like a regulator, or an investor for AML, KYC, you can set them up with what's called a node. And all that means is that they have a private permission to access to the chain of activity. So, that could be, again, the launch of a fund will be a really good example where you might have half a dozen different entities who are trying to all get this fund live.

Shane Brett: So, the fund manager, definitely the fund administrator, the custodian, and even the auditors, and the legal guys as well, plus the regulator's going to oversee that. So, what our clients can do is if they want to launch a new fund, they can centralize and manage that whole process very securely and on a permission basis, using the blockchain integration.


Des O'Donohoe:
Okay, cool.

Shane Brett: Yeah.

Des O'Donohoe: Sounds great.

Shane Brett: Yeah, so that was the idea around that. We expanded. We opened an office in New York in January. We put London on hold at the time for a while just because of Brexit. You know?

Des O'Donohoe: Yeah. You're not sure what's going to happen there, or whatever.

Shane Brett: Well, that's it, that's it. It's changing by the day. And as one prospects said, "Listen, how can we buy a compliance solution when we don't know what the rules are going to be in the future?"

Des O'Donohoe: Yeah, yeah.

Shane Brett: Which is fair enough.

Des O'Donohoe: Which is very true. Yeah.

Shane Brett: Exactly. So, what we did was we focused on New York. Opened up there in January and on boarded our first clients there in May. And there's three people over there full-time. And then as we started to look at larger institutions, they would often say, "Well, who's going to cover us in Asia? We need to follow the sun, 24/7 type of model." And I had lived in Sydney, like many people in our industry, for years. So, we opened an office over there.

Des O'Donohoe: Excellent.

Shane Brett: We've got three people there now as well.

Des O'Donohoe: Very good.

Shane Brett: And they're really pro-technology in ways to improve and streamline things.

Des O'Donohoe: And just back to the blockchain-

Shane Brett: Yeah, yeah.

Des O'Donohoe: ... so is this solution actually live?

Shane Brett: Yeah.

Des O'Donohoe: So, people are actually using... And it's blockchain backed?

Shane Brett: Absolutely. So, what we've had to do is we've built an optional non-blockchain version for the simple reason that not... Especially the larger players, we find the mid-tiers, say up to maybe 200 or 300 people, those sorts of fund companies are very keen to try new technology like blockchain. The much larger tier one financial institutions, they're more in a POC stage. I think realistically it'll be 2019 before...

Des O'Donohoe: Really?

Shane Brett: The banks in particular will put things live for us, because they'll save a lot of money on settlements. And it means that you only have to have one set of records. Like here in Dublin where you've got a lot of reconciliation people, I hear a lot of people and the fund manager doing the shadow accounting.

Shane Brett: So, I would see definitely longer-term the funds industry moving into this. We've specifically looked at Hyperledger, because most of the key global regulators, like the Bank of England and the Federal Reserve in Boston, DTCC, Swift, they're all using Hyperledger.

Des O'Donohoe: And did you have to meet with any of the regulators?

Shane Brett: We did it regularly. Yeah, we met with the SCC a number of times.

Des O'Donohoe: Okay.

Shane Brett: They actually spoke on a panel we did on blockchain in June over in New York. And we would meet with the Central Bank here regularly and even the FCA recently as well. So, the idea is I think a lot of them are playing a wait and see approach to an extent and they're trying to understand how best they can utilize the technology.

Shane Brett: Certainly for them, instead of coming in and doing an onsite review, or an audit, if they can just log in, say Des Fund ABC, and then whenever they want to see what your current status is and what state your documentation of reporting is, it's a much more streamlined way for them.

Des O'Donohoe: Yeah, yeah. And what's their attitude been towards blockchain in general? In the US, let's say.

Shane Brett: In the US, definitely wait and see. So, the gentleman that we would do some work with over there, he's the head of the blockchain working group for the SCC.

Des O'Donohoe: Right.


Shane Brett:
So, they've had a lot of attention focused over there more around initial coin offerings and your token sales. But specifically around blockchain, one of their big challenges and one of their fears is that they will be invited into all of these funds' chains to oversight the compliance, but from a logistical perspective in long-term, that could be a hundred thousand funds and a hundred thousand blockchains they'll be a member of, which from an organizational perspective is one of their key concerns. But the technology is evolving so quickly. It hasn't really answered that specific question yet.

Des O'Donohoe: Yeah. I know one thing that has given the whole blockchain thing a bit of bad press, and it was given by association, is the association with Bitcoin.

Shane Brett: Yeah.

Des O'Donohoe: We saw only the other day it broke the $10,000 barrier.

Shane Brett: Yeah. And it's $11,500 today.

Des O'Donohoe: In the space of a couple of months.

Shane Brett: Yeah, exactly.

Des O'Donohoe: So, just briefly, what are your thoughts on Bitcoin and where you think that might be going?

Shane Brett: Well, Bitcoin is here to stay. In terms of last Friday, the CFTC just approved two Chicago exchanges to set up their futures. What's interesting about Bitcoin is up until now there's been no way to short it. If you wanted to take a bet on Bitcoin, you had to go and buy it. And now these futures and options that are going to come out from the Chicago exchanges will be a way to short it. So, I wouldn't be surprised if we get a bit of more realism around pricing over the next say six to twelve months.

Des O'Donohoe: Very good. Okay. Well, listen, thanks very much for stopping by-

Shane Brett: Great.

Des O'Donohoe: ... and taking the time to speak with me today. And we'll hear more from GECKO Governance soon, I'm sure.

Shane Brett: Brilliant.

Des O'Donohoe: Cheers, Shane.

Shane Brett: Always a pleasure. Thanks very much, Des. Cheers.

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