Trends in Intermediary Oversight | 3 tips for fund companies

ArrowsOmnibus accounts are now the norm for keeping records of shareholder accounts sold through intermediaries. But with a recent focus on intermediary oversight   — happening just within the past few years — the policies and procedures that funds and their transfer agents use for monitoring these accounts are still evolving.
Ken Larsen, Vice President of Intermediary Services at Boston Financial Data Services, summarized trends in intermediary oversight on a NICSA webinar held in November 2014.

  • Programs in place, but evolving. Fund companies  are more and more likely to have a formal intermediary oversight program: 88% in 2014 versus 73% in 2013, according to Boston Financial surveys. But fewer than 1 in 10 are highly satisfied with their programs, which suggests that those programs will be continuing to evolve.
  • New industry tools are a key driver of change. One reason that programs are changing is because they are incorporating new industry-wide tools once they become available. For example, FICCA control reports are playing a larger role in oversight programs, reflecting their increasing adoption by intermediaries. Similarly, DTCC’s Omni/SERV platform  –continues to evolve to provide more information that will make oversight easier by standardizing subaccount data delivery.
  • Oversight will remain in the spotlight. But it won’t be enough for funds to become satisfied with their oversight programs: they’ll also need to convince two key constituencies that they’ve got an effective approach in place. Both the SEC and fund boards of directors have turned the spotlight on omnibus recordkeeping arrangements, asking about processing, service levels and fees.

Larsen has 3 tips to stay on top of the trends:

  1. Plan to invest time and energy. Unfortunately, at this stage, intermediary oversight isn’t “set it and forget it.” Funds and their transfer agents must be prepared to change their programs as their business evolves and new tools are developed.
  2. Match words and deeds. The formal written document describing the oversight program should match the actual program. Fund companies are most likely to get into trouble if they don’t do something that they’ve officially said that they would do.
  3. Participate in industry forums. Keep up to date on the latest developments in tools and leading practices. Participating in industry forums is an effective and efficient way to remain current.

NICSA is dedicated to keeping operations professional abreast of the news in intermediary oversight. In addition to the archive of the webinar discussed in this post, available NICSA resources include:

And check the NICSA blog for posts discussing how omnibus recordkeeping affects important transfer agent processes such as Blue Sky and escheatment.



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