Mutual Fund Compliance: Today’s hot issues are only the tip of the iceberg
While a lot of noise has been made recently regarding mutual fund sales practices, little has been said about the underlying inefficiency of current compliance processes, the solution to which requires flexible technology moving at the speed of regulation.
Unless you've been hiding under a rock this past year, it would have been hard for you to have missed the scandals, legal action and hefty fines that have dominated recent headlines. The result has brought investor confidence to an all-time low, and has led to such an increase in regulatory and management scrutiny that compliance officers (and broker/dealers in general) are now struggling to keep pace in an area that was already burdened with manual systems and processes ready to burst at the seam.
While important, the issues of market timing, late trading, and breakpoint abuses are only the tip of the iceberg.
As Mary L. Shapiro, NASD Vice Chairman, commented last March after speaking about the regulator's highly publicized mutual fund efforts, "let me just mention a couple of other areas where we will be highly focused this year." She proceeded to address a number of less heralded issues, including variable annuity sales, suitability practices relating to mortgage lending, retail sales of non-conventional products, abusive short-selling - the list goes on.
So what's the problem?
Today's compliance departments require cost-effective technology that not only addresses the problems of today, but that can improve overall efficiency across a number of tasks and leave them better prepared for the problems to come.
With industry regulations in a constant state of flux, and an ever-expanding product mix to deal with, monitoring and supervision has become more difficult and increasingly complex for compliance departments to handle. The resources required to integrate disparate systems and databases across multiple business units is a major obstacle for many firms, and the manually-intensive compliance processes that have resulted have led to inconsistent reviews, slow response times, and overlooked cases.
The answer to the problem is not merely "a new report." Adding a new reporting capability only creates more paper and more work for supervisors and compliance officers. New reports may identify new issues, but do not relate those issues to old ones, and do not provide a clear picture of the supervisory performance of the firm while clearly explaining what has been identified to the end user.
To make matters worse, management has historically viewed compliance as a pure expense. With recent industry efforts to streamline costs and reduce spending, many broker/dealer compliance departments have been left to tackle their increasing regulatory burden with a less than comparable increase in budget.
SunGard offers a solution to these challenges.
SunGard's SynapseTM Surveillance solution provides flexible, yet powerful suitability and surveillance capabilities. An automated, enterprise review system that processes transaction and account data from multiple sources against a comprehensive rule base of regulatory guidelines and company-specific policies, Synapse Surveillance works to immediately identify real or potential compliances violations. It can identify whether a client received the appropriate sales charge, or if a trade was close to next breakpoint. It can also analyze trading activity to determine if multiple round trips within the same fund family occurred over a given period of time, or if trades were placed after hours that were processed at current-day closing prices.
Tweet This