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Andrew Rafalaf
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BONY, Brown Brothers Choose Charles River for Compliance

Brown Brothers is currently testing and writing the compliance rules for the system, and expects to go live sometime in September or October.

The mutual fund accounting and administration divisions of Bank of New York (BONY) and Brown Brothers Harriman are looking to Charles River Development's ComplianceMaster to automate their post-trade compliance services. Brown Brothers is currently testing and writing the compliance rules for the system, and expects to go live sometime in September or October. BONY is already using the system to augment the compliance services it offers to portfolio management clients

Responding to the requests of their customers for more frequent testing, Brown Brothers and BONY began looking at compliance systems in the second half of 1998. Both firms were facing an increasing amount of business, and needed to automate large portions of the post-trade compliance process so that it could answer to the increasing volumes without having to increase the number of operations personnel.

"The business has been growing so quickly and we felt that we could improve our ability to do compliance tests, more frequent tests and a broader range of tests with an automated system," explains Ed Marcarelli, who is responsible for Brown Brothers custody and banking systems. "We needed to more efficiently use the time of our operations personnel. We needed to do more compliance tests on more funds with the same number of people. We were looking to break that chain that you have with a less than automated process where more processing means more people."

BONY was also looking for a compliance system that would allow it to utilize its operations personnel more efficiently. As David Moffet, v.p. of BONY's mutual funds administration group, describes it, post-trade compliance procedures have typically been labor intensive, and consequently very expensive.

"We wanted a system that could take us to the next step," Moffet says. "As we looked at automated compliance tools, we realized that the time of our more skilled labor pool could be spent testing, focusing on the marginal issues, the exceptions. We are doing the same level of compliance as we had in the past, but no we can take on more business without having to increase the staff."

In addition, Moffet is relying on ComplianceMaster to take a more proactive stance with its clients. The system enables BONY to help clients plan their portfolio with modeling capabilities included in the system. "For example, if one of the rules governing my portfolio is that I can't own more than 10% of a security, the system can alert you to when you reach 5%, or when I'm at 7%," Moffet explains. "This allows me to model and determine what would happen if I were to change one of those thresholds.

Brown Brothers looked at about five systems, but Macarelli could not name them, referring all questions about the search process to Catherine Vacca, head of the compliance department. Vacca did not return phone calls. Moffet declines to name the other vendors Brown Brothers considered.

A primary concern for BONY was that the chosen compliance system integrate easily with the firm's investment accounting system, SunGard Data System's Invest One. Flexibility to define different rules for different clients was also on the top of its objectives list.

BONY took a slightly different approach, putting the upmost emphasis on the flexibility of the system so that it could meet the varying needs of its clients. The firm was determined to pick a system based on functionality, and then work out the details of integrating it with Omega, its proprietary fund accounting system, Macarelli says.

BONY administers approximately $300 billion in assets.

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