DTCC introduces mutual fund transfer capability

Source: Depository Trust & Clearing Corporation

The Depository Trust & Clearing Corporation (DTCC) today announced that it has developed a new capability to transfer mutual fund shares between fund companies and brokerage firms, banks and other distribution firms.

By enhancing its ACATS-Fund/SERV service, DTCC can now draw into an automated, standardized environment another industry process that to date has been costly and inefficient.

"Through our collaborative work with The Investment Company Institute (ICI) and its Broker/Dealer Advisory Committee, we determined that this was an opportunity to address a growing industry need," said Ann Bergin, managing director and general manager, DTCC Wealth Management Services. "By extending our existing technology, we're able to offer our members a solution that introduces dependability and control to the process."

Research by DTCC and ICI Committee members revealed that transfers between funds and distribution firms have been a significant source of customer dissatisfaction. Completion times vary widely; manual processes heighten the rate of errors and cause funds and firms to incur high costs; and certain positions may be left behind at the delivering firm. To further complicate matters, in cases where distribution firms have automated portions of the transfer, reconciliation has become very complicated.

"Many fund-to-firm and firm-to-fund transfers are complex and can involve myriad combinations of retail and retirement assets," said Eileen Gilfedder, vice president and senior director, PNC Global Investment Servicing, and a member of the ICI Broker/Dealer Advisory Committee. "This application allows for more efficient transfer activity processing and significant customer-service improvements for both fund families and broker/dealer firms."

Gilfedder also explained that in some cases, "the manual transfer process can take weeks to complete, involving multiple processing methods that can lead to delays, incomplete customer statements and high labor and processing costs. We anticipate the number of manual transfer requests will continue to diminish as the various phases of DTCC's rollout go into production."

PNC Global Investment Servicing isvicing is the first transfer agent to take advantage of the service. The company is a leading provider of processing, technology and business intelligence services to asset managers, broker/dealers and financial advisors worldwide.

Another committee member, Kristie Thompson, group leader, Edward Jones, also commented on the new fund transfer service. "The timely and accurate transfer of client assets is critical. This first phase of DTCC's automated solution streamlines the process and brings us closer to a single transfer method that meets the needs of our clients, our firm and the financial-services industry," she said.

How ACATS-Fund/SERV Works
ACATS-Fund/SERV is a powerful combination of two distinct services. ACATS, an acronym for the Automated Customer Account Transfer Service, is used to automate the transfer of customers' assets - of all types - between distribution firms. Fund/SERV® centralizes mutual fund order entry, confirmation, registration and money settlement between funds' transfer agents and distribution firms.

The combined service - ACATS-Fund/SERV - until now had been limited to transferring mutual fund accounts between firms.

Three-Stage Rollout
DTCC has taken a three-part approach to rolling out the service. The initial phase allows a firm to initiate a customer account transfer to the firm from a fund company, or to a fund company from the firm. The second phase will allow funds to initiate these transfers. And the third phase will address account liquidations. DTCC currently is working with industry members to determine a launch date for these enhancements.

Transfers are limited to Fund/SERV-eligible funds and are considered in-kind, meaning that the full and exact position will be re-registered at the receiving fund or firm.

In 2008, ACATS-Fund/SERV processed 6.7 million fund transfers, a 26% increase over the 5.3 million recorded in 2007. Both services are provided by DTCC's National Securities Clearing Corporation subsidiary.

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