The Depository Trust & Clearing Corporation announced today its plan to help the mutual fund industry address the breakpoint issue by modifying two of its mutual fund services- Fund/SERV® and Mutual Fund Profile Service.
Enhancements to these DTCC systems will allow for the more accurate tracking and application of breakpoints. These changes are consistent with recommendations proposed in a July 2003 report by the Joint NASD/Industry Task Force on Breakpoints, which identified Fund/SERV and Mutual Fund Profile Service as being critical components of an overall industry solution. DTCC's mutual fund services are provided by its National Securities Clearing Corporation (NSCC) subsidiary.
"Over the last year, we have been engaged in an active dialogue with the NASD and other market participants through our involvement with the Task Force. With valuable input from the industry, we developed a blueprint for these modifications. Once implemented, we believe they will provide effective tools to address requirements by making it easier to identify breakpoint opportunities and ensure that investors receive appropriate discounts," said Ann Bergin, managing director, DTCC Distribution Services.
Fund/SERV, recognized as the de facto industry standard for processing fund transactions by fund companies and third-party distributors, will be enhanced to enable fund companies to transmit and receive information necessary to identify and apply proper breakpoints on investor trades.
Mutual Fund Profile Service is a central repository comprising discrete databases of information on individual funds (securities), NSCC's Mutual Fund Services members, and fund distributions. DTCC plans to expand Mutual Fund Profile Service's Security database by including additional data elements, allowing for complete breakpoint-related information. Common definitional standards associated with breakpoint discounts, developed by the industry with DTCC's participation, will be incorporated into the Security database.
In another move designed to support the fund industry and the Task Force's recommendations, DTCC has also announced that, through an agreement with NewRiver, a leading data technology firm providing services to the financial services community, it is introducing a new option that will make it easy for fund participants to populate Mutual Fund Profile Service with security data.
"By automating the data input and streamlining what has been a burdensome process, we are offering our fund participants an alternative to entering into the Security database information for each individual fund they offer. Our agreement with NewRiver has provided an excellent way for us to do that, and to make the database more robust at the same time." Bergin added.
NewRiver will extract security information from the Securities and Exchange Commission's (SEC) EDGAR (Electronic Data Gathering Analysis and Retrieval) System using its patented technology and proprietary database. This information will represent the latest valid information from funds' prospectuses or statements of additional information provided to the SEC through regulatory filings. NewRiver will then create and transmit to DTCC unique profile records, in a format that follows MFPS specifications.
"NewRiver is proud to work in concert with NSCC to deliver the right solution to the industry," said Jim Wironen, executive managing director of sales and marketing, NewRiver.
For those fund companies who choose to take advantage of this new offering, DTCC will begin populating their data into Mutual Fund Profile Service's Security database in the June/July timeframe. Once the data is in place, fund companies will then be able to update the information in the database using their internal resources. "If we see a demand for us to provide future updates, we are more than ready to work with the industry on fulfilling that need," Bergin noted.