Progress toward developing Insurance Services' new Fund Transfers solution reached a critical point in January, with a number of carriers and distributors committing to testing the service in 2007. The pilot launch is targeted for September, and full rollout of the service is expected by the end of the year, subject to regulatory approval.

"Gaining customer commitment for 2007 testing is a major step forward," said Randi Gordon, DTCC vice president of Product Management, Insurance Services, who is overseeing the initiative. "We are pleased that so many companies have agreed to step up and provide support for the service with their time and resources. Their contribution is invaluable to the project and will go a long way toward making it a success."

Fund Transfers is aimed at helping broker/dealers more closely monitor and manage the trading activities of their registered agents. The service was initially driven as a response to regulatory actions surrounding illegal market timing and late-day trading. Some firms have paid substantial fines and were asked to implement new procedures to track and monitor all broker-initiated fund transfers within annuities held by insurance carriers.

The insurance industry has made it a priority to better identify and monitor broker-initiated fund transfers. In 2005, Fund Transfers was singled out as a key industry initiative in an advocacy paper issued by the Insurance Panel of the Securities Industry Association (now the Securities Industry and Financial Markets Association - SIFMA).

"Fund Transfers will be an important service improvement for us, and we're actively involved with the pilot planning," said Sharon Hockersmith, senior vice president, Administration, Merrill Lynch Insurance Group. "Not only will the service provide a better means of monitoring and supervision, but by centralizing and standardizing the process, it will also foster a more desirable business environment for our financial advisors."

As envisioned, the new service will give broker/dealers an automated platform for submitting agent requests for fund transfers. The service will enable broker/dealers to link their front-end monitoring technologies to DTCC's centralized processing hub and ultimately provide the level of supervision and control sought by regulators.

Fund Transfers will be the first solution introduced by Insurance Services that incorporates XML messaging standards developed by the Association for Cooperative Operations Research and Development (ACORD). XML is playing an increasingly important role in the exchange of a wide variety of data on the Web and elsewhere, and many top carriers are already using XML in their IT architecture. Making ACORD XML standards a part of Fund Transfers will help carriers maximize current technology investments.