An Interview with Ann Bergin, Managing Director, Mutual Fund Services
Ann Bergin
In general, how did DTCC’s Mutual Fund Services fare in 2006?
It was a very good year. We brought in new clients and expanded our relationships with the IBDs; there’s a lot more understanding of who we are and the benefits we can bring to their businesses. Volumes are growing, and we’ve been able to give the industry some solid solutions to compliance issues. We’re also developing deeper relationships with our clients, which will put us in an even better position to keep pace with their needs.
Last year, you said that the key issues and challenges facing the fund industry were product innovation, fund performance and continued regulatory scrutiny. Has your outlook shifted over the past 12 months?
Regulatory scrutiny is still very real, particularly in the areas of transparency and disclosure, such as fund fees and expenses, revenue sharing and conflicts of interest in sales arrangements. The focus is on ensuring that investors have access to pertinent information and that the funds are able to track activities such as frequent trading and late trading.
The SEC’s Rule 22c-2 [the redemption fee rule] rose to the top level of industry attention in 2006. How involved has Mutual Fund Services been in this issue?
We’ve been very involved. We completed an important enhancement to Networking that addresses the frequent trading/redemption fee issue and gives funds and firms the ability to initiate and respond to requests for shareholder information in omnibus and super-omnibus accounts. And while the SEC ultimately extended its compliance deadlines, our service is ready for immediate use by the industry.
We have a number of firms and major transfer agents and service providers testing now. But we’re hoping that the industry moves on this early, so programming and testing can be completed well in advance of the October 2007 deadline.
Are breakpoints still an issue for Mutual Fund Services?
They are, and we’ve made a lot of progress this year. The NASD recommendation that the industry use Profile’s Security Issue Database for breakpoint information initiated a much larger program to transform it into a comprehensive central repository for data.
Editor's Note: See related story DTCC Targets June ’07 to Complete Major Redesign of Mutual Fund Profile Service.
As DTCC expands its focus overseas – moving into the OTC derivatives processing space and finalizing an agreement with the Japanese Securities Depository Center, for example – how will this affect Mutual Fund Services?
The cross-border market is complex, however. The model for the domestic markets in Europe is very different from ours in the States. There seems to be a fair amount of recent activity by providers in the European market, so it is certainly something we’ll keep our eye on going forward.
What are your next steps to bring additional users of DTCC’s Managed Accounts Service on board?
Interest has been heartening. Our announcement with Citigroup’s Smith Barney Consulting Group and Global Transaction Services, by far the largest players in the SMA world, brought our efforts center stage. The investment managers, sponsors and vendors we’ve been talking to want to see this product grow in line with forecasts for industry growth. What the market doesn’t have right now is scalability, and we can bring to it a more efficient, better-margined service. I expect it to grow substantially in 2007.
DTCC is also working on developing a service for the alternative investment market, which is somewhat beleaguered by a highly manual processing environment. What are your plans for 2007?
In the first quarter, we’re planning to pilot a new service that will initially automate and standardize transactions in these products, including account openings, account maintenance, purchases, redemptions and commission payments. The service is off to a good start, and we expect to see healthy growth.
Any final comments?
I don’t think we can emphasize enough the important role DTCC plays in managing operational risk and in business continuity. We take the responsibility of maintaining soundness, information security and information privacy extremely seriously, and we’ve put stringent protocols in place – not only internally, but with our vendors, as well – to ensure that the integrity of our systems and business methods are never compromised.
Our clients rely on us as a trusted, secure partner. They expect us to protect their information as carefully as they do. As a key contributor to the financial infrastructure of the country, we’re at the forefront of these issues, and we work vigilantly to make sure that our processes, our products and our services facilitate compliance for DTCC and our clients. 