Overview

Networking is the industry standard for account reconciliation and dividend processing. Through Networking, all customer account-level information – either in an omnibus or non-omnibus environment – can be exchanged and reconciled between fund companies and broker/dealers and other distribution firms, allowing identical information to appear on all parties’ records.

Networking offers several features:

• Networking for Direct Accounts, which allows funds to pass to firms information on accounts held directly at the fund.
• Share-Aging File, for accounts that are being transferred from one firm to another and are migrating to or from an omnibus environment. This feature allows participants to pass account information needed to determine redemption fees, 12b-1 trail commission fees and whether money market shares are commissionable.
• Networking for Standardized Data Reporting (SDR) to support SEC Rule 22c-2, which requires intermediary firms to respond to requests from fund companies for shareholder-level information in omnibus accounts so that funds can monitor accounts for possible market-timing and frequent-trading activities and impose redemption fees, if applicable. (See separate fact sheet for more information.)

Participants choose from one of five types of reporting options, based on the structure of their business and reporting responsibilities. Although Networking does not require Fund/SERV® participation, the two services work best when used together.

Networking participants are able to generate consolidated statements with the most current and accurate information available.

Networking is accessible via mainframe over DTCC’s SMART connection or through DTCC WebDirect, a Web interface that gives participants direct access over the Internet to services provided by DTCC's subsidiaries.

Who Can Use the Service

Any interested financial organization that meets NSCC qualifications can use the service.

Benefits

• Reduces reporting errors through a uniform record format.
• Maintains identical customer account records at firms and investment companies or their transfer agents.
• Captures and reports to firms activity within the next cycle period.
• Facilitates consolidated statements that accurately show all client holdings.
• Enhances reporting control because each organization can choose the level of client reporting that best matches its business practice and customer service objectives.
• Supports accurate compliance reporting and regulatory requirements regarding breakpoint calculations, frequent trading and short-term redemption fees.
• Saves time and money by eliminating the need for the receipt, processing and storage of paper statements

How the Service Works

Activity Reporting

• Reports any financial transaction that occurs directly at a fund that causes a change in the balance of a sub-account.
• Includes closing share balances for Fund/SERV-initiated activity.
• Reports year-end tax information on reallocated distributions.

Dividend Distribution Reports

• Transmits dividend information, including the dividend rate, posting, record and payable dates, and short-and long-term capital gains.
• Reports new share balances for each customer account, whether the client has opted to have dividends reinvested or be paid in cash.
• Provides an option to use NSCC's net settlement system for participants that elect cash dividends.

Position Files

• Transmits to firms scheduled files of closing share balances for each sub-account at the fund.

Account Maintenance & Reconciliation

• Funds can send non-financial detailed account information to a participant firm on a particular security.
• Provides a scrub file from funds so firms can review how their accounts have been set up at a fund.
• A Fund Account Response Indicator allows firms to request a full set of fund conversion records for a particular Networked account.
• Offers scheduled, detailed reporting of each account's setup, including withholding information, branch number, account representative number, and distribution option information.

Networking Level Account Control

Firms select the level of reporting controls for each type of account.

• Level 1: Firms maintain most but not all control over the fund assets in a customer account, sending orders and issuing client statements. Tax reporting is handled by the fund company. Clients have limited direct shareholder privileges.
• Level 2: Firms maintain less control than at Level One. They send customers order confirmations and handle most client communications. Tax reporting is handled by the fund. Clients have full shareholder privileges directly with the fund.
• Level 3: Firms maintain full client control, handling all orders, customer statements and reporting. Clients have no direct privileges with the fund company.
• Level 4: The fund company handles all client communications. Clients have full shareholder privileges directly with the fund, or can manage transactions directly through a brokerage firm. Firms that process orders are informed by the fund company of all customer account record changes.
• Level 0: This level can be used to identity accounts that are non-Networked, held directly at a fund company, or are trust accounts that are shared by a trust company and a brokerage firm. This dual arrangement allows both parties to share information, with the trust maintaining fiduciary responsibility for the account.

For More Information

Please contact DTCC Relationship Management at (212) 855-8877.