DTCC Connection

May 01, 2012 • DTCC Connection

AIP Breakthrough Makes Headlines

by Rich Marulanda


DTCC's Alternative Investment Product (AIP) is gaining traction among market participants with the number of companies on the platform growing daily. To date, more than 40 firms are active on the system, more than 50 are in testing and another 50 are in the pipeline.


Several industry publications reported that the service hit a milestone with the recent rule amendment that will allow AIP to help broker/ dealers comply with regulations related to the custody of client positions in alternative investments.


A no-action letter from the Securities and Exchange Commission to Charles Schwab, followed by the NSCC rule filing, illustrates the power of partnering to achieve solutions that help grow the industry, according to Ann Bergin, DTCC Managing Director and General Manager, Wealth Management Services.


Investment News, RIA Biz and Advisor One covered the news. Here are some highlights.


No-Action Letter Could Signal Next Step for Alts Custody: SEC's decision is seen as a tacit endorsement of the AIP service," Investment News, March 12
"A no-action letter that The Charles Schwab Corp. received from the Securities and Exchange Commission could accelerate efforts to streamline trading and custody of alternative investments. The letter essentially OKs Schwab's use of The Depository Trust & Clearing Corporation's AIP service to provide custody services for alternatives and report them on Schwab statements," the article stated.


Investment News also reported that Schwab has seen DTCC's AIP as an important tool in helping qualify assets for custody, and plans to encourage sponsors of alternative products to use the service as well. Ronald Ferguson, Chief Executive of National Advisors Trust Company FSB, noted that Schwab's embrace of the AIP service is a positive, adding that "almost every custodian is embracing" it.


John Tovar, Managing Director at TD Ameritrade Institutional, said, "The no-action letter appears to be a step in the right direction. Having a standard platform creates lot of efficiencies. We've been an early adopter of the AIP service and have been encouraging sponsors to join."


Investment News, a weekly newspaper and online news source for financial advisors, reaches more than 183,000 financial advisors via its newspaper and more than 202,000 registered users via its online portal.


Investment News also reported that Schwab has seen DTCC's AIP as an important tool in helping qualify assets for custody, and plans to encourage sponsors of alternative products to use the service, as well. Ronald Ferguson, Chief Executive of National Advisors Trust Company FSB, noted that Schwab's embrace of the AIP service is a positive, adding that 'almost every custodian is embracing' it.


"In 'Hugely Important' Move, Schwab Endorses DTCC's AIP Custody Service," Advisor One, March 7 In this publication, Schwab's Bernie Clark, Executive Vice President and Head of Schwab's Advisor Services, said, "[H]aving DTCC step into this void will greatly accelerate both the custody of alternatives and, perhaps, advisors' embrace of alternative investments." He also noted that Schwab was pleased to "have been the cheerleader here," and pointed out that AIP would "work for all custodians" now that the SEC has said AIP will be an acceptable control location.


Adam Langley, Chief Compliance Officer at Aspen Partners, a Registered Investment Advisor (RIA) and a commodity pool operator, noted that the Schwab announcement and the no-action letter "will be hugely important." Commenting on the benefits automation can bring to the manual pricing and valuation process of alternative investments, he said, "AIP will automate that process and all parties will be ‘speaking the same language’ and transmitting data through AIP to the custodians, significantly decreasing processing time for new investments, but also reducing errors. It will provide everybody with more flexibility…making the process faster and more accurate than ever before; it will benefit the fund sponsors, the custodians, and the investors."


Advisor One, published by Summit Business Media, is an online news and research portal for the investment advisory community.


"Schwab Wins Long-Waited Green Light from the SEC on Alternative- Assets Distribution," RIA Biz, March 7
RIA Biz reported that RIAs now have more access to hedge funds with less hassle, and noted that DTCC has been partnering with Schwab for some time on the rule amendment.


In this article, Bernie Clark, Executive Vice President and Head of Schwab’s Advisor Services, said, "AIP paves the way for hedge funds to be used much more like mutual funds and for Schwab to form a virtual supermarket of them on its platform. Success requires participation by alternative investment issuers. We have been working to drive issuer adoption of AIP, and we will be stepping up those efforts in the coming weeks and months."


RIA Biz is an online news outlet that provides news to the registered investment advisor community.


To read the complete story coverage, visit Investmentnews.com, RIAbiz.com and AdvisorOne.com. @


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