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Webcast Series 2009
featuring . . . DTCC’s New Transfer Capabilities
July 23, 2009
WelcomeIntroduction
Ken LarsenVice President
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Meeting Logistics
Agenda
Barbara BrowneBoston FinancialVice President, NSCC Support Services
Patty AgnewDST Systems
Applications Analyst Consultant, Home Office Services
DST's Integration Plan
Mutual Fund Transfers through the DTCC
Scott BradyMerrill LynchDirector, Asset Transition Services
Impact to Merrill Lynch / Intermediary Community
Mutual Fund Transfers through the DTCC
Barbara BrowneVice President, NSCC Support Services
ICI Broker/Dealer Advisory Committee (BDAC)
Mission
To provide a forum to identify ways to improve the distribution, operational processing, servicing and support of mutual fund products to better service the needs of the industry
and mutual fund shareholders
Background and Business Need
Automated
Transfers of Retirement Assets (ToRA)
Automated Customer Account Transfer Service (ACATS)
Networking
Manual
Labor intensive
Lengthy processing cycles
Significant source of client dissatisfaction
BDAC Transfers Working Group Formed in 2006
Approximate Current State
Manual
75%
Automated
25%
Call for Industry StandardizationNeed for single transfer system to meet industry needs
Minimize programming efforts to simplify adoption
DTCC leveraged ACATS and Fund/SERV systems
Existing systems and existing users
Limits market exposure
Improves overall customer experience
Reduces processing cycle time
Built‐in controls around tracking transfers
BenefitsBenefits
Automating In‐Kind Transfers
FIRM‐initiated retirement & non‐retirement account re‐registrations that move shares either:
From the firm to existing fund direct accounts
From fund direct accounts to the firm
Firm initiates transfers through ACATS
Fund Company has two roles
Processes re‐registration instructions
Acts as a Contra‐Party to the transfer
NSCC Rule ChangesSpecial task force of Transfers Working Group was formed to assist DTCC legal with NSCC rule modifications
NSCC Rule 52 was amended to accommodate the transfer and re‐registration of shares between fund companies and financial intermediaries
Similar provisions contained in NSCC rules for other services
Rule 52 ‐ Section 46 covers Fund/SERV & ToRA
Rule 50 ‐ Section 17 covers ACATS
Fund Participation RequirementsTo use the ACATS‐Fund/SERV Account Transfer Capability, a fund company must:
Contact DTCC to sign up
Ensure ACATS‐Fund/SERV eligibility of Security Issue IDs (CUSIP)
Work with service provider to implement necessary changes
What’s Next
FUND initiated in‐kind transfers, including possible revisions to the ToRA service
Complete asset liquidation upon transfer between broker/dealer, bank, and mutual fund companies
To Acquire Detailed Information
Contact Information
Through your DTCC Relationship ManagerDTCC Wealth Management Services
(212) 855‐8877Website: http://dtcc.com/products.wealthmgmt/
Contact Information
Through your Boston Financial Relationship Manageror
NSCC Administrator
DST’s Enhancement To Support ACATS In‐Kind Transfers
Patty AgnewApplications Analyst Consultant,
Home Office Services
DST Enhancement Project
Home Office Services (HOS) Development Team
Project Kick‐off ‐ August, 2008
Participated in Transfers Working Group Meetings
Participated in DTCC Best Practices Discussions
Worked with DST Client Sponsors throughout the Project Lifecycle
Traditional vs. In‐Kind
Phase 1 ‐ Firm‐Initiated ACATS In‐Kind Transfers
Fund to Firm Transfer (“Firm Pull”)
Firm to Fund Transfer (“Firm Push”)
Retirement and Non‐Retirement Accounts
Transfer Between Two Firms Transfer Between Firm and Fund Company
Re‐registration of Mutual Fund Position ‐ No Settlement
In‐Kind Transfers
Existing ACATS Option on NSCC Options Screen (Required)
New Options on NSCC Cross Reference Screen (Required
Allow ACATS Fund to Firm
Allow ACATS Firm to Fund
Allow ToRA ACATS Firm to Fund (Future Functionality)
Available via Existing PowerSelectQuery for R11 Table
TA2000 Options
New Options On Social Code Exclusion Screen (Optional)
ACATS Fund to Firm Transfers
ACATS Firm to Fund Transfers
New On‐Request Job (ZMR761) Available to Copy Exclusion Values Across Financial Institutions
In‐Kind TransfersTA2000 Options
Customer SSN/EIN Number
ACATS Account Type
Values Defined by DTCC
Gift/Donation Indicator
ʺ0ʺ ‐ Not a Gift/Donation
ʺ1ʺ ‐ Gift or Donation
Viewable in the Unformatted Data Screen of the DST SmartDesk ‐NSCC Feature and the NSCC Desktop
In‐Kind TransfersDTCC Layout Changes
Identifying In‐Kind Transfers on the ACATS 018 Record
Fund Participant Number for the CUSIP in Delivering Firm Field on 018 Record = Fund to Firm Transfer
Fund Participant Number for the CUSIP in Receiving Firm Field on018 Record = Firm to Fund Transfer
Fund Participant Number for the CUSIP Not in Delivering or Receiving Firm Field on 018 Record = Firm to Firm Transfer
Identifying In‐Kind Transfers on the NSCC Transaction Table
Firm to Firm Transfer (“0”)
Fund to Firm Transfer (“1”)
ToRA Firm to Fund Transfer (“2”) (Future Functionality)
Firm to Fund Transfer (“3”)
Not Applicable (“Z”)
Available via Existing PowerSelect Query for AU7 Table
Edits for In‐Kind Transfers
Hard‐Reject Edits (For example: UFILE ACATS option set to “no”, Invalid Firm Number, Account Coded “Stop Transfer”)
Soft‐Reject Edits (For example: Delivering or Receiving Account Not Found, Insufficient Shares)
Transaction Codes/Suffixes for Non‐Tax Reportable Transactions
Scenario: Fund to Firm Transfer
Shares Held in a Fund Prototype Retirement or Non‐Retirement Account Directly with the Fund (Matrix Level 0 or 4)
Shares Can Be Transferred to a New or Existing Account
Firm Initiated ʺPullʺ
Receiving Party Firm
Delivering Party Fund
New Edits for Fund to Firm TransfersUFID Allow ACATS Fund to Firm Option for Submitting Firm
Delivering Account Matrix Level of 0 or 4
SSN on Delivering Account Matches Customer SSN Field on 018 Record (or Matches SSN on Receiving Account)
DST Social Code on Delivering Account Not Excluded for Submitting Firm
If Delivering Account is Fund Prototype Retirement Account ‐ACATS Account Type on 018 Record and NSCC Social Code (Convertedfrom DST Social Code on Account) Must be Valid Combination (as Defined in the BRD)
Delivering Account Cannot be Trust‐Networked
If Receiving Account is Trust‐Networked, Only the Trust (Not the Dealer) Can Submit a Fund to Firm Transfer
Scenario: Firm to Fund Transfer
Shares Held in a Retirement or Non‐Retirement Account with the Firm
Shares Can Only Be Transferred to an Existing Account(Matrix Level 0 or 4)
Firm Initiated ʺPushʺ
Delivering Party Firm
Receiving Party Fund
New Edits for Firm to Fund TransfersUFID Allow ACATS Firm to Fund Option for Submitting Firm
Receiving Account Must Exist, With Matrix Level of 0 or 4
SSN on Receiving Account Matches Customer SSN Field on 018 Record, or Matches SSN on Delivering Account, or Gift Indicator Must Equal “1”
DST Social Code on Receiving Account Not Excluded for Firm
If Receiving Account is Fund Prototype Retirement Account ‐ACATS Account Type on 018 Record and NSCC Social Code (Converted from DST Social Code on Account) Must be Valid Combination (as Defined in the BRD)
Receiving Account Cannot be Trust‐Networked
If Delivering Account is Trust‐Networked, Only the Trust (Not the Dealer) Can Submit a Firm to Fund Transfer
Modification to ACATS Reporting
ACATS Rejects Displayed by Receiving Firm Number
New Field Added for Delivering Firm Number
Populated for All ACATS Transactions
Implementation StepsActivation Letter (Required by DTCC)
Work with Your DTCC Relationship Manager
UFILE ACATS Option (Required)
UFID Options (Required)
Allow ACATS Fund to Firm
Allow ACATS Firm to Fund
UFID Social Code Exclusions (Optional)
ACATS Fund to Firm Transfers
ACATS Firm to Fund Transfers
Project Schedule and References
Installed to DTJ Platform 7/10/09
Installing to Production 7/24/09
Business Requirements/Design Document
Proposed Systems Change Document for JMU554
MFB Test Scripts
Job Profile ‐ ZMR761 Social Code Exclusion Copy Job
Customer Center
Automating Mutual Fund Transfers
Scott BradyMerrill Lynch
Director, Asset Transition Services
Transfer Process – Current StateFirm to Firm ‐ ACATS Transfers
Industry standard process
Straight through processing
Full transfer settlement time frame (4 – 5 business days)
Partial transfer settlement time frame (3 – 4 business days)
Inconsistent and lengthy processing timeframes
Transferring mutual funds to Broker Dealers
Transferring mutual funds to Mutual Fund Families
Transfer Process – Mutual FundsFund specific processing requirements
Fax
Original documents
Overnight mail
Varying document certification requirements
Signature guarantee
Varying signature guarantee stamps
Corporate resolution
Merrill Lynch ParticipationActively leveraging functionality since May 2009
Successfully tested and activated several relationships
Consistent settlement timeframes (3 – 4 business days)
Large reduction in manual letters
Tracking mutual fund family usage
Participating in testing
Fund family activation
Benefits – Firms and Mutual FundsAllows for the systematic delivery and receipt of assets using standard industry methodology
Straight through processing
Consistent process rules and requirements
Leveraging mature industry processes
Promotes asset portability
Standardized settlement times
Consistent client expectations
NSCC Rule 52
ACATS Fund/SERV activation
Reduce rejects for broker to broker transfers
Enables PTF use
Maximize use of the PTF transaction
Review entire product line to ensure all funds are turned on for the service
Avoid differing transfer types based upon CUSIP
Best Practices
Questions
Ken LarsenVice President
A Call to ActionGet additional information
DTCC Relationship Manger
DTCC website (http://www.dtcc.com/products/cs/equities_clearance/acats.php)
Implementation Support
Boston Financial / DST Relationship Manager
NSCC Administrator
Set up new options on TA2000
Ensure that all CUSIPS are ACATS and Fund/SERV eligible
Maximize use of PTF across all your funds
Thank You