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MMI's Separately Managed Accounts Operations Communications ...

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MMI's Separately Managed Accounts Operations Communications ...

  1. 1. The Money Management Institute Data Standards Committee 2nd Edition Separately Managed Accounts Operations Communications and Data Standards Prepared by: Data Standards Committee The Money Management Institute 2nd Edition September 2005 Copyright © 2005 The Money Management Institute. All Rights Reserved.
  2. 2. The Money Management Institute Data Standards Committee 2nd Edition Table of Contents I.Executive Summary II.Introduction III.Separately Managed Accounts Industry IV.Plain English A.Account Setup B.Account Activity C.Account Maintenance D.Account Notices V.Appendix A.Message Notification Flows B.Plain English Glossary C.Standards Strawman D.Table Codes (See Microsoft Excel Document) E.Matrix (See Microsoft Excel Document) Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 2 of 68
  3. 3. The Money Management Institute Data Standards Committee 2nd Edition EXECUTIVE SUMMARY: THE SEPARATELY MANAGED ACCOUNT BUSINESS DRIVE FOR STANDARDS The current quest for standards in the Separately Managed Accounts (SMA) industry should be viewed in its historical context. Most of the Investment Managers (IM) who became involved in the business in its early stage of development were Institutional Asset Managers who were interested in expanding their product distribution to the retail networks of the major Broker Dealers. The investment management business institutional operating model was the one most Investment Managers were familiar with. It depended on tri-party trade communications between broker-dealers, Institutional Investment Managers and Custodians. DTCC was the industry utility for communications. The standard was electronic trade communications, interface, procedures and agreements (ad-hoc). However, Institutional Managers were more accustomed to low volume levels of new accounts, terminations, external cash flows and client driven portfolio activity. They had primarily tax-exempt clients, highly customized reporting, sophisticated institutional consultants and distribution channels. SMA Sponsors adopted the role of consultants in addition to their traditional roles as broker-dealers and custodians. There were no standard communications between Investment Managers and Sponsors. There is no industry utility. The all-important account life cycle communications are delivered via paper, fax or proprietary electronic communications, depending on the Sponsor. In addition, many Sponsors require Investment Managers to use Sponsor specific trading and allocation generation platforms. The Sponsors developed systems to accommodate multiple Investment Managers in multiple investment styles. Many spent considerable resources on trade entry, portfolio management and allocation generation platforms to support each of the Investment Managers. In many cases these systems are redundant to each other. They spent additional significant resources, collectively, on Manager training, interface maintenance, telecommunications, systems development and the IT infrastructure to support each of the Investment Managers. Though the industry has been relatively free of major trading errors, they have had to manage market exposure when their systems do not perform reliably. The typical Investment Manager involved in the Separately Managed Account business now has adapted to this infrastructure. Each IM participates in multiple Sponsor programs and in multiple investment styles. They support multiple trading and allocation Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 3 of 68
  4. 4. The Money Management Institute Data Standards Committee 2nd Edition generation front-ends. The resulting staffing issues are significant. The learning curve for new staff, coverage for vacations or illness and turnover are challenges made exponentially more difficult by the use of these multiple front-ends. Trade order management and best execution standards must be managed with extreme care. The need to eliminate operational drain created by the redundant development and maintenance of these various interfaces is clear. Standardized data formats and a central processing flow will reduce costs and operational risks, thereby improving the quality of services. High volume and critical communications will be categorized and content must be standardized for fields of information, required vs. optional data, aggregation elements, data definitions and standard data formats. The Money Management Institute (MMI) Data Standards Committee established a working group to focus on the development of standard data communications between Sponsors and Investment Managers. After many long meetings and conference calls, the first edition (Version 1.1) of the MMI’s Standards for Data Communications was published in September 2002. The second edition published herein encompasses additional data standards as well as revised standards originally published in Version 1.1. Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 4 of 68
  5. 5. The Money Management Institute Data Standards Committee 2nd Edition WORKING GROUP MEMBERS – SECOND EDITION: The dedication of the volunteers who have worked on this project and continue to work on the development of the many additional data communication standards is extraordinary. The spirit of cooperation and selfless commitment of time and effort in this endeavor is truly remarkable. Attached is a list of the active participants in this project. There have been many leaders among the group who worked on several of these important documents. To mention a few would slight the team that has shown an outstanding resolve and persistence to produce the results. The group in its entirety is listed below. PARTICIPANTS Allen Dionne Angela Pearson Bridget Vaughn Cheryl Cohen Christine Rogers Denean Williams Diane Murphy Goldstein Fabian Gomez François Coeytaux Gib Veconi Greare Sutherland James Kiernan John Axisa Jim Quartuccio Lynn Zabner Liz Getter-Johnson Michelle Lazzara Curley Mary Gentempo Nicole St. Pierre Nancy Camarata Renee Bowen Paul Bucaoto Roger Stevens Rick Austin Stephanie Bream Sandra Fortier Suzanne Akers Steve Semple Walter Makarucha Vinny Lepore William O’Dell PARTICIPATING FIRMS AdvisorPort PFPC AIM Private Asset Management, Inc. Bear Stearns Bank of America CheckFree Investment Services BISYS Davis Advisors Credit Suisse Asset Management Franklin Templeton Private Client Group DTCC INVESCO Gartmore Separate Accounts LLC Lockwood JP Morgan Asset Management Merrill Lynch Investment Managers Lord, Abbett LLC Prudential Investments Nuveen Investments SEI Investments Rorer Asset Management LLC The Bank of New York State Street Wealth Management Services UBS Financial Services Inc. The Money Management Institute Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 5 of 68
  6. 6. The Money Management Institute Data Standards Committee 2nd Edition It is expected that the Standards will be adopted by MMI members and SMA industry participants. As a practical matter, Sponsors and Investment Managers should establish realistic timetables to implement the Standards to provide improved services to clients. As standards are adopted, it is anticipated that middleware infrastructures will improve the operational efficiencies of all participants. Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 6 of 68
  7. 7. The Money Management Institute Data Standards Committee 2nd Edition INTRODUCTION: The purpose of this document is to describe, diagram and define a standard set of data formats, operational and communications process flows and message specifications for the Managed Accounts industry. By defining and adopting these standards the Separately Managed Accounts (SMA) industry will make significant progress toward improving overall operational efficiency. This document will serve as the SMA industry repository for current and future standards. This edition of the Money Management Institute’s data and communication standards for the SMA industry is the second in a multi-part plan aimed at standardizing the operations communications between SMA business partners across all operational functions. After publishing the first Standards edition in late 2002, the Data Standards Committee on Standards laid out a plan for publishing subsequent editions. Each subsequent edition will include enhancements to existing standards as required by the industry. Initially, the sub-committee has elected to standardize the following processes: New Account Profile New Account Funding New Account Authorization to Trade Contribution Distribution Tax Trading Guidelines Voluntary Corporate Actions Account Termination Investment Restriction Custodian Change Financial Consultant/Team Changes Halt Trading/Resume Trading Investment Manager Style Change Client Profile Update Short Position or Debit Cash Notification Proxy Information Client Override Fee Reporting Additional processes have been identified as future standardization targets, and will be incorporated into this document upon completion. Those identified are: Reconciliation Billing MSPs Trading Error reporting, processing and correction communications Performance reporting Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 7 of 68
  8. 8. The Money Management Institute Data Standards Committee 2nd Edition SEPARATELY MANAGED ACCOUNTS INDUSTRY Separately Managed Accounts (SMAs) evolved in the early 1970s from the defined benefit pension funds market. E.F. Hutton formally introduced the first SMA in 1976 and was the sole provider for the next 10 years. The structure in the early years was relatively simple. Sponsors acted as the introducing intermediary, custodian and trade executor for the investor. Investment Managers (IMs) interacted directly with the client and provided asset management services in return for a fee negotiated with the investor. In 1987, E.F. Hutton launched the Select Managers program and assumed fiduciary, record keeping and reporting responsibility. Fees and account minimums were standardized, and the traditional consulting process assumed a greater significance. This remains the predominant structure of the SMA business today. The industry had approximately $576.1B1 in assets under management (AUM) at the end of 2004. This includes all SMAs. The industry is in a state of rapid growth. Financial Research Corporation (FRC) projects that by the year 2008, assets held in separately managed accounts will approach $1.3 trillion and the total number of individual accounts will increase to 5.1 million. The SMA industry is faced with numerous challenges in the technology and operations area. One key area of concern is the potential scalability of the business due to a lack of standardized protocols and processes. Achieving standardization is directly correlated to the level of connectivity and the free flow of data that exists between the Sponsors and IMs that serve the industry. The current state of connectivity in the SMA world does not allow for the efficient flow of this data as reflected in a study by FRC.2 In the study, SMA Investment Managers identified the current fractured operational environment as the single greatest challenge they face today, and the quantitative research concurs by showing that operations personnel/resources increase in direct correlation to a firms' SMA assets and SMAs under management. While the industry is growing rapidly, it is relatively small compared to other financial products. SMA assets are dwarfed by the mutual fund industry that has over $7.92 trillion in total assets under management. From an operational perspective, the current state of the SMA industry may be likened to the mutual fund industry some twenty years ago. At that time, the fund industry defined the standardized operational procedures and protocols that made it scalable and profitable and allowed it to become the investment product of choice for individual investors. Many believe that SMAs have reached a similar critical point in their life cycle. 1 Money Management Institute, February 1, 2005 2 Investment Company Institute, February 24, 2005 Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 8 of 68
  9. 9. The Money Management Institute Data Standards Committee 2nd Edition PARTICIPANTS Within the industry there are six categories of ‘participants’ that are described below. While these descriptions attempt to neatly categorize each participant, in practice there are actually many exceptions. For example, Sponsors are also often IMs for both their proprietary and other Sponsors’ SMA products. This blurring of roles is increasing as the industry continues to evolve. Investors/Clients There is a wide range of investor types with an increasing range in wealth. SMA programs now range in initial account size from as low as $10,000 all the way up to $5 million (or more) with an approximate average size of about $300,000. Investor types range from retail investors through institutional plan sponsors. Financial Consultants / Advisers (FC) Financial Consultants / Advisers (FCs or FAs as they are commonly known) are the primary distribution for the SMA industry. Working with the client, they help to define the client’s needs, goals, objectives and risk tolerances to determine the appropriate asset allocation and investment style. Sponsors Sponsors are responsible for the creation, maintenance, marketing and distribution of separately managed account programs as enhanced services for their clients. Sponsors can be wirehouses, regional firms, independent broker/dealers, insurance companies, banks, etc. In some cases Sponsors create the framework for the SMA program as a service provider to another entity. They are responsible for ongoing due diligence to determine the Investment Manager’s participation level in their program. As such, they may be the primary investment adviser with the ability to delegate discretionary powers to sub-advisors (IMs). Investment Managers An Investment Manager (IM) is a registered investment adviser under the Investment Adviser’s Act of 1940 and has the power, delegated to it in writing, to manage, acquire and dispose of assets in a client’s account. In the Separately Managed Account (SMA) industry, the IM is the provider or manufacturer of the investment process for the client. They generally create model portfolios based on a particular investment style and risk tolerance. IMs may act as sub advisers, as part of a master agreement with the Sponsor, serving as co-fiduciary on the client account. Custodians Custodians are responsible for holding the client’s assets. The Custodian is often the same firm as the Sponsor but may also be a third party such as a bank or trust company. Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 9 of 68
  10. 10. The Money Management Institute Data Standards Committee 2nd Edition Service Providers Service Providers accommodate the services that the participants require for SMAs. Some of the services include operational outsourcing capabilities, portfolio manufacturing applications (e.g. complete accounting systems), trade order management, performance generation and report writing capabilities. This may also include full security pricing, sector coding and security restriction functionality. PRODUCTS The SMA is composed of securities (which could include stocks, bonds, mutual funds, commodities, etc.) representing a particular target investment style, for example, large cap growth or small cap value, that is selected based on a particular investor’s profile or financial goals. This target portfolio is then managed according to the investment style and securities are bought and sold in the account consistent with that style. The fee for the SMA is usually based on a percentage of the assets under management. The advantage of this fee arrangement for the investor is that it is defined at the inception of the account. As the SMA industry adds participants and programs, the number of style categories will continue to increase over what is described here. As the number and type of categories increase, the variance in operations and processing will also become more challenging to manage. The processes described in this paper are designed to be as broad as possible in order to support an increasing variation in product types. Some of the major SMA products include the following: Separately Managed Accounts currently supported by the Standards  Retail The retail SMA is the traditional account sold by FCs. The investment styles are well-defined, e.g. large cap, small cap, etc. and based on an investor’s risk profile. The primary investors are individuals.  Institutional The institutional SMA is geared towards corporations, public and private entities, pension plans, etc.  Tax Aware Accounts The ‘tax aware’ SMA is designed to consider an investor’s tax bracket and investment goals and utilize time trading in order to limit tax exposure.  Multi-Strategy Portfolios Multi-Strategy Portfolios are accounts that integrate multiple investment styles into a single account or strategy, providing portfolio diversification (and presumably less market risk). These SMAs usually have the Sponsor act as the ‘manager of managers’, selecting investment styles, IMs, and the allocations to those IMs as components of a single account. Minimums for these accounts usually start at $100k and are targeted at the ‘high-end’ SMA investor. **The notifications in the current edition partially support Multi- Strategy Accounts and will be defined in its entirety in the next version. Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 10 of 68
  11. 11. The Money Management Institute Data Standards Committee 2nd Edition CURRENT PROCESSES The diagrams below illustrate the dominant modes of communication between key players in the industry. The total number of communication points equals the total number of relationships between individual participants. SMA Industry3 3 P = Program, C = Custodian Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 11 of 68
  12. 12. The Money Management Institute Data Standards Committee 2nd Edition SMA Generic Flow Financial Consultant/Adviser Client Interaction Evaluate client info Determine suitability Create Profile Dedicated Front-End Input Client Data Direct access to Sponsor’s Sponsor Program system Suitability Review Profile Back Office processing in accounting system Establish Accounts Money Market Brokerage Web Record keeping Mail Account Activity E-mail Sends client investment information to: Fax Web IM Mail Custodian E-mail Financial Operations Fax Investment Manager Receives funds from Client Quality Control Check to Custodian, or Review and validate requirements Custodian ACAT to Custodian Accept client Retains account info Investment Administration Accounting Proxy record keeping System Facilitates Client reporting Determine asset allocations Holds physical shares Cost Basis Re-balance allocations Web Determine buys/sells Trading Desk Mail E-mail Trading Team Executes orders Fax Bundles orders sorted by Sponsor Records order activity in accounting system Places orders with Sponsor’s trade desk The data currently flows among industry participants via regular mail, telephone calls, faxes, email, manual uploads and downloads and semi-automatic and fully automatic interfaces. Because there is no standard communication protocol, there is little efficiency. There are a large number of one-off interfaces created in order to attain the current fragmented level of automation. Considerable resources (both human and financial) are spent on continuous re-designing and re-engineering business processes in an attempt to be more fully automated and reduce errors. Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 12 of 68
  13. 13. The Money Management Institute Data Standards Committee 2nd Edition BUSINESS INTERACTIONS The purpose of this section is to describe the business interaction between participants for particular processes. The primary assumption in developing these descriptions is that these processes would be implemented systematically and uniformly, eliminating the current paper-based fax and postal mail exchange of information that is the prevalent form of information exchanges between Sponsors, IMs and Custodians. The basic approach to the process flow design and that is integrated into the following descriptions are the following:  All message files from Sponsors to IMs will be followed by an immediate acknowledgement that a Notification message was received.  The actual ‘accept’ or ‘reject’ message would be received at some later time, the timeframe to be negotiated between IM and Sponsor, as to whether the message is accepted or rejected. If the message rejects, a Reject Code and a comment supporting the reject would be sent to the initiator of the message. The message and flow standards have been developed with the assumption that they will be implemented electronically. Although these are defined as distinct messages, it is possible that they could be combined into one electronic message. Since this is the business layer of the message, it should be assumed that the technology layer and the protocol selected will handle message delivery, header/trailer information, time stamps, etc. and are not described in this document. SMA COMMUNICATIONS STANDARDS Notification Categories Standards Notification Header Standard Message Standard Acknowledgement Message Standard Accept/Reject Message Standard Notification Delivery Cycle Standard Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 13 of 68
  14. 14. The Money Management Institute Data Standards Committee 2nd Edition Plain English Table of Contents I.Account Setup A.New Account Profile B.New Account Funding C.New Account Authorization to Trade II.Account Activity A.Contributions B.Distributions C.Tax Trading Guidelines D.Voluntary Corporate Actions III.Account Maintenance A.Account Termination B.Investment Restriction C.Custodian Change D.Financial Consultant/Team Changes E.Halt Trading / Resume Trading F.Investment Manager Style Change G.Client Profile Update Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 14 of 68
  15. 15. The Money Management Institute Data Standards Committee 2nd Edition IV.Account Notices A.Short Position or Debit Cash B.Proxy Information Client Override C.Fee Reporting Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 15 of 68
  16. 16. The Money Management Institute Data Standards Committee New Account Profile Notification 2nd Edition Summary: The New Account Profile Notification is to be used by a Sponsor Firm, Custodian, or other authorized Third Party (Sponsor) to communicate the investor’s decision to retain the asset management services of an Investment Manager (IM) for a selected investment strategy. It provides the necessary data that the IM needs for suitability, “Know Your Client,” and for management of the account. Justification: Each Sponsor requires that their clients complete a Profile Questionnaire before investment of their assets. Within the SMA industry the relaying of this data is not standardized. Each Sponsor has their own data fields that they provide to the IM. The New Account Profile Notification will provide IMs with standardized data for each new account, so that the information is in a consistent format among Sponsors. The Sponsor will transmit this data in the form of the New Account Profile notification that the IM will use to accept the account and populate their accounting and/or trading system for purposes of managing the account. Definition and Scope: The New Account Profile is to be used by Sponsors and their Financial Consultants (FCs) to relay new client account information to the IM. The New Account Profile is only to be used for the transmission of data for a new account. The notification is forwarded to the selected IM for their review and subsequent approval or rejection. The New Account Profile Notification is to be used for individual client accounts only; it is not a global notification. Usage Considerations: • The New Account Profile Notification is to be used by a Sponsor to notify an IM of a decision to open a new account. This notification provides the selected IM with: o Account Data (specific to data regarding the client’s account, e.g., IM Style) o Client Data (populated with personal client information, e.g., client address) o Source Data (in regards to the relationships around the account, e.g., FC/Team information). Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 16 of 68
  17. 17. The Money Management Institute Data Standards Committee New Account Profile Notification 2nd Edition • The New Account Profile Notification data alone does not deliver client data that could or would trigger a trading event such as account style or restriction changes. • The New Account Profile Notification, the New Account Funding Notification, and the New Account Authorization to Trade Notification are associated with one another, and may be used independently or packaged together depending on the contractual relationship between the Sponsor and IM. • The tables associated with the New Account Profile are: Account Type Table, Restriction Type Table, and Bonding Agencies Type Table. • The New Account Profile Notification follows standard MMI message cycles. *No service level agreement is applied by accepting a standard message. Standards are subject to the terms and agreements between the industry participants. Table of Contents Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 17 of 68
  18. 18. The Money Management Institute Data Standards Committee New Account Funding Notification 2nd Edition Summary: The New Account Funding Notification is used by a Sponsor Firm, Custodian, or other authorized Third Party (Sponsor) in order to provide the Investment Manager (IM) with notification of funding for a new client account. Justification: Once an account has been established by the Sponsor, the New Account Funding Notification is used to provide the IM notification that account is funded and ready for investing at the discretion of the IM. Definition and Scope: The New Account Funding Notification is sent by the Sponsor Firm, Custodian or other authorized Third Party to the IM informing the IM that the account is funded. The IM has the responsibility to either accept or reject this notification. Depending on the contractual relationship between the Sponsor and IM, the New Account Funding Notification may be used to initiate trading on the account. This notification is to be used on the individual account level and is not intended as a global communication. Usage Considerations: • The New Account Funding Notification communicates specific funding data to the IM, including: o Account information o Cash and securities information including tax lots and unsettled transactions, if applicable o Custodian information, if applicable • The New Account Profile Notification, the New Account Funding Notification, and the New Account Authorization to Trade Notification are associated with one another, and may be used independently or packaged together depending on the contractual relationship between the Sponsor and IM. • The New Account Funding Notification may trigger trading. • The New Account Funding Notification does not use pre-determined table codes. • The New Account Funding Notification follows standard MMI message cycles. Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 18 of 68
  19. 19. The Money Management Institute Data Standards Committee New Account Funding Notification 2nd Edition *No service level agreement is applied by accepting a standard message. Standards are subject to the terms and agreements between the industry participants. Table of Contents Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 19 of 68
  20. 20. The Money Management Institute Data Standards Committee New Account Authorization to Trade Notification 2nd Edition Summary: The New Account Authorization to Trade Notification is used by a Sponsor Firm, Custodian, or other authorized Third Party (Sponsor) to notify an Investment Manager (IM) when a new account is authorized to begin trading. Justification: Once an account has been established and funded by the Sponsor, the New Account Authorization to Trade Notification is used to provide the IM with notification that the account is ready for investing at the discretion of the IM. Definition and Scope: The New Account Authorization to Trade Notification is sent by the Sponsor Firm, Custodian or other authorized Third Party to the IM informing the IM that the account is ready for investing. This notification is to be used on the individual account level; it is not a global communication. Usage Considerations: • The New Account Authorization to Trade Notification communicates specific authorization data to the IM, including: o Account information o Custodian information o The date the IM took responsibility for discretion of the account o The market value of the account at inception o An indication that investment restrictions exist on the account, if applicable o Special instructions, if applicable • The New Account Profile Notification, the New Account Funding Notification, and the New Account Authorization to Trade Notification are associated with one another, and may be used independently or packaged together depending on the contractual relationship between the Sponsor and IM. • The New Account Authorization to Trade Notification will trigger trading. Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 20 of 68
  21. 21. The Money Management Institute Data Standards Committee New Account Authorization to Trade Notification 2nd Edition • The New Account Authorization to Trade Notification does not use any pre- determined table codes. • The New Account Authorization to Trade Notification follows standard MMI message cycles. *No service level agreement is applied by accepting a standard message. Standards are subject to the terms and agreements between the industry participants. Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 21 of 68
  22. 22. The Money Management Institute Data Standards Committee New Account Authorization to Trade Notification 2nd Edition Table of Contents Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 22 of 68
  23. 23. The Money Management Institute Data Standards Committee Contribution Notification 2nd Edition Summary: The Contribution Notification is used by a Sponsor Firm, Custodian, or other authorized Third Party (Sponsor) to notify an Investment Manager (IM) of a contribution to be made to an existing account. Justification: After a client’s account has been established by both the Sponsor and the IM, clients may add additional funding to the account from time to time. This notification enables the efficient communication of this information from Sponsor to IM. Definition and Scope: A Contribution Notification is defined as a Sponsor Firm, Custodian or other authorized Third Party sending a message to inform the IM of contribution activity in a client account. The Contribution Notification is to be used for individual client accounts; it is not a global notification. Contributions can be cash, securities, or a combination of both. If the contribution is in cash, the Contribution Notification acts as an instruction to begin investing the additional funds. If the contribution consists of securities, the Contribution Notification acts as a notification of securities received into the account so that the IM can act accordingly (e.g., liquidate, retain, etc.) Usage Considerations: • The Contribution Notification communicates specific client contribution data to the IM, including: o Account information o Contribution details (e.g. cash, securities, or both) o Securities information, if applicable • The Contribution Notification is not dependent upon any other notification, nor is any other notification dependent upon it. • The Contribution Notification may trigger trading. • The Contribution Notification does not use pre-determined table codes. • The Contribution Notification follows standard MMI message cycles. Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 23 of 68
  24. 24. The Money Management Institute Data Standards Committee Contribution Notification 2nd Edition *No service level agreement is applied by accepting a standard message. Standards are subject to the terms and agreements between the industry participants. Table of Contents Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 24 of 68
  25. 25. The Money Management Institute Data Standards Committee Distribution Notification 2nd Edition Summary: The Distribution Notification is used by a Sponsor Firm, Custodian, or other authorized Third Party (Sponsor) to notify an Investment Manager (IM) of the need for a distribution to be made from an existing account. Justification: After a client’s account has been established by both the Sponsor and IM, clients may withdraw cash and/or securities from the account from time to time. This notification enables the efficient communication of this information from Sponsor to IM. Definition and Scope: A Distribution Notification is defined as a Sponsor Firm, Custodian or other authorized Third Party sending a message to inform the IM of distribution activity in a client account. The Distribution Notification is to be used for individual client accounts; it is not a global notification. Distributions can be cash, securities, or a combination of both. If the distribution is in cash, the Distribution Notification acts as an instruction for the IM to review the account to determine if securities must be sold so that cash is available for the distribution. If the distribution consists of securities, the Distribution Notification acts as a notification of securities delivered out of the account so the IM can act accordingly (e.g., rebalance the account). Usage Considerations: • The Distribution Notification communicates specific client distribution data to the IM, including: o Account information o Distribution type o Securities information, if applicable • The Distribution Notification is not dependent upon any other notification, nor is any other notification dependent upon it. • The Distribution Notification may trigger trading. • The Distribution Notification does not use pre-determined table codes. • The Distribution Notification follows standard MMI message cycles. Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 25 of 68
  26. 26. The Money Management Institute Data Standards Committee Distribution Notification 2nd Edition *No service level agreement is applied by accepting a standard message. Standards are subject to the terms and agreements between the industry participants. Table of Contents Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 26 of 68
  27. 27. The Money Management Institute Data Standards Committee Tax Trading Notification 2nd Edition Summary: The Tax Trading Guidelines Notification is used by a Sponsor Firm, Custodian, or other authorized Third Party (Sponsor) to notify an Investment Manager (IM) of a client’s desire to realize capital gains or losses for tax purposes. The notification may be used to prompt the IM to execute trades or the sale of specific securities, as well as to notify the IM of wash sale restrictions. Justification: Clients and their financial consultants require the ability to incorporate the assets in separately managed accounts into their tax planning strategies, and may direct IMs to effect sales in their accounts to generate gains or losses, according to the client’s needs. These transactions involve specific instructions concerning gain and loss targets, types of gains or losses sought, and restriction periods to be observed, which are otherwise not addressed by other message types. Definition and Scope: Tax trading is defined by one of three scenarios where the Sponsor sends notification to the IM: • to generate trades within a client’s account realizing capital gains or losses for tax purposes (Request Investment Manager Generated Tax Trades) • to generate specific sale of securities for the purpose of realizing capital gains or losses for tax purposes (Sale of Specific Securities) • to place specific security restrictions on an account due to tax trading by another IM (Wash Sale Restrictions) The Tax Trading Guidelines Notification may be (a) driven by the Sponsor, where the Sponsor gives the tax trading directives to the IM, or (b) client driven, where the Sponsor is merely passing along the instructions of the client for the IM to act upon. Included in this flow is the option for the Sponsor to notify the IM of specific security restrictions to be placed on an account due to tax trading by another IM. This option will permit the Sponsor to avoid having a client’s tax-loss trade negated by the actions of another manager for the same client. Unlike many of the flows that normally occur between the Sponsor and the IM, tax trading involves many variables that may differ significantly by Sponsor and are dependent on the Sponsor/IM relationship. Consequently, certain assumptions will apply between the firms and must be agreed to in advance. Outlined below are some of the assumptions the IM and Sponsor should discuss: Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 27 of 68
  28. 28. The Money Management Institute Data Standards Committee Tax Trading Notification 2nd Edition Assumptions: • The IM will confirm back to the originator of the request notification what trades were executed to complete the request. • Once the IM has acted on the instructions, they are considered to be complete. • Requests are short-term instructions, typically not more than one (1) week in duration. This communication is not designed to indicate long-term, ongoing tax aware investing. • Additional tax trades will require a new set of instructions. • The IM will attempt to meet the bulk of the request but may not be able to fulfill all of it. In the event that the IM is unable to complete the request, the IM will communicate back to the Sponsor what portion of the request could be fulfilled. • Restrictions included in the Tax Trading Guidelines Notification apply to wash sales only and should be lifted after 31 days. • Depending on the IM’s access to the portfolio/trading system, the IM will be responsible for lifting the 30-day wash sale restriction. If the IM does not have that access, then the Sponsor assumes the responsibility. • The IM is responsible for reinvesting the account after the expiration of the 30-day wash sale restriction. However, the IM, at its discretion, may restrict the accounts from further trading beyond the 30-day period, up to and including year-end, to avoid offsetting the results of the tax trades. The Tax Trading Guidelines Notification is to be used for individual client accounts; it is not a global notification. Usage Considerations: • The Sponsor Firm, Custodian or other authorized Third Party will indicate to the IM the type of tax trading to be done, the amount of gains or losses to be realized, the minimum gain or loss to be realized per transaction, and how to treat the proceeds (if any). The Sponsor Firm, Custodian or other authorized Third Party may give parameters such that the specific securities to be bought/sold are at the IM’s discretion, or the Sponsor Firm, Custodian or other authorized Third Party may dictate specific securities, lots and amounts to be executed by the IM for tax trading purposes. The Tax Trading Guidelines Notification communicates necessary data elements, including: o Client account information o Details of tax trade (e.g. type, amount, instructions) o Specific security information for each tax lot (e.g. security identifiers, tax lot information, unit cost) Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 28 of 68
  29. 29. The Money Management Institute Data Standards Committee Tax Trading Notification 2nd Edition o Security restriction information for each tax lot (e.g. security identifiers, wash sale expiration information) o Reject reason codes, if applicable (in the case of sponsor executed tax trades, a reject reason code must be included for each tax lot) o Specific security sale information for each tax lot • The Tax Trading Guidelines Notification is not dependent upon any other notification, nor is any other notification dependent upon it. • The Tax Trading Guidelines Notification may trigger trading. • The Tax Trading Guidelines Notification uses the following pre-determined table codes: Tax Trade Type. • The Tax Trading Guidelines Notification follows standard MMI message cycles. *No service level agreement is applied by accepting a standard message. Standards are subject to the terms and agreements between the industry participants. Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 29 of 68
  30. 30. The Money Management Institute Data Standards Committee Tax Trading Notification 2nd Edition Table of Contents Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 30 of 68
  31. 31. The Money Management Institute Data Standards Committee Voluntary Corporate Action Notification 2nd Edition Summary: The Voluntary Corporate Actions Notification is used to relay voluntary corporate action details, requests for action, and decision information between the Sponsor Firm, Custodian, or other authorized Third Party (Sponsor) and the Investment Manager (IM) in accordance with the arrangement between all parties. Justification: Once a separately managed account has been invested by the IM, the security holdings within that account may undergo voluntary reorganizations. The Voluntary Corporate Action Notification was created to relay the details and solicit the IM’s decision concerning securities undergoing voluntary corporate reorganizations on behalf of clients who hold such securities. Definition and Scope: The Voluntary Corporate Action Notification begins by either (a) the Sponsor or the Custodian notifying the IM, or (b) the IM notifying the Sponsor or Custodian of a Voluntary Corporate Action (VCA). The corresponding party acknowledges receipt of the VCA Notification back to the originating party. The IM then communicates the VCA decision details made on behalf of the accounts that the IM manages, using the Voluntary Corporate Action Decision Notification. The VCA choices can be any or all of the following: stock tender only, stock and cash tender, cash tender only, odd-lot offer to purchase or sell or participation in optional dividend or “other.” The Voluntary Corporate Action Notification can apply to one or multiple accounts. In addition, a Voluntary Corporate Action Notification could affect one or multiple securities. Separate instruction files should be sent for each VCA that the IM decides to participate in. Usage Considerations: • When a relationship between Sponsor, Custodian and IM is initially established, it is determined at that time (a) which party is responsible for the notification of voluntary reorganizations, (b) whether the IM should send VCA decisions to the Sponsor or to the Custodian, and (c) the standard timeframe for submission (i.e. in relation to the VCA record date). Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 31 of 68
  32. 32. The Money Management Institute Data Standards Committee Voluntary Corporate Action Notification 2nd Edition • The Voluntary Corporate Action Notification can follow one of three different message cycles: o Message Cycle Type 1: Initial notification comes from Sponsor:  Sponsor notifies the IM of VCA  The IM acknowledges receipt to Sponsor  The IM notifies the Sponsor of the decision by sending a Voluntary Corporate Action Decision Notification  Sponsor processes the file and sends accept/reject notification message back to the IM, providing reasons for a reject (if applicable) in the comment field  IM acknowledges receipt of processed file or accept/reject notification file back to the Sponsor o Message Cycle Type 2: Initial notification comes from Custodian:  Custodian notifies the IM of VCA  The IM acknowledges receipt to Custodian  The IM notifies the Custodian of the Voluntary Corporate Action Decision (or, if previously established, notifies Sponsor of decision) by sending a Voluntary Corporate Action Decision Notification  Custodian processes the file and sends accept/reject notification message back to the IM, providing reasons for a reject (if applicable) in the comment field.  IM acknowledges receipt of processed file or accept/reject notification file back to the Custodian o Message Cycle Type 3: Initial notification comes from IM:  The IM notifies the Sponsor or Custodian of VCA by sending a Voluntary Corporate Action Notification, and of the action decision by sending a Voluntary Corporate Action Decision Notification  Sponsor or Custodian acknowledges receipt to IM  Sponsor or Custodian processes the file and sends an accept/reject notification message back to the IM, providing reasons for a reject (if applicable) in the comment field  IM acknowledges receipt of processed file or accept/reject notification file back to the Custodian • The Voluntary Corporate Action Notification from the Sponsor or Custodian (Message Cycle Type 1 or 2) communicates specific data to the IM, including; o Terms and details of the VCA (e.g. type, dates) o Account information for those security owners impacted by the VCA Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 32 of 68
  33. 33. The Money Management Institute Data Standards Committee Voluntary Corporate Action Notification 2nd Edition o Security details o Summary information (e.g. number of shares and accounts included) • The Voluntary Corporate Action Notification from the IM to the Sponsor or Custodian (Message Cycle Type 3, or decision on Message Cycle Type 1 or 2) communicates specific data to the IM, including; o Terms and details of the VCA (e.g. type, dates) o Account information for those security owners impacted by the VCA o Security details o Summary information (e.g. number of shares and accounts included) o VCA action taken (multiple codes if applicable) o Summary information (e.g. number of shares and accounts included) • The Voluntary Corporate Action Notification is associated with three pre- determined tables: Rejection Table, Voluntary Corporate Action Table, and Voluntary Corporate Action Type Table. • The Voluntary Corporate Action Notification does not follow standard MMI message cycles. *No service level agreement is applied by accepting a standard message. Standards are subject to the terms and agreements between the industry participants. Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 33 of 68
  34. 34. The Money Management Institute Data Standards Committee Voluntary Corporate Action Notification 2nd Edition Table of Contents Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 34 of 68
  35. 35. The Money Management Institute Data Standards Committee Account Termination Notification 2nd Edition Summary: The Account Termination Notification is to be used by a Sponsor Firm, Custodian, or other authorized Third Party (Sponsor) to communicate the decision to terminate the asset management services of an Investment Manager (IM) for an account. Justification: In a world of volatile investments, it is critical that an investor’s wishes and instructions be acted upon as quickly as possible. The Account Termination Notification will facilitate the timely notification of a Sponsor or investor’s desire to terminate the asset management of an account by a designated IM. In addition to notifying the IM of the account termination, this notification will also inform the IM of the investor’s chosen disposition method/termination instructions for the account. Investment Managers are expected to react to Account Termination Notifications immediately upon receipt. Definition and Scope: An account termination is defined as when the Sponsor Firm, Custodian or other authorized Third Party, on behalf of an investor, notifies an IM that the services provided by the IM are no longer required for a specific account. Account Termination Notifications are designated for a single specific account; it is not a global communication. Therefore, if an investor, via a Sponsor, has multiple accounts managed by the IM, and wishes to terminate more than one account, a separate Account Termination Notification is be required for each termination. The Account Termination Notification must also include the investor’s desired disposition method/termination instructions (e.g. terminate and keep, full or partial liquidation by the Sponsor or IM). Usage Considerations: • Upon the decision to terminate an account with the IM, the Sponsor will send to the IM an Account Termination Notification containing the necessary information, including: o Account details o Termination instructions Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 35 of 68
  36. 36. The Money Management Institute Data Standards Committee Account Termination Notification 2nd Edition o Security information, if applicable • Upon accepting the termination, the IM should notify the Sponsor of pending trades in the account. At that point, the terminated account should have no further transactions other than those included in the termination communication and/or settlement of any pending transactions. • The Account Termination Notification is not dependent upon any other notifications, nor is any other dependent upon it. • The Account Termination Notification may trigger a trading event if the termination instruction indicates either full or partial liquidation by the IM. • The Account Termination Notification uses the following pre-determined table codes: Termination Instruction Table, Termination Reason Table. • The Account Termination Notification follows standard MMI message cycles. *No service level agreement is applied by accepting a standard message. Standards are subject to the terms and agreements between the industry participants. Table of Contents Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 36 of 68
  37. 37. The Money Management Institute Data Standards Committee Investment Restriction Notification 2nd Edition Summary: The Restriction Change Notification is to be used by a Sponsor Firm, Custodian, or other authorized Third Party (Sponsor) to communicate restrictions on actively managed accounts and to relay relevant instructions to the Investment Manager (IM) regarding the impact of those restrictions if necessary. Justification: After the Sponsor has established a client’s account at the IM, a client may choose to add investment restrictions, change existing investment restrictions or remove existing investment restrictions. These changes may require further action to be taken in the client account, e.g. sell an existing position. The Restriction Notification has been created for the Sponsor to communicate the client’s investment restriction instructions, as well instructions governing the handling of securities affected by those restrictions. Definition and Scope: The Restriction Notification is used by Sponsor, Custodian or other authorized Third Party on behalf of an investor to notify IMs of restrictions in accounts under their management. The Restriction Notification may also include specific instructions for the treatment of securities held that are affected by the requested restriction changes. The Restriction Notification is to be used for individual client accounts only; it is not a global notification. Usage Considerations: • The Restriction Notification from the Sponsor Firm, Custodian or other authorized Third Party to the IM delivers account specific data elements relating to the requested restriction change, including: o Account details o Financial Consultant/Team information o Custodian information o Designation of whether the Restriction Notification is an addition, change or deletion to previous restrictions on the account o Restriction type (e.g. category, cash limit, duration, individual security, etc.) o Restriction description (specific category, security, etc. to be restricted) Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 37 of 68
  38. 38. The Money Management Institute Data Standards Committee Investment Restriction Notification 2nd Edition • In addition, the notification may include additional specific data elements if the restriction change requires action to be taken on a security held in the account at the time of the change, for example: o Restriction Sub-Types (e.g. buy, sell, buy/sell, gain/loss) o Restriction Qualifiers (e.g. min/max, weighting limit) o Restrictions or securities in violation, with instructions for handling those securities (e.g. the IM to liquidate or the Sponsor to liquidate/remove) • The Restriction Notification can trigger trading. • The Restriction Notification is not dependent upon any other notification, nor is any other notification dependent upon it. • The Restriction Notification is associated with three pre-determined tables: Reject Table, Restriction Table, and Bonding Agencies. • The Restriction Notification follows standard MMI message cycles. *No service level agreement is applied by accepting a standard message. Standards are subject to the terms and agreements between the industry participants. Table of Contents Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 38 of 68
  39. 39. The Money Management Institute Data Standards Committee Custodian Change Notification 2nd Edition Summary: The Custodian Change Notification is used by a Sponsor Firm, Custodian, or other authorized Third Party (Sponsor) to relay a change in Custodian for a client account to the Investment Manager (IM). It is also used to relay instructions to halt trading in the account during a change in custody. Justification: When a change in Custodian occurs, the Sponsor or authorized Third Party must notify the IM so that the IM can update its records, and halt trading during the transfer of assets from one Custodian to another. The halt in trading allows the new Custodian to reconcile the account, and the Sponsor and IM to acknowledge the transfer of assets without error. Definition and Scope: A Custodian change is defined as when the Sponsor and the IM are remaining constant while the custodian of the assets is changing. For separately managed accounts, the client’s assets are held in custody and executed through the same entity (in most cases, the custodial/trading entity is the Sponsor). However, in some circumstances the client may be housing the custodial aspect of their account at a bank, trust company or some other institution separately from where the trades would be placed. The Sponsor in this scenario may be completely independent from the Custodian and/or broker-dealer. The client, old Custodian, or new Custodian will alert the Sponsor of a change in custody. The Sponsor or authorized Third Party will initiate notifications to the IM in this process. During a change in Custodian, as the assets are being transferred from one entity to another, all trading is normally halted (generally for ten business days or less). Once the new custodian notifies the Sponsor that the account’s assets have been successfully transferred, the Sponsor will send a separate Resume Trading Notification to the IM to resume trading. The Custodian Change Notification is used for individual client accounts only; it is not a global notification. Usage Considerations: • The Custodian Change Notification delivers the data necessary for the IM to act on the change, including: o Account specific information Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 39 of 68
  40. 40. The Money Management Institute Data Standards Committee Custodian Change Notification 2nd Edition o Old and new Custodian information (e.g. Custodian designation and identifiers, account numbers, Custodian contact information) o Halt trading details (e.g. dates) o Indication of whether or not the Custodian needs an ad hoc letter to identify responsibility for trade settlement between Custodian and IM or Sponsor o Indication of whether or not the Custodian needs trade authorization signature(s) for person(s) authorized to give Custodian instructions on behalf of the account • The Custodian Change Notification delivers client data that may impact trading. • The Custodian Change Notification is not dependent upon any other notification, nor is any other notification dependent upon it. • The Custodian Change Notification uses the following pre-determined table code: Rejection Table. • The Custodian Change Notification follows standard MMI message cycles. *No service level agreement is applied by accepting a standard message. Standards are subject to the terms and agreements between the industry participants. Table of Contents Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 40 of 68
  41. 41. The Money Management Institute Data Standards Committee Financial Consultant/Team Change Notification 2nd Edition Summary: The Financial Consultant/Team Change Notification is to be used by the Sponsor Firm, Custodian, or other authorized Third Party (Sponsor) and their Financial Consultants to relay updated Financial Consultant/Team changes to Investment Managers (IM). Justification: Financial Consultants (FCs) change teams, branches, and/or firms regularly. Many IMs maintain internal records of FCs/Teams and their associated accounts. To maintain the appropriate relationship to client accounts, it is necessary for the Sponsor or FC to communicate these changes to the IM. Historically, this information has been communicated via fax, e-mail, phone, or not at all. Definition and Scope: An FC/Team change is defined as any of the following: a) An FC/Team moves from one office to another, within the same Sponsor Firm b) An FC/Team leaves the Sponsor Firm, and the accounts are assigned to a different FC/Team c) An FC partners with a Team of Consultants The Financial Consultant/Team Change Notification can be used to relay changes for one account or multiple accounts (can be a global notification). Usage Considerations: • The Financial Consultant/Team Change Notification contains data necessary for the IM to apply the change, including: o Account details o Old FC/Team information o New FC/Team information o Indication of whether or not the change is to be applied to all accounts linked to the old FC/Team • The Financial Consultant/Team Change Notification is to be used by the Sponsor or the FC to update FC/Team information for client accounts to the IM. Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 41 of 68
  42. 42. The Money Management Institute Data Standards Committee Financial Consultant/Team Change Notification 2nd Edition • The Financial Consultant/Team Change Notification is not dependent upon any other notification, nor is any other notification dependent upon it. • The Financial Consultant/Team Change Notification does not trigger trading. • The Financial Consultant/Team Change Notification is not associated with any pre-determined tables. • The Financial Consultant/Team Change Notification follows MMI standard message cycles. *No service level agreement is applied by accepting a standard message. Standards are subject to the terms and agreements between the industry participants. Table of Contents Copyright © 2005 The Money Management Institute. All Rights Reserved. Page 42 of 68
  43. 43. The Money Management Institute Data Standards Committee Halt Trading / Resume Trading Notification 2nd Edition Summary: The Halt Trading / Resume Trading Notification is to be used by the Sponsor Firm, Custodian, or other authorized Third Party (Sponsor) to notify the Investment Manager (IM) to halt or resume trading for an account. Justification: During the course of business for an account, the Sponsor may find it necessary to halt trading on an account for a period of time or to initiate the resumption of trading previously halted. In order to expedite these requests the Sponsor will send a standard communication to the IM with instructions. Definition and Scope: The process for a Halt Trading Notification is defined when the Sponsor notifies the IM to stop all investment activity for an account. During the halt trading period no buying or selling may be done in the account; only Corporate Actions may be processed during the halt trading period. Sponsors may elect to put a Halt Trading request on an account for a variety of reasons such as: change of account information (e.g. style change), change of custodian, at the request of the client, issues regarding the assets in the account, or issues regarding the restrictions in the account. In order to reinitiate the investment activity, the Sponsor will send a Resume Trading Notification to the IM, notifying the IM to resume all investment activity for an account. Usage Considerations: • The Halt/Resume Trading Notifications contain specific data necessary for the IM to interpret the instructions, including: o Account information o Financial Consultant/Team contact information o Custodian information o Halt or resume trading effective date o Estimated length of inactivity • Both the Halt/Resume Trading Notifications may be sent in conjunction with other notifications (e.g. Custodian Change). Copyright © 2005 Money Management Institute. All Rights Reserved Page 43 of 68 Page 43 of 68
  44. 44. The Money Management Institute Data Standards Committee Halt Trading / Resume Trading Notification 2nd Edition • The Halt/Resume Trading Notification is not dependent upon any other notification, nor is any other notification dependent upon it. • The Halt/Resume Trading Notification may trigger trading. • The Halt/Resume Trading Notification utilizes the Reason Type and Rejection Type table codes. • The Halt/Resume Trading Notification follows standard MMI message cycles. *No service level agreement is applied by accepting a standard message. Standards are subject to the terms and agreements between the industry participants. Table of Contents Copyright © 2005 Money Management Institute. All Rights Reserved Page 44 of 68 Page 44 of 68
  45. 45. The Money Management Institute Data Standards Committee Investment Manager Style Change Notification 2nd Edition Summary: The Investment Manager Style Change Notification is to be used by a Sponsor Firm, Custodian, or other authorized Third Party (Sponsor) in the event that a client selects a different investment strategy for their existing account while the Investment Manager (IM) remains unchanged. Justification: The client’s initial investment strategy may change with an IM after the original establishment/acceptance of a client’s account by the Sponsor and the IM. Since most of the data within the client profile will not change, rather than re-send the entire Client Profile Update, certain data points may be sent via the Investment Manager Style Change Notification. Definition and Scope: The Investment Manager Style Change Notification is to be used by Sponsors and their Financial Consultants when a client selects a different investment strategy with the same IM, and the client account number remains the same. This notification is forwarded to the selected IM for their review and subsequent approval or rejection. This notification could trigger trading in a client’s separately managed account. This notification is only to be used for an individual client account; it is not a global notification. Usage Considerations: •The Investment Manager Style Change Notification delivers certain client specific data required by the IM to act on a change in the client’s investment strategy, including: o Account details o Change in investment style o Change in the tax strategy or client restrictions, if appropriate •The Investment Manager Style Change Notification is not dependent upon any other notification, nor is any other notification dependent upon it. •The Investment Manager Style Change Notification in most cases will trigger some type of trading activity. •The Investment Manager Style Change Notification uses the following pre-determined table codes: Termination Instructions, Restriction Type, Bonding Agency Code. Copyright © 2005 Money Management Institute. All Rights Reserved Page 45 of 68 Page 45 of 68
  46. 46. The Money Management Institute Data Standards Committee Investment Manager Style Change Notification 2nd Edition •The Investment Manager Style Change Notification follows standard MMI message cycles. *No service level agreement is applied by accepting a standard message. Standards are subject to the terms and agreements between the industry participants. Table of Contents Copyright © 2005 Money Management Institute. All Rights Reserved Page 46 of 68 Page 46 of 68
  47. 47. The Money Management Institute Data Standards Committee Client Profile Update Notification 2nd Edition Summary: The Client Profile Update is to be used by a Sponsor Firm, Custodian, or other authorized Third Party (Sponsor) and their Financial Consultants to relay updated client account information to the Investment Manager (IM). Justification: After a client’s account has been established at the IM by the Sponsor, certain information may change on the account such as a client’s address, marital status or other information that would not trigger trading when updated. Rather than resend the complete New Account Profile data as used when establishing a new account, a condensed version was created: Client Profile Update. Definition and Scope: The Client Profile Update is to be used by Sponsors and their Financial Consultants to relay updated client account information to the IM. The notification is forwarded to the selected IM for their review and subsequent approval or rejection. The Client Profile Update will not trigger trading in a client’s separately managed account. This notification is to be used for individual client accounts only; it is not a global notification. A variety of reasons could result in the need for the Client Profile Update to be sent to the IM: only those fields that need to be updated are to be sent to the IM. There are no conditional data fields associated with the Client Profile Update. Usage Considerations: • The Client Profile Update delivers client specific data: o Change in Source Data o Change in Account Data o Change in Client Data • The Client Profile Update does not deliver client data that could or would trigger a trading event such as account style or restriction changes. • The Client Profile Update is not dependent upon any other notification, nor is any other notifications dependent upon it. • The Client Profile Update does not use pre-determined table codes. • The Client Profile Update follows the standard MMI message cycle. Copyright © 2005 Money Management Institute. All Rights Reserved Page 47 of 68 Page 47 of 68
  48. 48. The Money Management Institute Data Standards Committee Client Profile Update Notification 2nd Edition *No service level agreement is applied by accepting a standard message. Standards are subject to the terms and agreements between the industry participants. Table of Contents Copyright © 2005 Money Management Institute. All Rights Reserved Page 48 of 68 Page 48 of 68
  49. 49. The Money Management Institute Data Standards Committee Short Position or Debit Cash Notification 2nd Edition Summary: The Short Position or Debit Cash Notification is utilized by the Sponsor Firm, Custodian, or other authorized Third Party (Sponsor) to notify the Investment Manager (IM) of a debit or short position in a client account so that corrective action may be taken. Justification: Currently the Sponsor e-mails, faxes or calls regarding the debit balance or short position that has been identified in the client account. In order to provide a standardized process, the Sponsor should notify IM of a short or debit in a client’s account. The IM may respond with corrective action to be taken to resolve short position or debit. It is anticipated that this notification would efficiently augment reconciliation procedures performed by the IM designed to detect these situations. Definition and Scope: The Short Position or Debit Cash Notification would be sent at the client level from the Sponsor Firm to the IM. Debit balances that occur in a client account can be caused by the following reasons (not related to system problems): • Account over-invested • Distribution processed without notification to IM • Fee charged to client account • Tax withheld (missing W8/W9) • Distribution processed/Sales not executed/processed • Account number changes/bulk FC transfers • Margin account • DVP/DK accounts Short positions that occur in a client account can be caused by the following reasons: • Position oversold • Reorgs on a sold position – due bill has not hit the account • Pending stock dividend • Wrong position sold • Position sold while journaling out, ACAT • Client-directed securities are delivered out of the account without notifying the Sponsor (ACAT/Gift) • DK/DVP trades Copyright © 2005 Money Management Institute. All Rights Reserved Page 49 of 68 Page 49 of 68
  50. 50. The Money Management Institute Data Standards Committee Short Position or Debit Cash Notification 2nd Edition Usage Considerations: • The Short Position or Debit Cash Notification delivers specific data that is necessary for the IM to research the debit or short, including: o Account information o Custodian information o Date and amount of debit or short o Short position security information and number of shares or units o Reason code • The Short Position or Debit Cash Notification may deliver client data that could or would trigger a trading event. • The Short Position or Debit Cash Notification is not dependent upon any other notification, nor is any other notification dependent upon it. • The Short Position or Debit Cash Notification does not use pre-determined table codes. • The Short Position or Debit Cash Notification follows standard MMI message cycles. *No service level agreement is applied by accepting a standard message. Standards are subject to the terms and agreements between the industry participants. Copyright © 2005 Money Management Institute. All Rights Reserved Page 50 of 68 Page 50 of 68
  51. 51. The Money Management Institute Data Standards Committee Short Position or Debit Cash Notification 2nd Edition Table of Contents Copyright © 2005 Money Management Institute. All Rights Reserved Page 51 of 68 Page 51 of 68
  52. 52. The Money Management Institute Data Standards Committee Proxy Information Client Override Notification 2nd Edition Summary: The Proxy Information Client Override Notification is sent by the Sponsor Firm, Custodian, or other authorized Third Party (Sponsor) to notify an Investment Manager (IM) that a client has stipulated how a proxy for specific security is to be voted. This notification will only occur if the IM is assigned to vote proxies and a client wishes to override the voting decision of the IM. Justification: The IM normally votes proxies according to their own guidelines. However, there are times when a client may stipulate how a specific security should be voted (typically larger accounts, Taft Hartley accounts, etc.). Therefore, standardized communication from the Sponsor to the IM is required when a specific account requires a security or group of securities to be voted in a certain way. Definition and Scope: Proxy voting is required for all equity securities owned in a portfolio. At the inception of an account, the client is typically given the option to vote the proxies themselves, assign the responsibility to the IM, or assign the responsibility to the Sponsor. For those instances where a client wishes to override the voting authority of the IM, a proxy vote instruction should be included for each applicable proxy proposal number. The IM, upon accepting the notification, will assume responsibility of voting the proposal(s) according to the client’s instruction. Usage Considerations: • The Proxy Information Client Override Notification communicates to the IM the client’s instruction for how the proxy for a specific security or securities should be voted. The notification includes data necessary for the IM to vote, including: o Account information o Security identification details o Total number of shares owned by the account o Proxy proposal number and specific vote instruction (e.g. For, Against, or Abstain) • The Proxy Information Client Override Notification is not dependent upon any other notification, nor is any other notification dependent upon it. Copyright © 2005 Money Management Institute. All Rights Reserved Page 52 of 68 Page 52 of 68
  53. 53. The Money Management Institute Data Standards Committee Proxy Information Client Override Notification 2nd Edition • The Proxy Information Client Override Notification does not trigger trading. • The Proxy Information Client Override Notification does not use pre-determined table codes. • The Proxy Information Client Override Notification follows standard MMI message cycles. *No service level agreement is applied by accepting a standard message. Standards are subject to the terms and agreements between the industry participants. Table of Contents Copyright © 2005 Money Management Institute. All Rights Reserved Page 53 of 68 Page 53 of 68
  54. 54. The Money Management Institute Data Standards Committee Fee Reporting Notification 2nd Edition Summary: By utilizing the Detailed and Summary Fee Notification, the Sponsor Firm, Custodian, or other authorized Third Party (Sponsor) is relaying period specific billing information pertaining directly to the Investment Manager’s (IM) distributed accounts from the Sponsor. Justification: A reporting standard for the Detailed and Summary Fee Notification (Fee Notification) from Sponsor and/or Custodians should be provided in a summary or detailed format to those IM that are contracted fiduciary advisers or sub-advisers in SMA asset management programs. Fee information is necessary for portfolio accounting as well as revenue reporting and projection, sales compensation, performance, auditing and due diligence. While the fee information is commonly available at the account level by style, a summarized representation from Sponsor to IM is required. Sponsors can send the detailed, summary, or both fee notifications. This notification can be utilized by the IM to validate their fees and process any reconciliation needed. Definition and Scope: The Fee Notification is sent from the Sponsor to the IM. The Sponsor consolidates all of its fees associated with the client’s account, inclusive of the Financial Consultants and IM fees, specifically relating to the end-client and IM contracts. Sponsors use several parameters such as the number of billing days to calculate the total fees that are debited from the client’s account or the fees paid directly to the IM. The process should be a common format of information fed to IMs on a periodic basis (with frequency depending upon the relationship with the Sponsor). The information and underlying fee parameters should be provided to the IMs in order to provide the ability to upload fee information to any given portfolio accounting system without any necessary translation to their preferred system. The fee detail reports do not necessarily need to equal the summary report. Adjustments at the summary level may not match the detailed level due to circumstances such as trading errors. Also, not all adjustments are account specific. Usage Considerations: • This notification delivers specific data that is unique to its function. Below represents some of the data fields that are specific to this notification. Copyright © 2005 Money Management Institute. All Rights Reserved Page 54 of 68
  55. 55. The Money Management Institute Data Standards Committee Fee Reporting Notification 2nd Edition o Detailed: • Account Billing Method • Total Market Value and Date • Reporting Period • Fee Type • Adjustments • Book Date • Total Fees (Account and Manager) • Annual Effective Rate o Summary: The information below repeats for each investment style • Investment Manager Style • Reporting Period • Fee Type • Billing Method • Date of Assets Valued • Adjustments (including Aggregate) • Total Number of Accounts Billed • Total Assets Billed • Payment Total (including Manager Fee) • The Fee Notification could trigger a trading event (for example the need for the IM to raise additional funds to cover the fees or adjust the portfolio to cover the debit of the fee). • The Fee Notification is not dependent upon any other notification, nor is any other notification dependent upon it. • The Fee Notification is associated with the two pre-determined tables: Fee Type and Adjustment Type. • The Fee Notification follows standard MMI message cycles. • The Detailed and Summary Fee Notifications are for informational purposes only. *No service level agreement is applied by accepting a standard message. Standards are subject to the terms and agreements between the industry participants. Table of Contents Copyright © 2005 Money Management Institute. All Rights Reserved Page 55 of 68
  56. 56. The Money Management Institute Data Standards Committee Fee Reporting Notification 2nd Edition Copyright © 2005 Money Management Institute. All Rights Reserved Page 56 of 68
  57. 57. The Money Management Institute Data Standards Committee Message Flows 2nd Edition Typical Message Notification Flow Initial Notification Sponsor IM SMA Operations Sponsor Acknowledgement of Receipt IM SMA Operations Sponsor Accept or Reject of Notification IM SMA Operations Copyright © 2005 Money Management Institute. All Rights Reserved Page 57 of 68
  58. 58. The Money Management Institute Data Standards Committee Message Flows 2nd Edition Voluntary Corporate Action Message Notification Flows Message Cycle Types 1 and 2 Initial Notification Sponsor or Custodian IM SMA Operations Sponsor or Custodian Acknowledgement of Receipt IM SMA Operations Sponsor or Custodian Notification of VCA Decision IM SMA Operations Sponsor or Custodian Accept/Reject of Decision Notification IM SMA Operations Sponsor or Custodian IM SMA Operations Acknowledgement of Processed file or Accept/Reject of Notification file Copyright © 2005 Money Management Institute. All Rights Reserved Page 58 of 68
  59. 59. The Money Management Institute Data Standards Committee Message Flows 2nd Edition Voluntary Corporate Action Message Notification Flows Message Cycle Type 3 Sponsor or Custodian Initial Notification IM SMA Operations Sponsor or Custodian Acknowledgement of Receipt IM SMA Operations Sponsor or Custodian IM SMA Operations Accept/Reject of Decision Notification Sponsor or Custodian Acknowledgement of Processed file or IM SMA Operations Accept/Reject of Notification file Table of Contents Copyright © 2005 Money Management Institute. All Rights Reserved Page 59 of 68

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