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NICSA White Paper: Oversight of Omnibus Accounts

NICSA has written a white paper that reviews evolving best practices for oversight of fund omnibus accounts.  Over the last several years, an increasing number of intermediaries have established omnibus accounts -- many families report that 80%-90% of their assets are now held through these types of accounts.  As such, it is becoming increasingly important that fund management have appropriate oversight mechanisms in place.  While no one approach is appropriate for every firm, participants in NICSA’s Intermediary Discussion Forum (composed of representatives of fund management companies) compiled a list of evolving best practices, including ensuring that fund transfer agents communicate early and often with fund boards.  The white paper states:

“Because a significant number of shareholder accounts are held within the omnibus accounts and serviced directly by the broker dealers and sub-accounting fees may be paid by the fund (either directly or indirectly), intermediary governance is an issue of considerable importance to fund boards of directors. Fund transfer agents should communicate regularly with boards about their intermediary governance approach and efforts.”

The white paper also recommended that fund transfer agents establish working groups and oversight committees dedicated to overseeing intermediary governance, develop a risk matrix or scorecard for evaluating omnibus intermediaries and recordkeepers, and use the standardized FICCA (Financial Intermediary Controls and Compliance Assessment) framework to assess the control environment at a financial intermediary.