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Vendors Team Up For Redemption Fee Rule Solution

The looming implementation of Rule 22c-2 is on the horizon, and a group of vendors is launching systems to relieve much of the work the rule will require.

  The looming implementation of Rule 22c-2 is on the horizon, and a group of vendors is launching systems to relieve much of the work the rule will require.

UMB Investment Services Group, PFPC and BISYS have teamed up with SunGard Transaction Network to help with these compliance issues. Marty Burns, v.p. and product manager at SunGard, said the nature of the alliances is similar. SunGard is providing the underlying technology while the service providers offer platforms to fund companies and intermediaries. SunGard outsourced the code development to Delta Data Software.

Burns said SunGard provides connections to both intermediaries and fund companies, just as it does with trading systems. SunGard is also building proprietary omnibus models to filter transactions for timing activity. Other technology providers in the 22c-2 market include Access Data Corp. and transfer agents such as DST Systems.

Because PFPC is the largest vendor of subaccounting systems, it can give its clients access to 50 million broker/dealer subaccounts. The deal with SunGard adds 43 million on the retirement side with bank trusts and third-party administrators. Christine Gill, v.p. and senior director of global product development at PFPC, said the vendor didn't feel it had to aim for intermediaries as many already use PFPC's subaccounting system and use industry-standard files to send fund companies information. "We've targeted our efforts on fund companies," she said.
SunGard and PFPC are developing models jointly. Gill said for the data the service provider doesn't have it will tap into mechanisms like the Depository Trust & Clearing Corp.'s omnibus hub. But direct access to 90 million total accounts will help it reduce costs for clients. She declined to comment on cost.

James Nolan, executive v.p. of BISYS Fund Services, said BISYS is the only user of the SunGard technology that is offering it in a full-service outsourcing model. BISYS is offering monitoring of 22c-2 transactions, helping funds get dealer agreements and helping to load data into a 22c-2 database. "Other service providers are only offering a technology solution," he said.

Compliance with the Redemption Fee Rule is an issue for both fund firms and intermediaries. The Rule, a response to the trading scandals that have plagued the mutual fund industry in recent years, requires funds and intermediaries to enter into contracts to obtain underlying information from omnibus accounts. The rule is expected to become effective in October, barring an extension, and the tight deadline is making implementation difficult for most companies. The ceo of a top fund company told FA that "it's essential to have a full outsourced solution for 22c-2 because the development work is complex and does not offer a fund company any competitive advantage." The October deadline, he said, "is making in-house solutions all but impossible."

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