Products December 26, 2013

Prudential Adds DST Clearing Service

Financial services and asset management firm DST reached an agreement to bring its retirement income clearing calculator (RICC) services to Prudential Retirement clients.
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DST’s retirement income clearing calculator tools are designed to enable easier distribution of retirement income across traditional recordkeeping platforms. The goal is to connect product providers with recordkeepers to better facilitate the delivery and portability of retirement income products, according to a statement from DST.

Prudential Retirement, a business unit of Prudential Financial, plans to use the income clearing calculator to distribute retirement income products—such as its Prudential IncomeFlex Target—across multiple recordkeeping platforms.

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According to Jude Metcalfe, president of DST Retirement Solutions, the tool will provide Prudential the opportunity to make its guaranteed retirement income products available to more distributors and large plan sponsors.

"RICC breaks through the technology barriers to enable providers like Prudential Retirement to reach the marketplace without the immense and costly effort of continuously updating systems," says Metcalfe. "With RICC, building one platform allows you to reach many guaranteed income products."

Specifically designed to effectively work with a broad array of income solutions, RICC enables providers to incorporate various functionalities to deliver income solutions to the market. The platform incorporates all of the calculations, and product and business rules around a guaranteed income product.

DST Retirement Solutions provides a broad array of front- and back-office technology and servicing solutions to financial service organizations offering retirement plan recordkeeping. 

More information is available at www.dstsystems.com.

Compliance December 26, 2013

FINRA Proposes Automated Oversight

The Financial Industry Regulatory Authority (FINRA) is soliciting comments on a proposal to standardize and automate account activity and security reviews for its members.
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FINRA outlines the proposed review system, called the Comprehensive Automated Risk Data System (CARDS), in Regulatory Notice 13-42. 

As proposed, the system will reform FINRA members’ account reporting requirements to allow regulators to automatically collect and analyze member account information, as well as account activity and security identification information that a firm maintains as part of its books and records.

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FINRA hopes the program, once enacted, will increase its ability to protect the investing public by utilizing automated analytics on brokerage data to identify potentially problematic sales activity. Under the proposed arrangement, FINRA plans to analyze CARDS data before examining firms on site, thereby identifying risks earlier and shifting work away from the on-site exam process.

"The information collected through CARDS will allow FINRA to run analytics that identify potential ‘red flags’ of sales practice misconduct and help us identify potential business conduct problems with firms, branches and registered representatives," says Susan Axelrod, FINRA's executive vice president of regulatory operations.

FINRA's Regulatory Notice 13-42 discusses the CARDS concept without submitting specific rule language. The idea is to solicit comments on how to best design and fund the CARDS system.

As currently envisioned by FINRA, the CARDS program would compel clearing firms (on behalf of introducing firms) and self-clearing firms to submit specific information relating to their customers’ accounts and the customer accounts of each member firm for which they conduct clearing activity. This information would be automatically collected, standardized and sent to FINRA on a regular basis.

Introducing firms would be required to provide their clearing firms with specified pieces of account and customer information. This would allow clearing firms to provide the information to FINRA in conjunction with other information the clearing firms provide.

According to its regulatory note, FINRA plans to use the information to run analytics that identify potential sales practice misconduct, such as churning, excessive commissions, pump and dump schemes, excessive markups and mutual fund switching, among others.

The information selected for submission to FINRA during the initial phase of CARDS would generally represent the same types of information FINRA already collects on a firm-by-firm basis during the examination process. 

Based on experience with two major clearing firms with which FINRA tested the feasibility of an automated data acquisition program, FINRA believes that the vast majority of the information that CARDS would collect is already stored in an automated format at clearing and self-clearing firms and service bureaus.

As a result, FINRA envisions implementing CARDS through a phased approach over a reasonable period of time and is seeking comment regarding the structure of a phased approach.

More on the CARDS program proposal and how to submit comments to FINRA is available here.

FINRA is an independent regulator for securities firms doing business in the United States.

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