National Regulatory Services (NRS), part of Accuity, today announced the Blue Sky Solution Transactional Exemption Module created to return expense management control to mutual funds. The system enables fund companies and third party administrators to identify investor purchases that are exempt from blue sky law reporting which covers the offer and sale of securities in a particular state. These transactional exemptions are key to the expense management of a fund because they reduce reportable sales and the corresponding fees.
The Transactional Exemption Module addresses the challenges associated with the dramatically escalating trend of mutual funds losing transparency at the account level. This trend is caused by funds migrating from fully disclosed blue sky reporting to “full omnibus” aggregated reporting that yields summarized, unfiltered reports. With shareholder account information decentralized across a variety of subaccounting systems, funds no longer have the data available to know which accounts are eligible for exemption.
According to Ginny Chapman, Vice President of NRS’s Blue Sky Services, “With a loss of transparency comes an inability to identify those transactions that are available for exemptions. As a result, funds end up reporting gross sales instead of reportable sales and overpaying in fees. These excess fees ultimately impact shareholder value. The Transactional Exemption Module was created to reinstate control over transaction filtering and mitigate the escalating fees that mutual funds are paying. As the first to offer technology with this capability, NRS is pleased to continue building its strong track record of delivering leading compliance solutions to the industry.”
The new transaction exemption module enables mutual fund companies and third party administrators to repurpose transaction and position data files available for compliance with SEC Rule 22c-2 (which allow a fund to manage against excessive trading by investors) to be used for blue sky compliance. Using the Transactional Exemption Module, funds can set up rules that systematically identify eligibility for the range of states’ exemptions. Should such data files not be received from some Broker Dealers (as not all relationships require excessive trade monitoring), the funds may request the BD to provide this data for the purpose of Blue Sky compliance.
The new file processing system will:
- Reside behind the firewall of the fund firm or that of their transfer agent to protect NPPI data contained within the source files
- Process the transaction files using configurable rules
- Output blue sky sales files that report the dollar amount of all reportable transactions
- Exclude the dollar amount of transactions identified by rules as exempt
- Serve as input to the Blue Sky Solution reporting system replacing old financial intermediary feeds
- Reduce blue sky state filing fees in states where fees are based on sales
Outputs from the Transactional Exemption Module flow into NRS’s Blue Sky Solution System, a state-of-the-art application designed to streamline the blue sky filing and compliance monitoring process. Developed with three primary objectives — efficiency, accuracy and electronic filing — the Blue Sky Solution System is the country’s premier blue sky compliance application. As a result of its user-friendly interface, accuracy, high productivity rates and low staffing requirements, it is the system of choice for some of the largest mutual fund companies and third party administrators in the country.
Owned by the Reed Elsevier, National Regulatory Service (NRS) is part of Accuity, the global standard for payment efficiency and compliance solutions. NRS is the US leader in compliance and registration products and services for investment advisers, broker-dealers, hedge funds, investment companies and insurance institutions. NRS has the practical expertise, proven capability and unparalleled reach to deliver integrated and effective compliance solutions to a wide range of users within the financial services industry. NRS delivers these solutions through three interrelated offerings – comprehensive education, best-in-class technology and expert consulting services – enabling our clients to meet their regulatory requirement and minimize risk.
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