Importance of Building a Strong Intermediary Oversight Program

Oversight is one of the hottest topics in the mutual fund industry today. While the SEC sweeps have come and gone, fund boards still have a high interest in dealer oversight as well as how that oversight operates. An effective Intermediary Oversight program gives you the ability to quantitatively and qualitatively evaluate your counterparty relationships.

In addition, an effective Oversight program means efficiently preventing a problem from becoming a business-critical situation, with the objective of delivering a more robust industry operating model. This can be accomplished by getting help from third-party service providers, getting organized, and getting informed.

First and foremost, fund directors should be aware of whether their fund’s adviser and key service providers have appropriate risk management frameworks, policies, procedures, and systems in place for identifying, analyzing, and managing risks.

The impact of technology as it relates to regulatory oversight requirements means optimized supervision and less impact of human error. Technology has the potential to provide real-time monitoring and transparency, while accelerating the detection of issues. It can also streamline responses for SEC exams and inquiries.

There isn’t a “one-size-fits-all” approach to risk oversight and risk programs, given the diversity among funds and fund families, as well as the evolving nature of risk in a dynamic environment and industry. When addressing risk management, fund directors should consider the factors relevant to their particular fund complex, including the fund’s investment objectives and asset size, as well as fund types and number of funds.

Ideally, third-party service providers will have the capability to provide funds with a single portal to better manage oversight activities, which makes oversight monitoring most efficient.

Intermediary oversight is best conducted with technology that can be issued and supported by a single third-party service provider, as it reduces the processes and systems required in place to monitor and manage the risk program.

Want to learn more about building a strong intermediary oversight program? Click here to download Delta Data’s Asset Manager Intermediary Oversight eBook to gain helpful insights and best practices to help you reach your Intermediary Oversight goals and objectives.