While the asset management industry is constantly changing, one area that continues to be at the forefront is the importance of a modernized intermediary oversight program.

In conjunction with Ignites, Delta Data sponsored a webcast on Modernizing Your Oversight Service Platform where Senior Vice President, Product, Colt Younger joined senior representatives from Charles Schwab and KPMG to discuss how asset managers can develop a modern, centralized system by using new data solutions to help with risk management, operational costs, and reporting.

A successful and scalable oversight program is a combination of operational processes that integrate distributor shared data and qualitative and quantitative analyses. The ultimate goal is to gain a clear and comprehensive risk picture for each entity distributing the asset manager’s funds.

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.

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.

There’s a lot that goes into intermediary oversight, and there are different data elements used in intermediary oversight that may not be employed in other parts of the organization, which requires unique and specialized platform functionality.

Lifecycle of the Intermediary

Oversight programs are typically divided into three areas: 1) onboarding of new intermediaries, 2) ongoing monitoring of existing relationships, and 3) reporting.

Onboarding Due Diligence

Prior to entering a contractual arrangement with an intermediary, fund complexes generally undertake a comprehensive due diligence effort as part of the onboarding process. This includes sending out comprehensive questionnaires to gather pertinent data elements covering the intermediary’s general information, the firm’s compliance history and structure, and operational and trading practices.

As part of contract administration, fund complexes look at very specific data and service elements of the contract before it is executed. The onboarding process ensures detailed contract negotiations outline and address all obligations, expectations, and responsibilities within the appropriate agreements.

Ongoing Monitoring

Once the relationship is established, fund complexes practice ongoing monitoring where they perform frequent due diligence reviews. These reviews may be done annually or on a more frequent basis.

A fund’s ongoing oversight monitoring program must satisfy the requirements of SEC Rule 38a-1, which requires that the fund have policies and procedures to oversee the compliance of its intermediaries, including investment advisors, principal underwriters, administrators, and transfer agents.

Ongoing due diligence methods include employing risk-based assessments of each intermediary, circulating periodic questionnaires regarding operational and compliance practices, and evaluating the quality of data transparency files.

Additional ongoing oversight functions increase transparency and provide assurances regarding the intermediary’s controls by obtaining underlying transaction data for broker-dealer omnibus accounts. These data elements are related to compliance with SEC Rule 22c-2 addressing frequent trading activities.


Fund boards have a high interest in dealer oversight as well as how that oversight operates, which is why it’s critical for funds to have integrated and cohesive processes in place to pull together all the data.

Most funds have quarterly reporting to the fund boards with more extensive reporting through their annual 15(c) Review Process, as well as ad hoc internal management and operational reporting.

From a reporting perspective, having accurate and timely data available within tools that can be utilized with ease is important. Funds have integrated access to robust data at their fingertips, and it’s easily obtainable within a consolidated platform and easy to navigate.

Modernizing Trends in Intermediary Oversight

Funds are seeking a controlled approach to intermediary onboarding, workflows, and document storage where they can automate oversight processes and expand comprehensive reporting capabilities.

Through the intermediary lifecycle, there are processes ripe for automation and efficiencies, including automation of invoicing, calculation of fee and revenue sharing, and allocation.

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.

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

A centralized portal supports the workflow for all counterparty interactions at every stage of the intermediary lifecycle, including CRM, contract management, analytics, documents, relationships, due diligence, contract activities, and annual reviews.

It’s really difficult in the intermediary oversight space to build something internally that houses all the data elements that funds need housed, including the workflow and the fee remediation. Off-the-shelf solutions, like Delta Data’s, allow for an asset manager to have everything live in one place without the manual work. All the intermediary oversight data is connected and working together, ensuring quality reporting.

Endless Pursuit of Oversight Modernization

While every asset manager is in a different stage of modernization, even for those that are fairly automated now, it’s an endless pursuit of further automation. Whether you feel behind the trend or believe you’re up to speed, the future will continue to bring constant opportunities.

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.

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 or contact us today to help you reach your Intermediary Oversight goals and objectives.