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Mutual Fund Directors Digest – Issue 2


The U.S. Securities and Exchange Commission (SEC) indicated that omnibus intermediaries and related oversight practices are a current priority in fund inspections. With the continuing migration toward intermediaries being a primary provider of shareholder services, the mutual fund industry has sought to refine its oversight of the intermediary population.

Increasing attention has been given to the use of Financial Intermediary Controls and Compliance Assessments (FICCA) as a means of enhancing fund oversight of intermediary relationships. FICCA is an independent internal controls attestation report that covers key focus areas relative to intermediary subaccounting services, such as transaction processing, reconciliations, and fee calculations. To complete a FICCA, an intermediary engages an independent accounting firm to examine its internal controls relating to specific service areas.

In light of the continuing shift towards intermediary subaccounting and the SEC’s focus in this area, directors may want to ask fund management if—as well as how—it has adapted to the changing landscape. Specific questions that fund directors may wish to consider include:

  1. What activities are being employed by management to oversee fund intermediaries?
  2. Which intermediaries currently providing subaccounting services for the funds are supplying a FICCA report and, if a FICCA is available, does the scope include the relevant control areas?
  3. For those intermediaries that are not supplying a FICCA report:
    • Has fund management requested one?
    • Has the intermediary indicated why it does not plan to provide such a report?
  4. Is there an opportunity to enhance the content and/or timing of existing board reporting with the inclusion of a FICCA report?

To learn more about oversight practices designed to help mitigate these and other risks in connection with intermediary relationships, please click on the summary.


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