Trust departments may soon have new tools to help them stanch the river of paperwork flowing from the growing volume of mutual funds transactions.
An American Bankers Association task force is seeking industry support for adoption of computerized clearing and reporting systems that could stem the tide by eliminating manual order processing and record keeping.
"As trust companies have become custodians for more and more mutual funds in their clients' accounts," they have incurred a tremendous amount of paperwork, said task force chairman Jesse H. Cole, second vice president of Northern Trust Co.
The task force is supporting changes to the computerized systems originally developed by the National Securities Clearing Corp. to handle broker-dealer transactions for load mutual funds.
Those changes would allow trust departments to automatically route sales charges and fees to broker-dealers, trade electronically in participating no-load mutual funds, and ensure accurate, automated transaction and customer record keeping for both load and no-load funds.
On Wednesday the Investment Company Institute's bank broker-dealer committee, which proposed the modification, will meet to determine whether support among banks and mutual fund companies to revise the computerized clearing systems is strong enough to go ahead.
"We're not going to build something people won't use," said Gregory K. Spero, account manager, National Securities Clearing Corp. "We'll look for the funds and the banks to say yes."
And bank support seems strong.
"Our participant banks are definitely committed to this," said Lisa A. Dougan, senior product development analyst at Depository Trust Co., a member-owned national clearing house for securities trades settlement. More than 500 banks across the country are members of the group.
Fund/Serv is clearing corporation's automated system for mutual fund transactions. A second system, called Networking, allows fund companies, dealers, and transfer agents to share nontrade-related customer information.
"We've asked for and received commitments to expand Fund/Serv and Networking interfaces upon adoption of the ICI trust proposal," Ms. Dougan said.
The National Securities Clearing Corp. is a nonprofit organization run by the New York Stock Exchange, American Stock Exchange, and the National Association of Securities Dealers.
Mr. Spero said the corporation processed more than 45,000 mutual fund transactions totaling $506 million during the month of August. Fund/Serv customers include 208 broker-dealers and 260 mutual fund families, encompassing more than 6,200 individual mutual funds.
Participating load mutual fund companies include Franklin Resources and Putnam Investments. No-load companies include Dreyfus Corp., T. Rowe Price Associates, and Neuberger & Berman L.P.
