The Client Need
Merrill Lynch is a Fortune 500 brokerage firm based in New York. The client was interested in enhancing their soft dollar process by:
- Providing greater transparency and accountability and
- Reducing the very labor intensive and paper based approach
The soft-dollar payment process works like this:
1. The investment managers use research from vendors and determine securities to buy or sell
2. They then get these orders executed by the broker dealers. In return, they accumulate soft dollars with the broker/dealers which are then used to pay the vendors
3. The vendors then submit paper invoices to the broker/dealers for services they have rendered to the investment managers
4. The broker/dealers fax these invoices to the investment managers to get their approval
5. The investment manager faxes the approvals back to the broker/dealer
6. The broker/dealer then pays the vendor
As can be seen, it is a process with many steps, and most of the steps are entirely manual and done through faxes going back and forth. Furthermore, there is very little transparency in the system and very frequently, funds get disbursed without getting the right approvals.
They were looking for a Compliance Solution to automate this workflow and improve the transparency and accountability of this process.
The Skillsets Illustrated
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WebObjects/.NET development
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Medium
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User Interface Design
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Strong
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Oracle PL SQL
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Weak
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Database object modeling
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Strong : Built datamodel from scratch
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Global Delivery
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Strong
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The Inkriti Solution
The Inkriti soft dollar application is a web-based system that automates the soft-dollar payment processes between investment managers, broker/dealers and service providers. Using this tool
- The investment managers get a consolidated, multi-broker view of all their soft dollar expenditures in an easily readable format.
- The broker/dealers create improved client relationships by providing easy to read, easy to understand payment reporting: the industry’s gold-standard for soft-dollar payment.
The system provides:
- XML based interface for exchanging payment and invoice information between systems.
- Inbuilt java based workflow engine that makes the communication of invoices and payments between investment managers, vendors and broker/dealers very seamless and efficient.
- Extensive roles based access control to ensure privacy and security of data
The Results
Benefits for Investment Managers
- Provides a consolidated, multi-broker view of all your soft dollar expenditures in an easily readable format
- Provides online approval of invoices
- Auto approve all bills
- Auto approve invoice if dollar amount does not change from previous month to this month
- View overall soft dollar budgets organized by products and services. Simplify ADV form filing by using our reports that allow your services to be classified by SEC category.
- Audits are easy; all information is online with scanned contracts, and invoices.
- View scanned contracts on line.
Benefits for Brokers
Streamlines operations:
- Provides quickly viewable workflow status of invoices.
- Allows viewing overall soft dollar budgets organized by products and services.
Discloses procedures relating to soft dollar practices:
- Discussions of invoices on line allowing compliance a view to discussions with their clients. An officer of a Broker/Dealer can review all correspondence with Investment Managers relating to soft dollars on line.
- Scanned Hedge Fund charters, Investment Manager Letter, and Plan Sponsor charters/letters.
- Audits are easy; all information is on line with scanned representations of contracts, invoices and charters.
Reduces costs:
- Dual approval process at the Broker/Dealer. Controller has final approval.
- Allow Controller to schedule future payables.
- Calendaring of invoices for ease of viewing payment dates.
- Allows the complete management reporting of soft dollar invoice payments. No commingling of internal invoices.
- Central PO Box always permanent in case you change address.
- Manage check/wire payments: no more losing or misplacing checks.
- Track sales/person, trader, and administrative persons per commitment and/or client for annual payout of bonuses.
- Saves paper and postage on mailing out payments.
Benefits for Vendors
Cashflow and contract management tools
- Instant access to payment status
- Seeing when receivables are coming in.
- View contract terminations and renewals.
Promotional Website Listing
- Advertise services within a particular market by SEC guidelines.
- Create contracts on line.
- Allows your services to be viewed in a cost effective manner.
The Technology
- Java
- BEA Application Server
- Oracle
- UNIX
