Come to your Census – Why Form N-CEN is a Key to Fund Administration Data Strategy

Date: February 26, 2018

How many times has your manager come to you and asked a difficult question that they expected you to know off the top of your head? “How many funds hold IBM stock?” or “Which clients use Accountancy ABC as an audit firm?” Chances are these questions are asked with very little context and a ton of urgency. And oddly enough, while these same questions might be asked as part of Form N-CEN, that same sense of urgency is not always shared when the topic of housing data for Form N-CEN arises.

The problem with answering Form N-CEN questions is that it almost always involves a scavenger hunt for information that lives “somewhere” within an organization and it is just a matter of finding that information, documenting the answer, and updating the answer when it changes. Unlike the efforts that firms have undertaken for Form N-PORT, most filers are not refactoring upstream systems and signing up for data enrichment services to account for missing data needed for Form N-CEN. However, from a data strategy perspective, Form N-CEN can be a common denominator across an organization’s data. In the future, the SEC may use the data in Form N-CEN to find commonalities and trends within the fund data and it would be valuable for the fund administration industry to do the same. Investing in the normalization of qualitative information databases can lead to significant savings of both time and money when answering questions that currently require specialized resources.

Consider the following questions:

  • I heard Accounting Firm XYZ is going out of business. What services do they provide for me?
  • There was a recent natural disaster in City ABC. How many third-party services do I use that have operations in that city? I need to know their Disaster Recovery plans.
  • There is a new regulation that requires my clients to file a new form if they engage in securities lending. What is the potential impact to my administration business? Can I commercialize it?

How would these questions be answered today? Do you need to pull in subject matter experts across multiple business lines to collate this information? Accurate and timely data allows managers to make quicker and more cost-effective decisions. All of the above questions could be answered very quickly by simply organizing the data associated with Form N-CEN.

That being said, these types of questions often don’t have a simple answer. It’s likely that on most occasions, the answers to these questions are “It depends.” And then this short sentence would be followed by a litany of the edge-case scenarios, data quality issues, or a list of qualitative decisions that must be made in order to answer the original question.

More and more companies are investing in data technology to counterbalance the inefficiencies of their upstream systems. It is easier to transform data in an application than it is to find a COBOL developer that can update the mainframe system. Fund administration is a big business where the quality of the data is just as valuable as the assets under management. One bad data point and there could be a world of trouble with a regulator. Knowing your data also involves anticipating what data might be needed and where the gaps may be. Even though a regulator doesn’t ask for a data point today does not mean that it won’t in the future.

It might even be time to get around to that pending project to clean up Fund IDs in a legacy accounting system or move non-publicized qualitative data to the data warehouse with Form N-CEN in mind. Doing so will ensure more accuracy in your Form N-CEN filing, solve for future data requests, and save you from having to say, ”It depends.”

To learn more about 13f-2 watch our webinar replay Part 1: Unpacking the SEC's New Disclosure Rules for Shareholders
Join us for Part 2: Operationalizing the SEC's New Disclosure Rules, for Shareholders on December 12.