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A seismic shift is occurring in the relationship between fund companies and intermediaries. Compliance requirements and strategic data analytics are converging as intermediaries are more and more insisting on delivering detailed trade activity data in the form of Direct Shareholder Activity (DSA) and Direct Shareholder Position (DSP) files to companies selling funds on their platforms.

Under Rule 22c-2, intermediaries must perform oversight of the trading activity of participants on their platforms. This means keeping fund companies informed of the details of the individual transactions within their omnibus accounts. DSA and DSP files, provided by the intermediary to their platform funds, break out the details of individual trades that would otherwise be masked within the fund company’s omnibus account.

From Optional to Obligatory: DSA and DSP Reporting – Like It or Not

In the past, fund companies were at liberty to opt in or out of receiving underlying DSA / DSP files. But many intermediaries are now making this data transmission a pre-requisite for fund companies who want a spot on their platforms. This isn’t merely a tactical shift; it’s a strategic change of focus, mandating not only that fund companies receive the data but also that they have a dedicated destination for the DSA and DSP files.

Since the files are sent only through Omni/SERV® or through a dedicated Secure File Transfer Protocol (SFTP), fund companies must establish some form of connectivity with Omni/SERV® or create a dedicated SFTP connection to the intermediary to be able to receive the DSA and DSP files.

First, fund companies must determine how to receive the data. Then they must decide what, if anything, to do with it. Herein lies an enormous data analytics opportunity.

From Obligation to Opportunity: The Data Analytics Potential of DSA / DSP Files

There is an opportunity to turn a compliance necessity into an operational advantage. While the intent of the mandate is compliance with regulations such as 22c-2, the data, abundant in details, can deliver valuable insights through data analytics that can inform sales strategy and help to drive new business.

Compliance with 22c-2: For intermediaries, the now mandated files enable them to demonstrate they are fulfilling 22c-2 requirements. The mandate is a safeguard against potential regulatory pitfalls.

Sales Insights: For fund companies, DSA/DSP file data analytics can yield a wealth of insights into sales trends, intermediary performance and investor behaviors. Whether or not a fund company has a dedicated sales team, even a cursory glance at the DSA and DSP file data reveals critical intelligence that can shape strategy and optimize fund performance. A comprehensive data analytics regime can unveil much more.

Beyond Compliance: Data Analytics for Sales Strategy

With the mandated inclusion of these DSA and DSP files in their processes, fund companies now have a goldmine of data that can be leveraged through data analytics on an ongoing basis for strategic purposes. Sales-related insights can be extracted from DSA and DSP data that will help fund companies understand where and by whom their funds are being distributed and identify potential avenues for strategic expansion.

The Way Forward: Compliance Informing Strategy Through Data Analytics

22c-2 Compliance no longer means intermediaries offering ‘nice to have’ DSA and DSP data files. The ‘nice to have’ has become a mandated connection. Invaluable data has been forced into the hands of fund companies. Digging deep into this data with comprehensive data analytics uncovers hidden narratives that can give fund companies a competitive edge. All that is needed is a seamless integration mechanism for ingesting the DSA and DSP files and the data analytics capability to uncover the intelligence in the data.

22c-2 compliance has become not just a box to be checked but potentially a gateway to the data-driven enhancement of sales strategy. Fund companies are now equipped, perhaps against their will, with a wealth of data and a golden opportunity to exploit it through data analytics. This mandatory data is a blessing in disguise. An investment in data analytics capability pays lavish returns.

Now more than ever fund companies need to be forward-thinking and leverage the potential of their sales data with data analytics that will keep them ahead of the curve and maintain momentum in a rapidly changing investment fund landscape.