Your PMS must support independent book of record requirements

In this interview, Raghid Nami, product manager at Croesus, discusses the importance of IBOR compliance and how technology can help wealth managers meet these requirements. Croesus is a leading Canadian WealthTech providing an all-in-one portfolio management system (PMS) built to empower its users to comply with Canadian regulations, including IBOR.

What is an Independent Book of Record?

R.N. An IBOR is a comprehensive set of policies, procedures, tools, and systems that allow a portfolio management firm to maintain an independent record of its business activities, financial affairs, and client transactions. It’s the firm’s own “book of record,” providing an independent and traceable view of its operations and client activities’ ledger ensuring effective data segregation.

Securities regulators in Canada require all registered firms to maintain their own independent books and records. It’s important to understand that the IBOR must be completely separate from records maintained by third parties such as custodians or investment dealers. Regulators emphasize that firms cannot substitute their own records with those of third parties and, as such, portfolio management systems can act as facilitators to help with the reconciliation of account data.

Why is IBOR important for Canadian wealth managers?

R.N. For Canadian wealth managers, the IBOR isn’t just a regulatory hurdle; it’s the cornerstone of solid financial practice and client confidence. It’s about taking ownership of the data. Maintaining a reconciled IBOR is essential for ensuring the accuracy and integrity of their information, which directly impacts their ability to make informed decisions and uphold their fiduciary duty.

Wealth management firms must rely on meticulous IBOR maintenance to ensure accurate and comprehensive information, rather than blindly trusting third-party records. Essentially, it’s about control and independence.

Regulators demand a rigorous reconciliation of the IBOR against custodian records, emphasizing a comparative analysis to pinpoint discrepancies, not just a basic data import. This ensures robust data verification against custodian records, minimizing the risk of errors that can lead to significant financial and reputational fallout.

Moreover, the IBOR serves as a powerful tool for mitigating operational risks. By reconciling the IBOR, firms drastically reduce the potential for errors in investment decisions, settlements, and reporting – think incorrect book values, missed cash flows, or performance miscalculations.

Adhering to IBOR regulations also strengthens compliance with broader regulatory reporting requirements. Regulators rely on consistent data to monitor market activities, detect anomalies, and enforce rules. A reconciled IBOR ensures that reported positions accurately reflect actual holdings, simplifying regulatory compliance.

Ultimately, maintaining a reconciled IBOR empowers portfolio managers with a comprehensive and independent view of their clients’ investments. This enables them to act in their client’s best interests and demonstrate their fiduciary duty. This cultivates trust and confidence, leading to stronger client relationships and improved business outcomes.

In a market where transparency and accountability are paramount, the IBOR is an indispensable asset for Canadian wealth managers.

What are the consequences of non-compliance with IBOR?

R.N. Failing to comply with IBOR requirements can be quite serious. Wealth management firms may face regulatory penalties, reputational damage, and operational vulnerabilities. It’s important to prioritize IBOR compliance not just to meet requirements but also to safeguard your firm’s future.

How can technology help wealth managers achieve IBOR compliance?

R.N. Technology plays a crucial role in helping wealth managers achieve IBOR compliance. Therefore, if you are a Canadian wealth manager, your PMS must offer a range of features designed to streamline this process, however, not all PMS do provide such functionality. To effectively address these challenges, a comprehensive PMS should incorporate these key functionalities:

Centralized data management: All relevant information, such as client data, transactions, holdings, and performance metrics, must be stored in one central location.

Automated reconciliation: Your PMS should automatically compare the firm’s IBOR with records from custodians and other third parties, making it easier to identify and resolve discrepancies.

Secure and controlled access: Your system should ensure that only authorized personnel can access and modify sensitive information.

Rapid retrieval and regulatory access: Data should be quickly retrieved in various formats, simplifying regulatory audits and reporting.

Built-in compliance and oversight tools: Your PMS should include tools for tracking KYC/KYP information, managing conflicts of interest, and generating compliance reports.

Business continuity and disaster recovery: It’s essential that you have access to robust data backup and recovery capabilities to ensure that critical information is protected and accessible in case of unforeseen events.

How does Croesus specifically help wealth managers achieve IBOR compliance?

R.N. Croesus has a long-standing commitment to aligning our solutions with Canadian regulatory requirements, and IBOR is a key focus. Our PMS is designed to streamline segregated record-keeping, automate reconciliation, mitigating operational risks and empowering wealth managers to make informed decisions. This enhances client service and transforms IBOR compliance from a potential burden to a source of improved efficiency and growth.

Croesus offers a reliable solution for independent reconciliations of records for investment dealers and custodians. Portfolio managers can also leverage the power of Croesus solutions to do the same.

We understand that implementing an IBOR can be a complex process. Our goal is to simplify this process for our clients and provide them with compliance tools and resources they need to succeed.

We also believe that IBOR compliance is not just about meeting requirements, it’s about creating a more efficient and transparent wealth management process. By providing accurate and up-to-date information, IBOR can help wealth managers build stronger relationships with their clients and make more informed investment decisions.