Practical Solutions to the Current Regulatory Avalanche

1
Practical Solutions to the Current Regulatory
Avalanche

• NICSA Midwest Regional Meeting
• October 8, 2003

2
Regulatory Panel

• Moderator
• John Kavanaugh, Ernst Young
• Panelists
• Jerry Dillenburg, ABN AMRO Funds
• Jim Grassi, Northern Trust
• Amanda Machen, SEC
• Janet Olsen, Artisan Partners

3
Regulatory Panel

• Topics
• Fund Share Trading Investigations
• Anti-Money Laundering Rules
• New Proxy Rules
• Sarbanes-Oxley Act
• SEC Examination Focus Areas

4
Fund Share Trading Investigations

• NY State AG and SEC Focus Areas
• Market Timing
• Late Trading
• Contractual Arrangements
• Fee Waivers
• Omnibus Account Monitoring
• Fair Valuation

5
Anti-Money Laundering

• Key provisions of USA Patriot ActTitle III
• Customer Identification Programs (CIPs)
• Minimum Requirements
• Identity Verification
• Record Keeping and Documentation
• Comparison with Government Lists
• Customer Notification

6
Anti-Money Laundering

• Key provisions of USA Patriot ActTitle III
• Other Considerations
• AML Program
• Board Approval Requirements
• Outsourcing Provisions

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Anti-Money Laundering

• Implementation Issues
• Problems/Difficulties
• Best Practices
• Obtaining Resources
• Internal
• Outsource
• Co-source

8
New Proxy Voting Rules

• General Requirements
• Policies and procedures utilized to
• Determine how to vote (internal and third party)
• Resolve conflicts of interest
• Information Referral
• Toll free number
• Website
• Other
• Effective Date July 1, 2003

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New Proxy Voting Rules

• General Requirements of Form N-PX
• Coverage Period
• 12 month period, July 1 June 30
• 60 day filing deadline Due August 31
• Investment Company Form
• Signed by principal executive officers
• No incorporation by reference or certification
  requirement
• Effective Date August 31, 2004

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New Proxy Voting Rules

• Implementation Issues
• Problems/Difficulties
• Best Practices
• Obtaining Resources
• Internal
• Outsource
• Co-source

11
Update on Sarbanes-Oxley Act

• Corporate Governance Considerations
• Financial Experts
• Auditor Independence and Scope of Services
• Pre-Approval of Audit and Non-Audit Services
• Disclosures to Investors
• Auditor Communication Requirements
• Partner Rotation
• Hiring Members of the Audit Engagement Team

12
Update on Sarbanes-Oxley Act

• Form N-CSR (Annual and Semi-Annual)
• Key Representations of Management
• Disclosure Controls and Procedures
• Internal Controls over Financial Reporting
• Evaluating the Effectiveness of Internal Control
• Disclosing the following
• Material changes in internal control
• Significant deficiencies and material weaknesses
• Fraud

13
Update on Sarbanes-Oxley Act

• Form N-CSR and Disclosure Controls
• Key Worksteps
• Identification of significant accounts,
  processes, and controls
• Documentation Approaches
• Narratives
• Flowcharts
• Walkthroughs
• Other

14
Update on Sarbanes-Oxley Act

• Implementation Issues
• Problems/Difficulties
• Best Practices
• Obtaining Resources
• Internal
• Outsource
• Co-source

15
SEC Examination Focus Areas

• Best Practices
• Culture of Compliance
• Key Elements
• Strategic Vision
• Identification of Risks
• Control Points
• Documentation
• Accountability

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SEC Examination Focus Areas

• Recent Focus Areas
• Internal controls and compliance (Form N-CSR)
• Valuation (fair value, non-public securities,
  etc)
• Trading (trade allocation, personal trading, etc)
• Marketing (performance advertising)
• Contingency and disaster recovery (power outage)
• Fund share processing (NAVs and market timing)