Rule Definition provided by Merriam-Webster Dictionary

Rules
Before we start talking about all the great features of our rule wizard, rule libraries, etc., maybe we should discuss what makes up a rule.  Most might think that a rule is nothing more that a mathematical calculation that runs against your data.  In ComplyPlus a rule is much, much more!

For example, part of a rule definition involves the creation of drill-down reports.  Drill-down reports allow users to see the data underlying the rule calculations.  Often the drill-down data consists of holdings that were considered by the rule.  ComplyPlus saves away a snapshot of the rule data when the rule triggers a warning or alert.  Drill-down information is collected at the time of rule execution. This is an important feature.  When examining a compliance violation that happened months ago, you'd want to see a snapshot of the situation then, not a mix of past and current data.  To display the drill down data, a report is created to go with the rule.  You can choose an existing report template or create a new one.  You can design the level of detail and layout of the report for each rule.  Reports can be viewed in the included workflow system.  See the "Reporting" link on the left for more information.

The next part of rule definition is workflow output.  When your rule triggers an alert or warning, it shows up in workflow.  ComplyPlus allows you to define how you want it to look in workflow.  Each rule works with different data elements, so you can design different workflow screens tailored to your rules.  ComplyPlus provides default templates, but you can change them to meet your needs.  In fact, you can design multiple screens for each rule to match the different types of users who will see each work item in workflow.  How a trader sees a work item might be completely different from how compliance staff sees the same work item. For example, the compliance staff's screen might contain information not shown to a trader (and vice-versa).  See the Workflow link on the left for more information.

As part of rule creation, you can attach any number of documents (e.g. Microsoft Word, Excel, or streaming media files like videos or taped messages) to individual rules.  These "documents" can be retrieved when next you view the rule definition or while reviewing a work item created by the rule.  Supporting documents are often prospectuses, SAIs, etc. that justify why the rule was created.  Documents that describe the law and its interpretation (such as a legal opinion) are frequently attached to rules.  Lastly, documents can be attached that describe the procedures to be taken to bring you back into compliance once the rule is triggered.  For instance, a data quality rule might have a document attached that details whom to call when there is a data quality problem.

The next part to rule creation involves setting up auditing information for the rule.  You can setup periodic review schedules or tie audits to specific events such as updates to prospectuses, SEC examinations, internal auditors, etc. When you perform your audits, the audit results are saved in ComplyPlus.

Next you choose when the rule should be run.  ComplyPlus supports running rules at any time.  However, pre-trade, post-trade, and batch are the most commonly used options.  Run the rule pre-trade to check an order before it hits the trading desk.  Use post-trade to check a trade after you've received the execution.  Or, use batch timing to process the nightly cycle or when you receive a data feed. 

The last part of the rule creation process concerns the mathematical calculations that run against your data.

Rule Library
ComplyPlus is well equipped with an ever-growing library of pre-defined, commonly known rules to support your business.  You can use them, copy them, edit them or ignore them and create your own.  Currently supplied rule libraries cover the following areas:

For Mutual Funds:

• US SEC 1940 Act guidelines for mutual funds
• US SEC 1940 Act guidelines for money market funds (Rule 2a-7)
• IRS Sub-chapter M and L tests
• Insurance related restrictions including variable annuities
• Asset diversification restrictions
• Class or voting ownership rules
• Enterprise investment policy/risk management rules
• Absolute and relative trading restrictions
• Ownership rules for airlines, banks, broadcast and other communication licenses, and casinos/gaming
• State specific rules
• And many more...

For Brokerage:

• Suitability
• BlueSky
• Asset Allocation
• Model Portfolio
• Cash Position
• Client Restrictions
• And many more...

And in Q1, 2004, we will be releasing our international rule library with support for over 20 countries.

Rule Wizard

• Easy to use Rule Wizard steps you through the rule creation process
• Powerful enough to create all the rules in the rule library
• Supports all the functionality described on this page
• Extensible by IT departments by creating new rule builder templates
• Generates native code for truly superior performance
• Saves your inputs to the rule wizard so you can modify a rule without having to rebuild it from scratch
  
  

Rule Functionality

• Pre and post trade checks
• Nightly cycle and batch modes
• Ability to run rules at any point in the trade cycle pre/allocation/post depending on your trading system
• "What-if" analysis checks to catch problems pre-trade
• Can use any attribute of a security, trade, position, issuer, portfolio, benchmark, broker, index, or any other data
• Benchmark-relative rules: tie exposures to an associated benchmark/index/portfolio
• Percent of total assets, net assets, a user supplied function or any other data attribute
• Constraints that limit exposure to different asset classes such as derivatives, warrants, illiquid securities, etc
• Boolean and conditional rule logic ("if-then-else") and much more with use of the integrated Visual Basic compiler
• Fixed Income-specific restrictions such as weighted average maturity, duration, yield, average life, credit quality and coupon limitations
• Calculate trading restrictions based on a percentage, minimum or maximum of portfolio, account or trade parameters, including "relative percent" restrictions
• and many, many more possibilities

Apply Rules to ...

• Individual portfolios, trusts or brokerage accounts
• To a list, such as a list of intermediate term fixed income funds
• Anywhere in the aggregation hierarchy
• To any object in the system, i.e. brokers, stocks, portfolios, fund managers, etc

Data Quality Checking

• Create rules that detect abnormal changes in nightly data, to highlight possible bad data
• Create rules to test for data quality issues
• Create rules that automatically calculate the effects of data quality on your compliance tests and optionally include the data quality error rate in threshold testing. Example: 13.2% in foreign issuers with a +/- 1.2% variance due to data quality problems

Holdings

• Create rules that include accounting system holdings, executed but unsettled trades, open trades, escrowed positions, and more
• Create rules that "look through" to underlying holdings for fund-of-funds, sub-accounts, etc.
• Create rules that "look through" underlying securities such as ADRs, GDRs, convertible bonds, and many other asset types
• Create rules that "look up" to the entire portfolio when checking sub-portfolios for cash usage, percent of portfolio assets, compliance threshold values, etc.
• Create rules which understand that asset types can be treated differently in different cases (e.g. iShares when calculating industry concentrations)

Interactive Holdings Filter Tester

• Many rules require that certain holdings not be considered during operation of the rule. For example, a rule might want to filter out equity holdings for calculation of average maturity or duration. ComplyPlus provides tools that allow you to interactively see which holdings are being included for each rule while that rule is being developed! No longer are external spreadsheets required to verify that the rule is working on the right data.
  
  

Thresholds

• Absolute Value Testing: e.g. Percent Issuer over 5% where 5% is fixed (absolute) across all portfolios
• Portfolio Relative: Where a portfolio has a specific threshold value, e.g. Portfolio A's limit is 5% and Portfolio B's is 8.5%
• Benchmark Relative: Where the threshold is relative to a benchmark, such as S&P 500
• Portfolio Benchmark Relative: Where the benchmark relative threshold varies by portfolio
• Model Portfolio Relative: Where the threshold values are relative to a model portfolio
• User Defined Functions: Where the threshold value is supplied by a user defined function
• Alert and Warning thresholds: e.g. A warning at 8.0% and an alert at 10.0%
• Flexible range based thresholds: e.g. Alert when the value is either < 3.5% or > 4.2%.

Versioning, Auditing, Testing, and Version Control

• Rule versioning lets you "rollback" to a previous version
• Integrates with Microsoft Source Safe for Version Control
• Built in reports show when rules were run and their results
• Full audit support with attachment of client mandate documents.
• Built in auditing capability supports periodic review of rules.
• Apply rules to test accounts before moving them into production.

Reporting

• Create custom reports per rule for output of violations
• Optionally, output drill-down detail such as holdings used by the rule
• Create summarized reports for specific time periods, such as daily, weekly, monthly, etc.
• Create reports that accumulate output from a single rule (or multiple rules) over a rule controlled time period
• Create snapshot reports showing current status, not just violations