Investments in Debt Securities

[Donq88]

Hello,

I’m a first time user so hoping to get helpful responses from forum users.

I have the following situation with a client regarding the source of information to be used for accounting the investment activity for the client’s investment portfolio. It is a $100M USD portfolio in US treasury and agencies and 1/3 in foreign government’s debt type securities. Currently the client uses JPM as custodian but the client is acting as asset manager. Because he doesn’t want to pay the accounting reporting package from the custodian the client generates its own activity and statements. Those reports are not very good and is causing reconciling issues when booking the investment period’s activity. I don’t have access to custodian’s system so I can’t even try to compare the activity reported to custodian’s.

So the questions are, less technical but more operational, in normal circumstances, i.e., having a proper commercial Asset Manager and Custodian, which source of information for the booking of the investment activity should be used, custodian or asset manager? What source does auditors normally rely on, asset manager or custodian information, or both? What arguments, if any, in terms of accounting best practices I can use to convince the client to request proper custodian reports?

Any feedback/comments would be greatly appreciated.

Cheers,

 

[kirby]

Horrible situation. The client reconciling issues should go in your management report.
There are many large brokers who have a security tracking and reporting system for a reasonable price as they wish to attract clients to put their trades through them. Those brokers also can use that data to provide management reports on the portfolio. The custodians usually focus on their custodial duties and the reports they provide are more basic. But in your case I would rely on those vs what this client provides, especially since you have noted client errors in the past.