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Buy Side Admits to Weaknesses in Current Accounting Systems

More than 56 percent of buy-side repondents said they are not confident in their accounting systems, while recognizing that positiions should be centralized a single accounting system, according to a SimCorp poll.

A survey of buy-side firms revealed weaknesses in their legacy accounting systems and concerns that they weren’t able to access the right data at the right time.

The results are based on a poll of 100 executives at 58 buy side firms conducted by SimCorp, a provider of investment accounting and portfolio managed software and services.

In the poll, 56 percent of the respondents admitted they were not confident that their current accounting systems could accurately record all events in the transaction lifecycle, including those related to OTC derivatives. Nearly 45 percent of firms have accounting systems that are unable to support their entire book of business.

"Investment firms that struggle to collect the right data at the right time are missing strategic opportunities to drive their business forward," commented Gert Raeves, research director at CEB TowerGroup, in the release. "Creating a central repository of critical financial data will allow firms to not only meet regulatory compliance goals, but to better understand their customers and implement effective enterprise risk management."

Despite the weaknesses in current accounting systems, the survey revealed that firms are thinking about making a move to a centralized system for position keeping. Poll results showed that 91 percent of participants believed that position data should be consolidated in a single accounting systems across their entire book of business to increase the accuracy and ease of reporting. According to SimCorp, the results support the view that data should be accessed from a central location versus reconciling data from disparate systems, which ultimately results in poor data quality that in turn impacts investment decisions.

The consequences of inaccurate client reporting can lead to loss of business and reputation, wrong investment decisions, loss of client confidence, inefficiencies with operational processes and ‘early retirement,’ according to respondents in the poll.

Commenting on the findings, David Kubersky, managing director of SimCorp North America, stated, “If there is anything that the recent accounting-related scandals have shown us – it is that improving record-keeping should be a top priority for firms. While it is encouraging to see that buy-side firms acknowledge the need to consolidate position-keeping in a centralized accounting system, it is time to convert belief into concrete action on the road to restoring investor confidence.”

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio

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