I know the industry has difficulty providing a clean flow of account data. How are accounts “cleansed?
The predominant vehicle for ensuring the accuracy of the account balances and returns especially when there is incomplete or bad data delivered to the system is through a daily account reconciliation process where the cumulative number of units of an asset in a given account is compared with a Position file for that same asset, as provided by the custodian. If there is an imbalance, the system automatically reconciles that account balance to the number of units by generating a Reconcile Positive or Negative transaction. For example, an FA has an account with 100 units of fund XYZ on June 1; on June 15, this fund receives a dividend of 2 units but the accounting for that transaction is, for whatever reason, not delivered to the system. On June 30, we receive the position file which lists 102 units in the account (the original 100 units plus the 2 that were reinvested). On that day we would automatically create a “Reconcile Adjust Positive” transaction of 2 units for that asset. This, in
