The Benefits of Working with a SAS 70 Certified Asset Manager

 

On June 17, AmCham Belgium hosted a seminar entitled “The impact of SAS 70 on the corporate governance of institutions for occupational retirement provision (IORP)”. To lead off, the question “What is SAS70?” was asked.

To summarize, SAS70 stands for Statement on Auditing Standards (SAS) No. 70, Service Organizations. It is a widely recognized auditing standard developed by the American Institute of Certified Public Accountants (AICPA). Mainly used by financial services organizations, it consists of an in-depth audit of their control objectives and control activities, which often include controls over information technology and related processes. The certification is delivered by an independent auditor.

User organizations will receive a detailed description of the service organization's controls and an independent assessment of whether the controls were placed in operation, suitably designed and operating effectively.

Clients of these SAS 70 compliant organizations no longer have to spend time and money sending their auditors to clients to conduct due diligences. Instead, all the information is available in the report.

Impact on Pension Funds

Since 2006, the Belgian Pension Funds legal environment has changed tremendously. The laws of October 27, 2006 on the supervision of Institutions for Occupational Retirement Provision (IORP or pension funds in plain English) and the CBFA circular letter regarding the governance of IORP’s have forced the pension fund Boards to take action.

There are 11 corporate governance principles that concern both the pension fund's structure and the relations and interactions between the different actors – whether they are plan sponsors, direct or indirect participants in the management of the pension schemes or beneficiaries of the pension scheme.

The weight of these new regulations can put a heavy burden upon pension funds who have partially or fully outsourced processes such as administration, accounting, actuarial management or asset management.

Is Working with a SAS 70 Compliant Asset Manager the Answer?

As the SAS 70 report describes the Asset Manager’s control measures, the efficiency of control design and the results of substantive testing performed by a third party, it:

• Can be used to help pension funds comply with six of the 11 corporate governance principles (on outsourcing, business continuity, internal control)
• Avoids expensive audits to be performed by the pension fund itself
• Lowers the amount of work (and the costs) of the pension fund's Internal Auditor, Compliance Officer and Internal Controller
• Ensures working in a well-controlled environment

Also for the asset manager and all other service providers to pension funds, SAS70 makes sense. They go through the process once and maintain certification via an annual external review. As such, they also benefit from economies of scale. More so, internal processes and controls are improved and awareness about them is kept alive.