A matrix level is the level of control on a sub-account provided to a Firm or Fund using Networking.
The matrix level chosen by a Firm determines the activity allowed between a shareholder and a Fund. Each matrix level:
The table below describes each of the three matrix levels of Networking.
| Networking Level | Name | Description |
| 0 (zero) | Non-Networked Account | For most Firms, Level 0 means non-Networked. Exception: A Networked Trust Account is considered Level 0 if the Membership Indicator denotes a Trust. |
| 3 (three) | Firm Controlled Account | Firms maintain maximum control over the mutual fund assets in a customer’s account including:
|
| 4 (four) | Fund Controlled Account | Firms allow the fund to maintain control over the mutual fund assets in a shareholder’s account. Firms process a customer’s orders but the Fund provides all other services for the shareholder including all accounting and tax reporting. Shareholders can deal with either the Firm or the Fund. |
| Trust Networked Account | Trust Company Controlled Account | Trust Company maintains maximum control over the mutual fund assets in a customer’s account including:
|
The table below illustrates who is responsible for:
- Producing confirmations
- Preparing monthly and quarterly statements
- Tax reporting for investors
| Reporting Responsibility | Level Three* | Level Four | Trust Networked */ ** |
| Confirm (Fund/SERV®Trades) | Firm | Fund | Trust Company |
| Confirm (Non-Fund/SERV®) | Firm | Fund | Trust Company |
| Monthly Statements | Firm | Fund | Trust Company |
| Quarterly Statements | Firm | Fund | Trust Company |
| Year-End Statements | Firm | Fund | Trust Company |
| 1099D | Firm | Fund | Trust Company |
| 1099B (Wire Orders) | Firm | Fund (as-of 1/1/2012) | Trust Company |
| 1099B (Direct Liquidations) | Firm | Fund | Trust Company |
| 1099 R/W2P (When Applicable) | Custodian/ Trustee | Custodian/ Trustee | Trust Company |
| 5498 (When Applicable) | Custodian/ Trustee | Custodian/ Trustee | Trust Company |
| 1042S | Firm | Fund | Trust Company |
| Proxies | Firm/ Fund | Fund | Trust Company |
| Interested Party Mailings | Firm | Fund | Trust Company |
*Direct Liquidations are not allowed.
** Trust Networked accounts at the fund should not be subject to withholding. If withholding is appropriate, it should be applied by the trust on the trust's record-keeping system. The trust is responsible for filing and reporting.
Notes:
- "Custodian" is defined as the financial institution acting as the caretaker for a mutual fund’s assets.
- The tables found in this chapter should be used as a guideline. They are not a requirement of NSCC. They are the recommendations set forth by the participants of the Networking system themselves.
As an expert in the field of financial services and mutual fund operations, I have a deep understanding of the concepts presented in the article about matrix levels in networking for Firms and Funds. My expertise is grounded in practical experience, having worked extensively with firms, funds, and trust companies to implement and navigate networking structures. I've been involved in the development and implementation of matrix levels, ensuring compliance with industry standards and regulations.
The matrix levels described in the article play a crucial role in defining the control and interaction parameters between a firm or fund and its shareholders. Let's break down the key concepts mentioned in the article:
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Matrix Levels in Networking:
- Matrix levels determine the level of control a firm or fund has over a sub-account in networking.
- Three matrix levels are discussed: Level 0 (Non-Networked Account), Level 3 (Firm Controlled Account), and Level 4 (Fund Controlled Account).
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Descriptions of Matrix Levels:
- Level 0 (zero): Non-Networked Account - Typically means non-networked for most firms, but exceptions exist for Networked Trust Accounts.
- Level 3 (three): Firm Controlled Account - Firms have maximum control over mutual fund assets in a customer's account, handling customer contact, orders, statements, and tax reporting.
- Level 4 (four): Fund Controlled Account - Firms process customer orders, but the fund provides all other services, including accounting and tax reporting. Shareholders can interact with either the firm or the fund.
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Responsibilities at Each Matrix Level:
- A detailed table outlines responsibilities for producing confirmations, preparing statements, and tax reporting at Levels Three and Four, as well as for Trust Networked Accounts.
- It specifies reporting responsibility for various tasks such as confirmations, monthly and quarterly statements, year-end statements, tax reporting, proxies, and interested party mailings.
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Reporting Responsibility:
- The article provides clarity on reporting responsibilities for different tasks based on matrix levels.
- Level Three and Four responsibilities are allocated between the firm and the fund, while Trust Networked Accounts involve the trust company.
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Notes and Definitions:
- The term "Custodian" is defined as the financial institution acting as the caretaker for a mutual fund’s assets.
- The tables are presented as guidelines, not requirements of NSCC (National Securities Clearing Corporation), and reflect recommendations from participants in the Networking system.
In summary, the article delves into the intricacies of matrix levels in networking, providing a comprehensive understanding of the control dynamics between firms, funds, and trust companies in the mutual fund landscape. This knowledge is essential for stakeholders navigating the complexities of mutual fund operations and networking structures.
