How We Help: Post-MCDC Underwriting

DIVER Underwriter Case Study 2016-11-09T20:05:57+00:00
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Scenario

Municipal Bond Underwriting teams are facing both regulatory and market pressures that are combining to bring unprecedented change to the industry:

  • The SEC’s MCDC Initiative has focused attention on underwriting requirements leading to updating of underwriting policies and procedures to ensure organizational compliance with SEC and MSRB rules and to provide evidence of adherence to the policies and procedures.
  • The industry is facing the reality of reduced margins, which have been declining since their peak in 2009. According to 2015 Bloomberg data, average municipal underwriting fees YTD 2015 are $4.75 per $1,000 bonds, down from $6.21 in 2009, $5.62 in 2011 and $5.52 in 2013. This steady decline in profitability and increased focus on regulation has resulted in conflicting demands to manage with smaller teams and increase the volume of deals while being mindful of diligence and regulatory requirements.

Client Problem

Our client, a medium-sized broker-dealer who underwrites hundreds of deals per year (and looks at many more), is facing the pressures described above which are further complicated by having multiple offices. Broker-dealers involved in lead, co or sole managed negotiated deals, private placements and note deals, or acting as a municipal financial advisor on certain transactions can struggle to efficiently manage the deal process across various offices and departments, given the ever-changing regulatory and business environment and the high volume of transactions.

They found that implementing policies and procedures across disparate teams in different locations was a significant challenge and, with increased regulatory scrutiny, the number of deals they could review and participate in had materially declined. Moreover, like most underwriters, their policies and procedures for both competitive and negotiated deals was based primarily on checklists, paper binders and shared file drives. Communication across the office and branches was inconsistent and uneven.
Their primary challenges were to:

  • Efficiently improve due diligence efforts, document management and reporting.
  • Demonstrate compliance with those new processes.
  • Streamline deal management and workflow for the capital markets business unit across various locations, systems and procedures.
  • Eliminate “one-off” deal management activities for current and new deals.
  • Allow for better communication and coordination amongst deal team members.
  • Implement a process that maximizes the number of deals they can bid.

DIVER by Lumesis Solution

DIVER Underwriter helps streamline and standardize all activities for the deal team while allowing firms to implement their standard procedures, approval processes and compliance checks in an electronic system. DIVER Underwriter can be customized to meet the needs of an individual firm, manage internal checklists, firm calendars, assign task management across departments and facilitate compliance tracking and deal reporting. Benefits include:

  • Easy Deployment
    • Access Directly from Ipreo’s Deal Calendar
    • Access via the Web
    • Access via Direct Install to Your Platform
  • Efficient Reasonable Diligence
    • Streamlined Material Information Diligence with Immediate Access to:
  • Offering Documents (NOS/POS/OS)
  • Disclosure Filings
  • Deal Features
  • Ratings
  • Obligor Profile
  • Obligor Material News
  • Consistent Application of Polices Across the Firm
    • Platform-Based, Configurable Diligence Process
    • Firm-Configurable Deal Approval Process
    • Electronic Deal Files and Archive for:
      • Internal and Regulatory Reporting
      • Subsequent Use for the Obligor
      • Deal Team Management
      • Deal File Review and Exception Based Reporting
      • Security Master and Deal Updates
      • Deal Templates from Past Deals

Lumesis worked closely with the client on an implementation of DIVER Underwriter that ensured consistency across all teams with everyone adhering to the same policies and procedures, the same process and having access to the same resources. Teams coordinated their efforts by using a single platform to submit documents, manage and document their diligence and deal requirements, complete and sign off on the deal process steps and keep each other informed in real-time as the deal progressed.
As a result of using the DIVER Underwriter solution, this broker-dealer has:

  • Provided an efficient, firm-wide solution for quick and thorough deal analysis.
  • Maximized deal participation.
  • Enabled easy proof of compliance with underwriting policies and procedures.
  • Enhanced communication across the organization.
  • Reduced the amount of time needed to take a deal from start to finish.
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