How Altair Safeguards Your Assets and Information
Altair has long maintained a system of checks and balances to guard against mistakes, prevent improper actions and help ensure that your assets and information are safe. We hope the following explanation underscores our high priority on safety when we make transfers involving your assets and data.
Our security is strongly grounded in a three-way balance among Altair, your money managers and your bank custodian. The custodian keeps the records, the managers allocate and invest, and Altair reconciles the data and stewards the process – but none of the three can carry out a decision alone.
How Investment Management Works
The outside managers we may recommend for your portfolio are given access to trade within an account. They do not have withdrawal rights. Altair reconciles the transactions each day to the balances your custodian shows in your account. In a similar fashion, the investment managers reconcile their record of the cash balance in the account and the trades to the custodians’ balances. If there are any discrepancies, we are alerted.
How Transfers Work
Altair can direct the actions of your custodians and money managers at your instruction. This enables us to move more quickly to both implement our investment recommendations and assist you with cash needs. We rely on a full set of internal control procedures to help these transactions happen smoothly. They are examined by an outside accounting firm at least once a year.
For recurring destinations: When you initially tell your Altair client service team how and where you will want your assets moved, the Chief Compliance Officer, who is an owner of Altair, or her delegate checks back with you to confirm the specifics. The instructions are then stored at your custodian (e.g., Pershing Advisor Solutions or Schwab) as an approved destination and cannot be edited.
When it is time to act on the instructions – for example, to move your money to an outside checking account – you let your adviser know. The adviser then informs our Client Operations Department of the amount and destination account. The Client Operations employee enters a transfer in the custodian’s system. The team leader of the Client Ops team must approve the transfer before funds are sent.
For one-time destinations: After you inform your adviser of the destination, such as a title company for a real estate closing, the adviser communicates it to Client Operations. The Client Ops analyst then enters it into the custodian’s system. The Chief Compliance Officer or her delegate calls you back to ensure the instructions are correct.
A series of safeguards prevents any one person from carrying out this order. No Client Service adviser can initiate or approve a cash movement in the custodian’s system; no “initiator” (Client Ops person) can approve a cash movement, and no one who is authorized to give final approval can initiate the transfer. In this way we ensure a separation of powers while still facilitating cash movements in a timely fashion for you.
Altair’s powers are documented in three places accessible to you as well as extensively in our internal controls document:
- Pershing legal power of attorney form – Allows Altair to do the work described above without a call back to you from Pershing each time a withdrawal is processed.
- Our engagement contract with you – Section 3 – Custodial Arrangements – excerpted here in formal language: “The Client authorizes Altair to give Custodian instructions for the purchase, sale, conversion, redemption, exchange, withdrawal or retention of any security, cash or cash equivalent or other investment for the Portfolio or for an Investment Manager Account, as the case may be. Provided, however, as stated above, that Altair will first obtain Client’s assent to implement such instructions with the custodian.”
Form ADV 2A. We file this annually with the SEC and make it available on our website. This “deemed custody” that we have results in us getting periodic surprise examinations by an independent auditor into our process and procedures involving client accounts for which we have withdrawal powers. We have consistently had clean audits since we became subject to this process in 2011.
Excerpt from item 15 of ADV 2A (2023): “Altair maintains constructive custody over some accounts of its clients since it has the ability to access their custodial accounts (either directly or indirectly via a third-party vendor) to perform services requested by the clients. Altair maintains strict controls for any such account over which it believes it has custody, including limiting access to individuals who are required to have such information to perform their jobs, active oversight by Altair management and engagement of an outside audit firm to perform a Surprise Custody Examination at least annually.”
Our Primary Custodian
As mentioned above, Pershing, the brokerage whose parent company is BNY Mellon, and BNY Mellon, the bank, are the primary custodians for our client funds and securities. BNY Mellon has withstood the test of time as the oldest continuously operating financial organization in the United States. It is the largest custodian in the world, with $46.9 trillion in assets under custody and/or administration as of June 30, 2023, and has the highest credit ratings among all U.S. financial institutions.
Pershing, the clearing house working behind the scenes on our behalf, has over $2 trillion in assets and more than eight decades’ experience serving financial organizations of every size and business model. It is focused on the safekeeping, servicing, segregation and reporting of assets held in its custody, with protection extending to you as a client through the Securities Investor Protection Corporation.
Altair’s partnership with our custodians offers both financial strength and stability. Their No. 1 mandate from us is the safety of your assets, and their track record for safety is exemplary. Yet we apply the same stringent procedures and protocols in working with them that we would with any custodian, regardless of size or past performance.
At Pershing/BNY all instructions are communicated through enterprise systems, so any ”bad actors” who managed to obtain your information would still have to infiltrate Altair since Pershing will not act on a phone call or email. If a client or someone posing as a client tries to reach out to a custodian directly, Altair is notified immediately and nothing is done without our consent. Both custodians are hyper-aware of fraud risks, and this process helps thwart them.
Clients sometimes tell us they wish they could transfer their assets online themselves. But this lack of control really limits what a hacker can do. Online access at Pershing/BNY is information-only. You are accessing a site that is totally separate from the underlying custodian system. That system reports information to the site you access but does not transmit any information in the other direction. There is no transaction-based ability by design.
New accounts or loans cannot be opened at either institution without a similar process and authorization from Altair. So, bad actors cannot open new accounts that you/we would not know about and execute transfers out through them.
As you can see, Altair, the managers and the custodian have our own balance of powers. It takes all of us to do anything, and we believe that makes your data and assets extremely safe.
The material shown is for informational purposes only and should not be construed as accounting, legal, or tax advice. Altair Advisers LLC is a registered investment adviser with the Securities and Exchange Commission; registration does not imply a certain level of skill or training. While efforts are made to ensure information contained herein is accurate, Altair Advisers cannot guarantee the accuracy of all such information presented. Please see Altair Advisers’ Form ADV Part 2A and Form CRS at https://adviserinfo.sec.gov/ for additional information about Altair Advisers’ business practices and conflicts identified.