SD-12.10 — Reconciliation

Business Domain: BD-12 Investment Operations & Servicing (Back office) · Applies: BOTH

Purpose

Reconciles the firm’s records against each other and against the outside world — positions, cash and transactions checked between the internal books, the custodian, the fund administrator and the counterparty, with every difference identified, investigated and resolved. Records held in different places, on different bases, drift apart; reconciliation is the control that catches the drift before it becomes a wrong number in a report or a NAV. SD-12.10 is that capability. It exists because reconciliation is the firm’s central data-integrity control across the entire operating model — it is what makes the book of record trustworthy rather than merely current. It is not the maintenance of any one book — SD-12.1 and SD-12.2 maintain the books; SD-12.10 checks them against each other and against external records — and it is not data-quality governance in general, which is SD-13.7. SD-12.10 reconciles records; SD-13.7 governs data quality across the estate.

Service Operations

Position reconciliation — reconcile holdings between the firm’s book and the custodian’s, the administrator’s, and (for an operated fund) the fund books, instrument by instrument.
Cash reconciliation — reconcile cash balances and movements between the firm’s book and the bank and custodian statements, account by account.
Transaction matching — match the firm’s transaction record against the custodian’s, the administrator’s and the counterparty’s, so every settled event is confirmed on both sides.
IBOR / ABOR reconciliation — reconcile the firm’s two internal books — the real-time IBOR (SD-12.1) and the accounting-basis ABOR (SD-12.2) — and account for the differences between them.
Break identification and ageing — identify reconciliation breaks, classify them by cause and materiality, and age them so unresolved breaks are visible and escalated.
Break investigation and resolution — investigate each break to root cause, drive the correcting entry or instruction, and confirm the break is closed on both sides. This is the per-break investigation at break cadence; the analysis of the root-cause trend across breaks, feeding upstream control improvement, is SD-14.7 Internal Control & Assurance’s at the continuous-improvement cadence — SD-12.10 resolves each break, SD-14.7 strengthens the control the population of breaks points to.
Reconciliation reporting and control attestation — report the reconciliation status — matched, broken, aged — and provide the control evidence that the firm’s records are reconciled.

Inputs and outputs

Inputs: the IBOR (SD-12.1) and ABOR (SD-12.2) books; custodian holdings and cash statements via SD-12.5; fund-administrator statements; counterparty records; settled-trade and settlement records from SD-12.4; collateral balances from SD-11.4.
Outputs: reconciliation results, break records and reconciliation-control evidence — consumed by SD-12.2 ABOR (correcting entries flow back into the accounting book), SD-12.9 Fund Accounting & NAV (a reconciled book is a precondition of a struck NAV), SD-14.1 Enterprise & Operational Risk Management, SD-14.8 Internal Audit, SD-14.7 Internal Control & Assurance, and SD-13.7 Data Quality & Governance.

Entities

Consumes: E-04 Holding / Position (any book — reconciliation operates across both ibor and abor books, matching them against each other and against the custodian), E-05 Transaction, E-06 Cash Flow Event, PB-06 Settlement Instruction, DR-04 Margin & Collateral Balance, E-03 Portfolio / Mandate; FO-04 Dealing Order (dealing-cash reconciliation — settled FO-04 orders are matched against the fund’s bank account to confirm that the cash received from subscribers and paid to redeemers agrees with the transfer-agent’s records; dealing-cash breaks are a primary reconciliation class for the transfer-agency function); FO-10 ETF Creation/Redemption Order (in-specie basket delivery reconciliation — settled FO-10 orders are matched against the custodian’s securities receipt and delivery records to confirm the in-kind exchange completed correctly; ETF primary-market settlement breaks are a reconciliation class for the custodian interface); the SD-11.4 collateral balances; the SD-12.1 IBOR; the SD-12.2 ABOR; the SD-12.4 settled-trade and settlement records; custodian holdings and cash statements via SD-12.5.
Owns: E-24 Reconciliation Break — the aged, owned record of a reconciliation difference with its resolution lifecycle: the two sides, the difference, the cause classification, the ageing and the state. Parallel in shape to E-18 Limit Breach. The provenance, ageing and resolution trail mean a regulator or audit can ask “what breaks occurred and what was done” from a record. The reconciliation runs over entities other Service Domains own and produces the break as the owned finding.

Standards

No external standard governs reconciliation methodology; it is a core operational control rather than a published standard.
The internal-control frameworks — COSO, and the SOC 1 / ISAE 3402 service-auditor reports a fund administrator and custodian provide — treat reconciliation as a key control, and SD-14.7 Internal Control & Assurance relies on its evidence.
ISO 20022 / ISO 15022 statement messages (holdings, transactions, cash) are the standardised external records reconciliation is run against.

Open extensions

The Service-Operation-level input/output contracts.
The escalation workflow on E-24 — the path from open through escalated to resolved, and who acts at each step.
The reconciliation-tolerance and auto-match sub-model — which differences clear automatically and which raise a break.