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NICSA – Midwest Regional Meeting

Panel Discussion - Exploring a New Era: Shareholder Authentication and Alternatives to Medallion Signature Guarantees

September 22, 2015

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Jay Sterling, Manager & Assistant Operations Officer

Jay is a Manager and Assistant Operations Officer for The Thrivent Mutual Funds Transfer Agent.

His primary focus is on regulatory support and oversight for all Mutual Fund operational functions.

Jay has 17 years of experience in the mutual fund transfer agent industry within 3 Midwest based companies.

He has served and participated on several industry steering committees including the ICI Transfer Agent Advisory Committee as well as the Regulatory Compliance Advisory Group with DST Inc.

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Carrie Caruthers, Risk & Fraud Control Manager

Carrie just took over the role of Risk & Fraud Control Manager at American Century Investments.

She has more than 16 years' experience working with direct clients and supporting their investment goals. Carrie holds FINRA 6, 7, 63, 24 & 26 licenses.

Previously, Carrie was the Business Manager, Priority Investors, for American Century Investments, overseeing the complex needs of brokerage and retail services, principle oversight and Priority Program manager of the team dedicated to supporting high net worth clients.

Carrie has worked closely with business partners in Legal, Risk & Fraud and Workforce Operations to safeguard a client's financial interests by strengthening the overall experience through increased authentication options with direct and indirect interactions.

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Joya Favors, Vice President & Control Manager

Joya Favors is a Vice President and Control Manager for Northern Trust Company. In her role, Joya collaborates closely with the Transfer Agency management to ensure a proactive focus on controls, works closely with internal and external audit partners, and acts as a subject matter expert in Transfer Agency controls.

Prior to joining the Control team in 2012, Joya managed the Operations team for Northern Trust’s North American Transfer Agency from 2007-2012. Joya also represents Northern Trust as a NICSA Transfer Agency Committee Member.

Prior to joining Northern Trust in 2007, Joya served as a Transfer of Accounts Manager at Mesirow Financial in Chicago. Previously, she worked as an ACATS Work Director at Wells Fargo Investments in Minneapolis, MN.

She earned a Bachelor's degree in business and sociology from Fisk University in Nashville, TN. She holds FINRA 7 and 63 licenses.

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Thrivent Mutual Funds Business Model

• Fraternal benefits organization− Member focused

• Captive sales force– Approximately 2,500 Thrivent Financial

registered representatives• Employees of the company

• Primarily a check and application shop– 85% network level 0– 10% omnibus– 5% network level 3

• Cross product ownership– High number of members own multiple

products• Mutual Fund/Annuity/Life Insurance

Thrivent Financial Headquarters – Minneapolis, MN

Thrivent Financial Headquarters – Appleton, WI

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Thrivent Mutual Funds Authentication Model

• Registered representatives– Full name– Registered representative #– One of the following two

1. Member ID2. Shareholder account #

• Shareholder– Full name– Two of the following three

1. DOB2. Member ID3. Shareholder account #

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Thrivent Mutual Funds Knowledge Based Authentication

• When used?– Enhanced security requested– Failed primary authentication

• Contract with third party vendor• Web based tool

– Enter shareholder information– Series of questions– Pass or fail?

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Thrivent Mutual Funds – Signature Verifications

• MSG• Notary Public• Registered Representative

Attestation– Notary or MSG is not an

absolute requirement – Registered representative is

attesting that the identity has been verified

– Registered representative accepts liability

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American Century Investments A Foundation for Success

• Founded in 1958 by James E. Stowers, Jr.

• Today we are one of the largest private money managers in the U.S.

– More than $140billion* in total assets.• Focused on superior investment

performance through active team-based investment management.

• Mutual funds and investment management expertise distributed through Intermediary, Institutional, International and Individual channels.

• Headquartered in Kansas City with offices in Mountain View, CA; New York; London; and Hong Kong.

* As of 9/8/2015

American Century Investments Headquarters

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Stowers Institute for Medical Research - A Hope for Life

• Founded by Jim and Virginia Stowers in 1994 to benefit humankind through research on genetic-based diseases, including cancer.

• One of the largest endowments in the world among private basic biomedical research institutions.

• Home to 21 independent research programs, three technology development programs and more than 350 scientists.

• Through our ownership structure, more than 40% of American Century’s profits have been distributed to the Institute in support of research to help cure genetically-based diseases including cancer, diabetes and dementia.

The Stowers Institute for Medical Research

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Shareholder Authentication – Current State

• Standard Client Verification– Identification and Verification (ID&V)– Phone Verification with representative

• Online Authentication– User name/password– Challenge question– One Time Security Code (OTSC)

• Exception Request Review – Reimbursement / cost exceptions– Policy / risk exceptions– Graduated approval requirements– Senior leadership visibility for larger financial risk requests– Documentation / audit trail

• Additional Verification– Additional level of security– High risk transactions– Information given– Out of wallet questions

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Shareholder Authentication – Future State

• Voice Bio-Metrics– High cost product– Enrollment process– Additional resources to analyze participants and process

• Phone-Print Verification– Analyzes phone numbers – Call audio recognition– Voice bio-metric options

• Critical Notification– Enrollment process– Text message – Automated voice

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Shareholder AuthenticationNorthern Trust’s Global Fund

ServicesPrepared for NICSA Midwest Meeting

September, 2015

Joya Favors, Vice President

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A Unique Business FocusNorthern Trust is a market leader in asset servicing and asset management solutions for institutions and private clients around the globe.Who we are

• A provider of fund administration, global custody, asset management, wealth management, banking and personal fiduciary services.

• Clients in approximately 46 countries; Services in over 100 markets • Worldwide staff: 15,000+

Global Fund Services • Focus on investment managers and fund companies• Global Transfer Agency Locations: Chicago, London, Dublin, Limerick, Guernsey,

Luxembourg, Bangalore• North America Transfer Agency Clients: 95 (as of June 30, 2015)

North America Transfer Agency Vehicles Supported

Mutual funds LPs & LLCs Common & collective funds Alternative funds and funds-of-funds

North America Transfer Agency Services Supported

Client Servicing Investor Servicing Intermediary Servicing

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Shareholder AuthenticationTypes of Funds Transfers Requiring Authentication

Authentication Methods• Security Questions• PIN/Password• Medallion Signature Guarantee• Callback

Cash Movement Non-Repetitive Maintenance Requests*

• Wire Transactions - Out• Internal Transfers – between client’s

accounts/legal entities• Outgoing check/ACH• Direct Funds to Client• Fee Payments

• Repetitive Transactions• Standing Instructions• Protected profiles

*For new or changes to existing

Callback

PIN/Password

Medallion Signature Guarantee

Security Questions

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Shareholder Authentication: Industry ChallengesIndustry challenges facing shareholder authentication

Some firms will not stamp a free form letter

Some firms will only prove a stamp if investor is one of their clients

Some firms are only providing stamp for transfer of securities

Prospectus contains a stamp requirement for transactions that are not a transfer of securities

Maintenance and Transaction Forms

Alternative Ways to Request Transactions

Signature Validation Program (SVP)*

Alternative Verification Process - Callback

Possible Resolutions

Investors Obtaining a Signature Guarantee

Stamp

*Designed for non-securities commercial transactions

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Important InformationConfidentiality Notice: This communication is confidential, may be privileged, and is meant only for the intended recipient. If you are not the intended recipient, please notify the sender as soon as possible. All materials contained in this presentation, including the description of Northern Trust, its systems, processes and pricing methodology, are proprietary information of Northern Trust. In consideration of acceptance of these materials, the recipient agrees that it will keep all such materials strictly confidential and that it will not, without the prior written consent of Northern Trust, distribute such materials or any part thereof to any person outside the recipient’s organization or to any individual within the recipient’s organization who is not directly involved in reviewing this presentation, unless required to do so by applicable law. If the recipient is a consultant acting on behalf of a third party client, the recipient may share such materials with its client if it includes a copy of these restrictions with such materials. In such event, the client agrees to comply with these restrictions in consideration of its accepting such materials.

© 2015 Northern Trust Corporation. Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A. Incorporated with limited liability in the U.S. Products and services provided by subsidiaries of Northern Trust Corporation may vary in different markets and are offered in accordance with local regulation. This material is directed to professional clients only and is not intended for retail clients. For Asia-Pacific markets, it is directed to expert, institutional, professional and wholesale investors only and should not be relied upon by retail clients or investors . For legal and regulatory information about our offices and legal entities, visit northerntrust.com/disclosures. The following information is provided to comply with local disclosure requirements: The Northern Trust Company, London Branch; Northern Trust Global Services Limited; Northern Trust Global Investments Limited. The following information is provided to comply with Article 9(a) of The Central Bank of the UAE’s Board of Directors Resolution No 57/3/1996 Regarding the Regulation for Representative Offices: Northern Trust Global Services Limited, Abu Dhabi Representative Office. Northern Trust Global Services Limited Luxembourg Branch, 6 rue Lou Hemmer, L-1748 Senningerberg, Grand-Duché de Luxembourg, Succursale d’une société de droit étranger RCS B129936. Northern Trust Luxembourg Management Company S.A., 6 rue Lou Hemmer, L-1748 Senningerberg, Grand-Duché de Luxembourg, Société anonyme RCS B99167. Northern Trust (Guernsey) Limited (2651)/Northern Trust Fiduciary Services (Guernsey) Limited (29806)/Northern Trust International Fund Administration Services (Guernsey) Limited (15532) Registered Office: Trafalgar Court Les Banques, St Peter Port, Guernsey GY1 3DA.