Volume 2 — Governance and ControlsGovernance and Controls © Copyright 2002, All rights reserved 28 Best Practices and Controls • Each day, the middle office should obtain broker statements, compare terms from the broker to the terms in the system, and notify the front office of any discrepancies to be resolved. • Once agreed on, the deal record should be locked in the system and should not be modified without proper approval. • Information on approved counterparties should be communicated to involved clearinghouses and banks. • Each day, an appropriate independent group should review the margin activity to determine if more margin is needed or if there is too much margin on hand per guidelines established by treasury. If a change in margin is needed, treasury should be contacted for resolution. Key Reports • Deal summary report. • Position report. • P&L report. 1.2.2 Confirmation Process Overview Like deal entry validation, confirmation—sending a written deal confirmation to any involved third party to verify agreement with terms—is a key control over deal entry. To establish the proper segregation of duties and maintain a sound control infrastructure, this process must be performed by a group uninvolved with deal making. A confirmation is simply a one- to two- page document that lists the individual terms of the deal and makes reference to the legal contract already in place. Once both parties have agreed to the terms and signed the deal confirmation, the document should be retained to resolve any subsequent dispute. Objectives • Establish in writing that a deal has been executed. • Ensure accurate and timely deal capture through third-party verification deter unauthorized deal making. • Increase accuracy of the portfolio. • Enhance the company’s ability to effectively manage risk. Best Practices and Controls • For deals with a duration of one day or longer, the middle office’s confirmation group should electronically generate a standard confirmation from the system on the following business day. The confirming party should be designated in the contract.