Disaster Plans Keep Investor Data On-Line

RUSS WILES, a financial writer for the Arizona Republic, specializes in mutual funds.

When the World Trade Center was bombed last month, 180 employees of Oppenheimer Management Corp. quickly had to evacuate their offices on the 33rd and 34th floors of the south tower.

The blast knocked out the mutual fund company's power and brought administrative, legal, marketing and portfolio-management functions to a temporary halt. As smoke wafted into the offices, stock analysts and secretaries alike dropped what they were doing and hoofed their way down the stairwells to safety.

But Oppenheimer's records--including vital shareholder account data--didn't have to go anywhere. That's because the information was stored well out of harm's way--2,000 miles to the west in Denver.

"At no point were we even concerned about the risk to shareholder data," says Eric Larson, a vice president of information systems in Oppenheimer's Denver office.

"If you had called one minute after the blast, I could have told you anything you needed to know about your account," he says.

When disaster strikes--in the form of fire, floods, hurricanes, earthquakes, power outages or even bombs--mutual fund companies face inconveniences.

But because of the elaborate precautions fund companies routinely take, an accidental loss of shareholder-account information is a remote possibility, experts say. That should offer some assurances to any investors who might wonder whether computer-generated records of their holdings are safe from disaster.

"Our shareholders definitely don't have to worry about that," says Theodor Hochman, executive vice president in charge of information technologies for Kemper Service Co. in Chicago.

He should know: Last year's Chicago flood knocked out power and 3,000 phone lines at Kemper's headquarters.

But none of the firm's paper records were threatened, and the computer-stored information was safe at a second operating center in Kansas City.

"I'd never want to do that again, but it was rewarding to see we didn't lose any records," he says.

Fund companies routinely make backup copies of shareholder and other vital data each business day and store the information in at least two locations, often in a different part of the country.

Many firms use a flame-retardant gas rather than a sprinkler system to guard against fires in the computer room. That way, they ensure that equipment and data aren't damaged by water.

"I'm not aware of any horror stories of lost data," says Basil Fox, vice president in charge of the Franklin Group's new Sacramento operations. "We all realize computers are the lifeblood of the system, so we guard them carefully."

Those safeguards include frequent inspections and other precautions against data-destroying computer viruses, Fox says.

Fund companies also rehearse for the worst in ways that don't necessarily involve computers. Many simulate disasters quarterly or semiannually, with a focus on maintaining critical services. Such services include pricing a fund's holdings on a daily basis--a regulatory requirement--and making sure representatives are still able to field calls from shareholders and brokers.

At Oppenheimer, representatives from each department meet on a weekly basis to discuss and update disaster plans. In Oppenheimer's case, it was pretty much business as normal by the Monday after the Friday blast.

Some employees were sent to the Denver office, but most moved to other locations near the World Trade Center.

Computers and other equipment were brought in and data was sent in from Denver. Company officials hope to be back in the trade center by early April.

Other mutual fund firms have their own contingency plans.

Massachusetts Financial Services, for example, has readied itself with a plan that would move shareholder-service representatives to a satellite office south of the company's Boston headquarters, while administrators and portfolio managers would go to a location to the west.

Two large rooftop generators would keep headquarters functioning in the event the city lost power. And if workmen accidentally cut the main phone lines, communications would be restored through alternate lines that enter the building from different directions. "The whole company has been involved in the planning," says John Reilly, an MFS vice president.

As for MFS' computer information, copies are kept in Kansas City and Atlanta.

After the 7.1-magnitude Bay Area earthquake of 1989, the Franklin Group, headquartered a short drive south of San Francisco in San Mateo, decided to move some staff and equipment to a new center in Sacramento to minimize the seismic risk.

The new facility not only stores backup data each day but handles phone calls from shareholders, processes payments and fund exchanges, and it can even house the portfolio managers if necessary.

"Our strategy is to have two sites, each able to process roughly 50% of the calls and split other functions on a routine basis," Fox says.

San Francisco-based brokerage Charles Schwab & Co., a large marketer of mutual funds, is another firm cognizant of earthquake danger. This year, the firm is moving its main data center to a Phoenix facility, which will house data on nearly 2 million active accounts when it opens in the summer.

Critics may argue that fund companies can't guard their records against every conceivable threat, but most seem to be doing what they can to stack the odds heavily in their favor.

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