SEI Sues SS&C For Threatening to Shut Advent/Moxy Access

Fund administrator SEI Global Services has sued rival SS&C Technology Holdings and subsidiary SS&C Advent for allegedly trying to put SEI out of business by cutting off its access to critical portfolio accounting technology SEI needs to service its fund manager clients.

The lawsuit, filed in the US District Court in the SEI’s backyard in the Eastern District of Philadelphia accuses SS&C Advent and its parent SS&C Technology Holdings of terminating SEI’s multi-year contract with SS&C to license the Advent Geneva and Moxy applications without cause, knowing the financial and reputational harm it would cause SEI. On January 27, 2020 according to SEI, SS&C gave SEI a “temporary key” to access Geneva and Moxy platforms but that “key” will expire on January 20, 2021. Unless SEI signs a new agreement with SS&C by then, it will no longer be able to use the applications. SEI wants a jury trial to award damages for a multitude of legal infractions such as breach of contract and violation of the Sherman Act, a federal statute which prohibits activities preventing competition.

Both SEI Global Services and SS&C, headquartered in Windsor, Connecticut, provide outsourced portfolio accounting and fund administration services to traditional investment, hedge fund and private equity fund managers. By public accounts, SS&C is the far larger service provider with nearly US$1.7 trillion in assets under administration through its SS&C GlobeOp unit while SEI has $632 million in assets under administration. SEI uses the Geneva platform SS&C’s Advent to process transactions, process dividend and interest accruals, and calculate portfolio performance for fund managers. SEI also relies on Advent’s Moxy, a portfolio and trade order management system, and says it hasintegrated Moxy with Geneva.

SS&C bought San Francisco-based Advent in 2015 and since it owns Advent’s software it can control its licensing deals. “SS&C is SEI’s direct competitor, Advent is not. Advent is SS&C’s alter ego and SS&C is using Advent for its own anti-competitive advantage,” writes James DelBello, a partner in the law firm of Holland & Knight in Philadelphia representing SEI in its suit against SS&C. “Even if SEI were able to locate a suitable replacement it will take at least three years for SEI to convert its business to a new system and SEI will likely lose many of its customers that rely on this information in the meantime and suffer additional harm to its reputation and goodwill.”

SEI signed its licensing agreement with Advent to use its Geneva and Moxy platforms back in 2000 and the agreement continued, according to SEI, with no problems even after SS&C’s acquisition of Advent. SEI claims that it was not until October 2019 that it had any inkling that SS&C wanted to change the terms. That is when SEI received a letter from Robert Roley, a senior vice president at SS&C Advent, asserting that unless SS&C Advent and SEI were able to find satisfactory terms to renew SEI’s licensing agreement for Moxy and Geneva, SS&C Advent was unwilling to review the contract.

SEI claims that it was surprised by SS&C Advent’s stance, because it was not aware that it had breached its agreement and had to renegotiate the terms. SEI interprets its contract with SS&C Advent to be perpetual and automatically renewable every three years unless cancelled by SEI. The contract could be terminated only if either SEI or SS&C failed to perform a material obligation and did not correct the issue within 30 days. If the contract were not renewed or were terminated SEI could continue to use Advent’s software for up to three additional one-year periods at the going rate. In addition, SS&C would be required to facilitate SEI’s switch to a new service provider.

In November 2019, says SEI, SS&C further elaborated on its beef telling SS&C there was a “public policy” reason to prevent continuing the agreement. SEI claims it remained baffled as to SS&C’s gripe until the following month when in a letter to SEI, Jason White, group general counsel for SS&C, asserted that SEI had “solicited to hire Advent employees in breach of Section 11.9 of the software license and support agreement.” White also called SEI’s claims that its contract with SS&C was perpetual to be “strained and aggressive” and unenforceable.

According to SEI, its managing director James Warren who is spearheading the new contract negotiations with SS&C, countered that SEI’s perpetual license was allowable under the law and the non-solicitation provision of the contract that SEI allegedly breached “does not relate to a material disruption and cannot form the basis of a proper termination.” SEI’s lack of an outright denial to SS&C’s claim suggests that SS&C’s allegation has merit. What SS&C is disputing, instead, is whether a solicitation of Advent employees would be considered a violation of its contract with SEI which would give SS&C the right to terminate the agreement. SS&C says it is not. The fact that SS&C didn’t raise any issues about its contract with SEI until the fall of 2019– several years after its acquisition of Advent — suggests that SS&C’s decision to change the terms of its contract was triggered by SEI’s attempt to snatch its employees.

According to SEI, SS&C is now willing to renew its licensing agreement for access to the Geneva and Moxy platforms but SEI won’t agree to SS&C’s new conditions. SEI refuses to sign a “settlement agreement” with SS&C releasing both Advent and SS&C from any wrongdoing because it doesn’t have enough information.  SEI also refuses to pay at least a forty percent increase in licensing fees or a fee based on SEI’s assets under management, as SS&C wants, on the grounds that its contract with SS&C Advent caps any annual rate increase at three percent. “Defendants cannot create a path to termination by manufacturing rate disputes that are contrary to the terms of the agreement,” writes DelBello who calls SS&C’s new financial terms an attempt to “extort” money from SEI.

Based on the fact that SEI never says in its suit what new terms it might accept and calls its agreement with SS&C perennial, one might presume it doesn’t want to change the original terms. SEI would not comment on its suit against SS&C beyond what it discussed in its court filing. “We are confident in our complaint which presents serious claims and speaks for itself,” says a statement issued by SEI to FinOps Report. “We look forward to our day in court and justice.”

SS&C would not comment on SEI’s suit beyond a statement issued to FinOps Report in which it calls the suit without merit. “After the suit was filed by SEI under seal SS&C successfully petitioned the court to unseal the action despite SEI’s objections,” says SS&C. In its statement, SS&C acknowledges that it and its predecessor company Advent had a twenty-year relationship with SEI. SS&C insists that it abides by its contracts.

Given that so many fund administrators use SS&C Advent’s applications it will be interesting to see how, or even whether the outcome of this case affects their contracts with SS&C.