EUROPE: EFAMA publishes new recommendations to improve fund processing

Wednesday September 10 2008

The European Fund and Asset Management Association has published a report containing new recommendations to improve efficiency in fund processing. This is an update of its 2005 report and has the objective of increasing efficiency in the processing of fund orders and achieve cost savings.

A key part of this is the Fund Processing Passport (FPP). Funds-Axis will be releasing details this month of our Funds-Axis GRC TMinnovative technology which fully supports the FPP in addition to providing a comprehensive incident management, policy management audit management and risk and control framework.

The latest report includes new sections covering the reporting of positions and transactions and commission reporting. In addition, the previous recommendations have been reviewed and, in some case, updated to reflect the current landscape and thinking.

Section 3 of the report consolidates the general recommendations to facilitate and improve the level of automation and straight through processing (STP) within the European funds industry. These include the adoption of the Fund Processing Passport (FPP) as a new industry standard, the use of ISO standard identifiers, such as BICs and ISINs, and the promotion of ISO 20022 as the single European message standard for fund messaging.

Section 4 considers the order and settlement process and includes recommendations concerning account identification and standing data as well as for automation of the order, acknowledgement and subsequent confirmation processes. The recommendations concerning settlement have been extended to settlement cycles, with a specific proposal to harmonize settlement date on T+3 or earlier, according to the nature of a fund’s underlying assets.

Section 5 introduces new recommendations to increase the harmonization of basic reporting services provided by fund administrators to distributors and institutional holders. The recommendations focus on the frequency and timeliness of position and valuation reporting and transaction statements.

Section 6 seeks to address various issues that exist currently in the area of commission reporting. In particular, the actor that calculates and pays commission – referred to as the `commission calculation agent` (CCA) – needs to be provided with the information necessary to allocate the payment correctly. Given this information, the CCA should then be able to make the payment and advise the distributor accordingly in a timely fashion.

Section 7 discusses how EFAMA is working with other organisations to promote the implementation of the FPSG’s recommendations and identifies areas of work still to be conducted, namely transfers of units and the processing of income entitlements and other forms of corporate action.