This paper is the second update to the report that was first published by EFAMA in 2005 to present recommendations to increase efficiency in the processing of fund orders and achieve cost savings.
In that paper, we indicated that the FPSG would proceed to look at other areas of fund processing, and it was duly updated in September 2008, in which new sections were added covering reporting of positions and transactions and commission reporting. This latest version, which includes further new sections on transfers of title and corporate actions, now encompasses the full scope of activities that were envisaged when the FPSG was formed.
In Section 3, we offer a number of general and overarching 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 an 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 include a specific proposal to harmonize settlement date on T+3 or earlier, according to the nature of a fund's underlying assets.
Section 5 is a new section and proposes measures applicable to the single- and double-leg processing models that exist for transfers of title in different markets due to local rules and conventions. The principle aims are to shorten processing timelines and improve communication between the actors involved.
Section 6 makes recommendations to increase the harmonization of basic reporting services provided by fund administrators to distributors and institutional holders. The focus is on the frequency and timeliness of position and valuation reporting and transaction statements.
Section 7 seeks to address various issues in the area of commission reporting. In particular, the actor that calculates and pays commission, needs to be provided with the information necessary to make the payment and advise the distributor accordingly in a timely fashion. The recommendations draw on initiatives that are underway already in some markets.
Section 8 is a new section and discusses various aspects in relation to corporate actions, with a view principally to improving communication with the wider market in order that underlying beneficial owners and their servicing agents are able to receive and process the information in a more timely fashion. This section covers income entitlements and those arising from fund reorganizations, as well as communications relating to unitholder meetings
and other investor notifications.
Section 9 discusses how EFAMA is working with other organizations to promote the implementation of the FPSG's recommendations.
Section 10 provides reaction of key industry stakeholders to the draft final version of the report.
