Cross-Border Distribution of UCITS

A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2011

CHALLENGES & OPPORTUNITIES

Recommendations issued by EFAMA

3.5.4.1

In September 2008, the EFAMA’s Fund Processing Standardisation Group (FPSG) issued re- commendations regarding distribution agreements and the tracking of distributor commis- sions, drawing on initiatives already underway in certain countries such as France 56 . In particular, the FPSG recommends: • That distribution agreements adopt a common framework, contain certain standard infor- mation and describe a clear process to ensure that the correct and complete commission entitlement information with respect to holdings, transactions and transfers is available to the commission calculation agent, • To identify distributors by way of a BIC code plus an extension where required or by an additional reference agreed by the contracting parties if necessary, • That orders carry the relevant distributor’s reference throughout the process chain in or- der to facilitate the correct allocation and payment of renumeration. As a next step, the FPSG will undertake further work to define a standard for the minimum information necessary to identify the individual distributors to whom trail commission is payable and calculate the amount they are entitled to, as well as how this might be annexed to distribution agreements. The Dematerialised Mutual Fund Sales Agreement (DMFSA) is an initiative launched and led by Schroders Luxembourg since 2007, which has now reached pilot stage. It is based on a belief that the negotiation process for mutual fund sales agreements should be simpler and faster, and that the back-office processing of commissions should be more accurate and more efficient. The objective is to develop a way to improve how the industry creates sales agreements and how it processes the associated commissions. It proposes a legal framework within which fund sales agreements may be made, and a technical framework in which their com- mercial terms may be defined. The technical framework defines the commercial term sheet that firms would append to their legal terms. These commercial parameters are capable of being put into an agreement database by a sales assistant in the front office or a commission officer in the back office. In effect, the term sheet is transformed from a legal document into an operational document with legal foundation. It can be produced quickly, cheaply, and very accurately. It can be printed and signed if the parties to the agreement wish to keep physical records or it can be exchanged using electronic messages over a trusted network such as SWIFT. If electronic messages are exchanged on the basis of an unmodified model agreement, there should be no need to print anything and firms will have made their agreement in “dematerialised” form. The term sheet makes it possible for companies to reconcile holdings, report and pay commissions and maintain distribution networks much more easily than today. It also makes it possible to do- cument and apply changes in commercial terms without delay once they have been agreed. DMFSA’s initiative 57

3.5.4.2

56 Source : EFAMA, “Standardisation of fund processing in Europe”, September 2008 57 Source : DMFSA, http://www.dmfsa.info/

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