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Understanding Investing 简体中文网页 Members section

Distribution – how many pieces to the puzzle?

Distribution delegation rules* are still open to interpretation three years after they were published. “Sufficient” due diligence must be carried out on every relationship prior to delegation to third parties. However, to-date there is still no common approach on what this means in practice and how oversight can be made seamless. As well as a lack of standardisation, there are grey areas regarding who must shoulder which responsibilities: the board, the management company, the distributor or transfer agent.

Gudrun Göbel, Chief Operating Officer, Director of Risk Oversight, Conducting Officer

The board and the management company are ultimately responsible for distribution, where the management company delegates certain functions to transfer agents and distributors.

It is essential that the transfer agent and distributor have solid know-your-customer and anti-money laundering procedures. The distributor to whom the distribution function was delegated has an important role to ensure that the funds are distributed in accordance with Luxembourg and local rules. Distributors must also carry out initial and on-going due diligence of their distribution network. The management company could assist with some tasks and to guide the distributors and investment managers through Luxembourg requirements, as well as the various rules in each jurisdiction where the fund is distributed.

In the absence of standardisation, all parties need to work together to agree on a common approach. Standardisation will enable practitioners to carry out their particular responsibilities efficiently, without duplication and to the extent to which this needs to be done.

Where the regulation is unclear, partnerships need to be built. Investment managers and distributors need help to create a comprehensive plan for their distribution structure to boost efficiency and guarantee seamless oversight. This process is complex given that Luxembourg funds are distributed into more than 70 countries, each with their own local marketing rules.

Experience in global distribution is essential when defining roles and responsibilities, and making sure these are understood in each market. The need for clear planning has never been greater. Players should seek advice to ensure long-term relationships are structured as efficiently and effectively as possible.

It is crucial to work with partners who can give a clear view of complex global distribution structures. This will ensure that Luxembourg and local rules are adhered to, and that equivalent investor identification requirements are followed by the entire distribution network. A coherent plan is needed to keep customers happy and avoid the potential for difficult regulatory questions. Everyone must be clear about who is responsible for carrying out and monitoring each part of the distribution chain on an on-going basis. Each part plays an important role. Without all the pieces in place, the distribution jigsaw will never be complete.

Gudrun Göbel, Chief Operating Officer, Director of Risk Oversight, Conducting Officer

Ross Thomson, Head of Central Administration / Distribution / Depositary Oversight, Conducting Officer

RBS (Luxembourg) S.A.

ALFI TA Steering Committee member

Panel discussion: Distribution oversight – opportunity or burden?

* CSSF circular 12/256 of 26th October 2012

Updated on 10/11/15  
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