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Securities Services

Investment policy and trustee services

Its purpose is to carry out checks on the regularity of management decisions for a UCITS Fund.

What is the trustee service?

Its purpose is to carry out checks on the regularity of management decisions for a UCITS Fund. These checks can either be regular or more infrequent and unexpected. The trustee bank can under no circumstances delegate the checks to a third party and the checks need to be carried out in the country where the funds are based. The trustee’s assignment is accompanied with a responsibility towards third parties or investors concerning violations of legislative or regulatory measures applicable to the UCITS Funds being checked. The regulatory bodies can impose administrative, disciplinary or criminal sanctions on the trustee, proportionale to the committed.

Organisation of the trustee service

Control procedures defined in the COB directive of 1993:

  • Check that the investments specified in the prospectus are correctly classified and placed.
  • Check that regulatory ratios and off-balance sheet commitments are respected.
  • Check the balance of the number of securities in circulation between the appraiser and the transfer agency manager.
  • Check that stocks exist and that there are no differences between the appraiser’s stock and the trustee’s stock.
  • Check that regulatory thresholds are respected (for settlement or daily valuation of the UCITS).

Control procedures not defined in the COB directive of 1993:

  • Check that the variations in NAVs are coherent.
  • Check the rates used for valuation purposes.
  • Check any suspense accounts which could have an impact on the NAV.
  • Check portfolio sensitivity in accordance with the interval specified in the prospectus.
  • Check for dividend payment in the five months following the end of the financial year for the distributing UCITS.
  • Check the guaranteed UCITS and the NAV calculated at the due date.
  • Performance analysis.
  • Check the number of minimum investors.
  • Follow the legal development of the UCITS (from creation of the fund to its unwinding).
  • Check respect of expenses and commissions.
  • Organisational checks.
  • Check the parameters of the software used to calculate the appraisers’ ratios.
  • Check the software used by the management companies for OTC product valuation.
  • Assess the organisation of internal control at the management companies and their procedures.
  • Examine the procedures of the appraiser.
  • Carry out assessments of certain products used with analysis of impacts at regulatory, accounting and financial level etc.

Trustee service tools

SGSS uses different tools to complete its trustee assignments:

  • GEODE offers both a multi-instrument inventory and the possibility to carry out some automated checks (of prospectuses, NAV variations, off-balance sheet commitments). OSCAR traces checks and anomalies for each UCITS Fund and can generate reports and statistics.
  • Numerous appraiser tools (Euro-opc, GP3, Chorus, Ophyr).
  • Financial contributors (Bloomberg, Telekurs, Reuters, Lipper, Europerformance etc.).

Services offering added value

SGSS offers supplementary services based on the specific needs of its clients, in particular:

  • The implementation of a specific service for pension funds and other provident institutions, concerning their professional framework (financial regulation of Arrco, the French complementary pension scheme for employees, etc.).
  • Regular checks of the portfolio composition of guaranteed UCITS.
  • Specific ratings checks at a rhythm defined by the client.

Client reporting

The trustee service guarantees a permanent dialogue with the fund management companies regarding possible anomalies so as to resolve any problems as quickly as possible. To this end, the client receives different documents, including:

  • Anomaly files (in the event of irregularities in decisions taken by the management company or any other anomalies).
  • Client reports (for service provided).
  • Portfolio certification.
  • Certification of the number of parts.

Changes in the trustee service

SGSS investor services is actively involved in various work groups in the Paris market which are currently examining ways of modernising the trustee service. One of the main projects launched in 2005 was a review of the procedures for trustee control. The other main development in trustee services is directly linked to the emergence of direct alternative investment and the introduction of prime brokerage into French regulation, which opens the debate over the division of responsibility between trustees, management companies and prime brokers.