The FundSERV network is built on a set of electronic processing standards adhered to by the investment fund industry. Accompanying these standards are timelines with set deadlines to keep transaction flow running smoothly. These deadlines are in place to maintain the integrity of the FundSERV network and to ensure business continuity between parties. When deadlines are missed, it leads to unnecessary risk, which FundSERV wants to avoid at all costs.

Over the years, FundSERV has tried to accommodate its customers by lending a helping hand whenever necessary. In fact, many FundSERV employees have worked long hours and weekends to support customers through their back office changes and network connectivity issues. FundSERV has even gone as far as to make the odd exception to deadlines for customers in dire straits. Unfortunately, these types of exceptions are being requested more frequently, thus placing FundSERV in an awkward position.

"We are here to support our customers and are happy to do so, but only to a certain extent, and not at the expense of our network and other customers," says Fatima Jafri, director of operations at FundSERV. "Our procedures and timelines are in place for a reason, and when deadlines are missed, it opens the door to errors and places unnecessary risk on the system."

One deadline that some customers are neglecting is the 2:00 p.m. EST cut-off time for FD file submission. The other involves distributors activating a contingency when experiencing order flow problems. Contingency activation requires distributors to consult with FundSERV prior to 2:00 p.m. EST. If special procedures are deemed necessary, FundSERV then requires an official letter by 2:30 p.m. EST authorizing FundSERV to begin contingency measures. Unfortunately, some customers are not abiding by these timelines and are notifying FundSERV well past the deadlines with the expectation the contingency will be invoked.

"Customers must realize that FundSERV is not the only party that needs to agree to a contingency, says Jafri. "Counterparties must also agree to it in order for it to be activated. Adhering to the deadline gives all parties involved enough time to consider the contingency and act accordingly."

But of all the deadlines in place, none is as important as submitting trade payment on time. FundSERV's payment policy specifies that customers in a net payable position must ensure FundSERV receives payment no later than 1:00 p.m. EST, and 12:00 p.m. EST for commission-related payments. Late payments, or missing payments completely, have a domino affect on the industry and consequently delays settlement.

To reinforce the importance of payment timelines, FundSERV is enforcing its fee schedule to those customers guilty of tardy payments. Customers sending payments to FundSERV post cut-off time will be issued a $500 penalty for the first payment delay, incrementing by $1000 for each subsequent offence, to a maximum of five infractions over a rolling 12-month period. FundSERV also has the right to suspend or terminate a customer if they exceed the five infractions or miss a payment completely.

"Unfortunately, customers sometime forget that their actions have repercussions on others," says Jafri. "We're in a position where we can see how those actions affect counterparties and must try and avoid it at all costs. Every exception has risk associated with it, and being that FundSERV is committed to operational excellence, we're not prepared incur additional risk just to accommodate a few."