For decades the industry has relied on paper documents to facilitate settlement activity held in client name accounts. Most notably, the requirement for distributors to forward RRSP applications to the fund companies for new accounts and authorized trade instructions on

client name redemptions and the new in-cash transfers (ICT). In its earlier days, this industry practice was effective in reducing risk and ensuring trade accuracy.

What makes a client name initiative possible now? Today you find an industry with robust dealer back office systems, a reliable and resilient industry network, and ever increasing standards and regulations. The result is an environment where fund manufacturers can accept trades in client name accounts electronically with no paper back-up exchange, all without accepting additional risk.

Client name automation means an estimated six million manual transactions a year can be made electronically. Two key support elements make this automation possible:

Electronic Processing Agreement (EPA)

The EPA is an agreement between distributors and fund companies that sets the ground work for client name trade execution without the need for the distributor to forward back-up documentation to the fund company. The agreement gives fund companies access to trade documentation should the need arise.

Eligible Transaction List

The Eligible Transaction List details specific transaction types that do not require paper back-up and that must be placed electronically through FundSERV.

The client name automation pilot currently involves three distributors and eight mutual fund companies. The first phase of this pilot was designed to flush out any challenges and needed modifications, which is why the number of participants was limited. The initiative involves mutual funds only, although other investment products will be considered in the future. With the release of v20, the next phase of this project should involve a rollout across the entire industry.

There will be many long-term benefits, including significant cost savings, faster reconciliation and tighter compliance, for the industry as client name automation is expanded across more participants and transaction types. Aligned standards and processing rules will make business easier and decrease the number of "not-in-good order" transactions.

FundSERV would like to thank the many individuals who contributed countless hours to ensure the successful launch of this initiative. In particular, the members of the steering committee, and the distributor and fund company administrative working groups. If you have questions or would like to learn more about this initiate, please contact Peter Lacasse at 416-350-7574 or peter.lacasse@fundserv.com.