SOLUTIONS FOR SPECIALIZED DEPOSITORIES AND SPECIALIZED REGISTRARS

The Aladdin-Systems company offers an integrated system for a specialized depository and specialized registrar based on the modules of the ALADSYS.SDEPO™ software package. This solution allows uniting the control department of a specialized depositary and the department that keeps the unit-holder registers of mutual (unit investment) funds (PIF) by the single corporate document flow system. This helps to simplify the control process, to avoid imputing the same data twice, to reduce the workload, and to cut the cost of the specialized depositary recording and the unit-holder register keeping.

The integrated system is constructed from modules and includes the following products:

The software ALADSYS.SDEPO™ product was developed on the basis of the ALADSYS.SQL™ financial system kernel, which makes possible using this product in a single corporate system with the other products of our company. This product can be used either as a separate software package in the Control Department or as the common document-flow and recording environment together with the depositary recording system ALADSYS.DEPO™. One of our recent products is the Pension Accruals Control subsystem for pension accruals that are transferred to NPF by the Pension Fund of Russia.

The subsystem "Control recording for PIFs"

According to current legislation, the PIF recording should be performed by the management company and should be duplicated by the independent control recording of the specialized depository. This means that the specialized depository has to keep independent recording of all the fund’s operations in categorization by unit-holder, and to perform the daily matching. Among the functions of the Recording and Control Division there is also the independent calculation of the fund’s net asset value (NAV) and the control over the compliance of the methodology of its calculation with the regulatory requirements. The subsystem “Control recording for PIFs” is designed for the automation of the abovementioned functions. It allows the Control Department of a specialized depository to perform the following functions:

The " Mutual Funds Register " subsystem

According to current legislation, specialized depositories may perform the functions of mutial funds (PIF) unit-holder register keeping; another alternative is that these functions are performed by a separate specialized registrar.

The function of keeping the register of unit-holders of a mutula funds (PIF) is quite different from that of keeping the corporate share register. The main differences are as follows: first, the constantly changing number of outstanding units, and secondly, the dual function of the investment unit itself (it is a security and a trust management contract at the same time). The "Mutual Funds Register" can help perform the following functions:

The " Mutual Funds Register " subsystem is a registry-keeping system with all standard functions, such as servicing nominee accounts, collaterals, conversion of units, splits and consolidations and others. In case of a unified system, different types of recording can be performed on the basis of the same input documents on operations with units, which allows to decrease the workload on the employees.

There is a separate product for specialized registrars - ALADSYS.SREG ™

The "Pension reserves of non-government pension funds NPFs" subsystem

Unlike an ordinary specialized depository, a specialized depository servicing non-government pension funds has to control the fund’s and fund managers’ activity related to the investment of pension reserves in order to ensure the fund’s compliance with the rules and restrictions on pension reserve investment and with the rules on the composition and structure of pension reserves – in accordance with the Russian Federation Government Statement №383 of 28.04.2000. This means that the specialized depository performs the independent control recording of all the fund’s operations and performs daily checks of the fund’s compliance with the requirements of legislation and with the fund’s rules. As the amount of information coming from the NPFs is quite large (it includes all operations with the fund’s assets), it is impossible to produce the required reports within reasonable time unless you have a special software.

The subsystem "Pension reserves of NPFs" helps to perform the following functions:

The modul ALADSYS.SDEPO also allows to perform the accounting both for the funds and for management companies.

The company Aladdin-Systems is the absolute leader in the market of specialized depository automation systems; it is substantially ahead of the competition by the number and the scale of finished projects in this field (more than half of existing specialized depositaries use the software ALADSYS.SDEPO, including 11 depositaries from the top 24).

Comments:

Unit Investment Fund (PIF) – is the instrument of collective investment in Russia that allows investors to combine their savings and invest them under the management of a professional management company. Functionally, unit investment funds in Russia are similar to mutual funds in the USA, but their legal status and regulation are somewhat different. One of the important differences is that the US mutual funds are forced by law to make distributions (they have to distribute at least 90% of their realized capital gains and dividend income each year), whereas the Russian PIFs don’t have to make any distributions. The “shares” of PIFs are called units (or investment units), and the investors are referred to as unit-holders.

Pension accruals are the funds that come from the mandatory pension deductions of employed individuals and are recorded in the special section of their pension accounts. These funds are to be invested in various financial instruments determined by the government, and by the time a person reaches retirement age, this money will be used to finance the accumulative part of the person’s government pension. (The government pension now consists of three parts – basic, insurance and accumulative, and the pension accruals are used to finance the accumulative part. For more detail see Federal Law №173-FZ of December 17, 2001, “On the labor pensions in Russian Federation”.)

Pension reserves are the funds coming from the payments to non-governmental pension funds from the individuals who participate in voluntary pension schemes.

Net assets value (NAV) of a unit investment fund is the fund’s net assets (= the market value of all the fund’s assets less all its liabilities) divided by the number of units outstanding (here we use the US mutual fund terminology).

The Federal Financial Markets Service (FFMS) is the federal executive body that controls and supervises activity in the financial markets, including the activity of exchanges, and issues the relevant regulations. It also regulates the investment of pension savings.