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Asset Management / Wealth Management
Singapore launches DLT-backed funds settlement system
Along with industry code of conduct, initiative aims to bolster city-state’s status as asset management hub
The Asset 31 Aug 2022

The Singapore Funds Industry Group (SFIG), a public-private partnership between the Monetary Authority of Singapore (MAS) and funds industry stakeholders, has launched Fundnode, an industry-wide investment funds settlement utility to improve the efficiency of funds settlement in Singapore.

Along with the release of a Code of Conduct to enhance governance standards for investment fund directors, the initiative aims to further strengthen Singapore’s value proposition as a full-service asset management and fund domiciliation hub.

Currently, retail investment fund transactions are settled manually. Fund managers and distributors require significant manual interventions to capture the full set of data into their proprietary systems for trade settlement. This has resulted in a highly fragmented and inefficient network among market participants.

Leveraging distributed ledger technology (DLT), Fundnode will provide a single platform for market participants, such as distributors, fund managers, transfer agents and fund service providers, to seamlessly conduct multiple activities across the settlement process. The industry-wide utility will significantly reduce manual steps, centralize processing and facilitate reconciliation of flows, thereby reducing settlement time and improving efficiency.

During its pilot phase, set to start next year, Fundnode will begin by streamlining fund processes, facilitating simplified subscription, redemption, and record-keeping workflows for funds offered to retail investors.

Fundnode represents the culmination of a broad industry-wide effort led by the SFIG Infrastructure and Innovation Working Group and MAS. Fundnode will be owned and operated by Marketnode, a joint venture between SGX Group and Temasek.

Participants of Fundnode’s pilot phase include fund distributors (DBS, OCBC Bank, Phillip Securities, Navigator Investments, UOB Kay Hian and UOB), fund managers (abrdn, Fullerton Fund Management, Mandiri Investment, Schroders Investment Management, and UOB Asset Management), transfer agents and service providers (Apex Group, Citi, Deutsche Bank, FNZ, HSBC and State Street) and CPF agent banks.

Code of conduct

Meanwhile, the Singapore Fund Directors Association (SFDA) has issued a set of Code of Conduct (CoC) guidelines for fund directors. Co-developed with industry stakeholders from SFIG, the CoC establishes a set of core principles and best practices to promote professionalism, oversight and governance of funds among fund directors in the country.

The CoC outlines 10 key principles to facilitate decision-making and guidance for directors in their governance and fiduciary obligations. It will also be used as a framework to structure industry-driven training and accreditation programmes that will better prepare fund directors to navigate the operational, regulatory and tax environment, and fulfil their governance obligations effectively.

Along with the release of the CoC, SFDA has launched a Fund Directors Certification course, which is now available to SFDA members. The course incorporates the key principles of the CoC in its curriculum. This certification consists of six core modules covering areas such as the roles and responsibilities for fund directors, risk management, controls and fraud mitigation, as well as the licensing and compliance requirements for variable capital companies.

Kai-Niklas Schneider, managing partner at Clifford Chance and co-chair of the SFIG executive committee, says: “The launch of Fundnode is a great example of how MAS has harnessed the power of public-private partnerships to enable digitization and centralized back-end processing for retail investment fund trades, thereby improving the efficiency of financial services delivery.

“Raising the standard as an attractive domicile for global fund managers, the Code of Conduct showcases SFDA and SFIG's commitment to enhance industry-wide governance standards. With the ongoing trend of digitization, these initiatives not only help funds and asset owners remain competitive with a robust legal regime and favourable tax environment, but also continue to strengthen Singapore’s position as an international funds centre.”

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