Central Securities Depository Of IRAN

 

Introduction

Central Securities Depository of Iran launched a registry and safekeeping of mutual funds investors’ information in a bid to register information related to units of mutual funds and their owners. This system is called CSDI’s Mutual Funds Platform, known as FundReg.

Today, there are so many mutual funds registered and supervised by the Securities and Exchange Organization of Iran (SEO) in three categories i.e. fixed income, equity and mixed types. 

These mutual funds have been operating under "Transfer Agent Model" in which they encountered numerous difficulties in not only registration and corporate action processes but also hampered supervision by the SEO.

Due to the concerns of registration of investment funds’ units that is based on subscription and redemption method, the need to register the information of the unit holders was vastly felt. Considering the membership of CSDI in the Asia Fund Standardization Forum (AFSF), since spring 2017, it conducted comparative studies and reviewed the status of mutual funds and their current challenges. Finally, using the global standards and the legal framework of the country, the Iranian Depository proposed models for registering investment funds in a “CSD Model” rather than “Transfer Agent Model” that uses the same method of subscription and redemption but in a centralized manner.

The "CSD Model" aims to resolve the primary challenges of the "Transfer Agent Model".  The new model sets to compensate for the absence of a centralized system, provide excellence in client services i.e. registry, settlement, etc. to fund beneficiaries and ensure sustainable productivity consistent with international standards and market infrastructure requirements. 

The "CSD Model" is currently being customized to comply with Iran's capital market infrastructure. It consists of three phases. The main objective of this model in the first phase is to complete and systematize the information of the owners of investment units through authentication and registration in the Comprehensive Information Gathering System (CIGS) and issue and assign a trading account for all investors. 

The second phase of this project is to offer services regarding subscription and redemption of investment units and performing corporate actions based on central database (post-trade system) stationed in CSDI headquarters.

The third phase is the most important phase of the project and takes place once the other two phases are complete. In this phase all the necessary information for the FundReg is loaded into it. Companies offering Operating Management System (OMS) should switch into the new model as well, and receive the information related to the mutual fund unitholders from the FundReg and the CIGS and use it as a reference during its daily operations. The objectives of this phase are as follows:

• More efficient supervision of the SEO over mutual funds
• Registry of unitholders information in CSDI
• The possibility to block or seize an investor’s fund units in accordance with legal orders
• The possibility of pledging the mutual funds’ untis

 

Service Provider	CSDI
Beneficiaries	1. The Securities and Exchange Organization Department of Supervision on Financial Institutions Anti-Money Laundering Committee Center for Islamic Research, Development and Studies 2. Judicial Branch of the Government Investors Companies offering operating management system (OMS) to funds Mutual funds segments Fund units trading systems 3. Central Securities Depository of Iran Issuers' Affairs Department Legal/Operations Sections Information Technology Department Planning and Development Department
Participants	Companies offering operating management system (OMS) to funds Mutual funds segments
Objectives	First Phase: Collecting and systematizing the unitholders information via CIGS system and make sure all investors have a trading account to their name. Second Phase: providing subscription and redemption services for the units of mutual funds and corporate actions via central database (post-trade system) Third Phase : More technically efficient supervision of the SEO over mutual funds based on subscription and redemption Unitholders’ information registration for each mutual funds in CSDI The possibility of blockage or seizure of units according legal orders The possibility of pledging units
Unveiling date	2018

 

 

Specifications

• Economies of Scale
• Transparency
• Easy Development

Features

• Receiving ultimate list of subscriptions and redemptions per fund on a daily basis
• Checking the registration status of all investors in CIGS and updating the FundReg database linking to CIGS’ for newly-registered investors
• Comparing the number of redeemed units  with the allowed ones per investor
• To update and record the number of units belonging to each investor based on the carried out subscriptions and redemptions list
• Receiving NAV on a daily basis per fund and reporting the aggregate value of the units for each given investor and fund:
• Rejecting unauthorized subscription or redemption requests in the following cases or providing service for announcing rejected units to each fund:
  • The investors who are not registered in CIGS
  • The number of redeemed units is more than the limitation
  • The total number of subscriptions is more than the fund limit (licensed by the SEO)
• Checking the fund’s limitation at the subscription time and rejecting the surplus
• Transfer of preferred units
• Regarding the authority of CSDI for registration and transfer of any assets in the capital market, the preferred units of investment funds are also registered in CSDI and their transfers are done through FundReg.
• Checking the duplicate data sent by each fund and take care of them
• To specify the allowed period for sending data to the OMS offering companies and Post-trade system
• Generating both separate and aggregate reports on investors' assets value per fund
• Secure linkage
• Using assigned tokens that securing the accountability

This system is only offered and available to mutual funds.