A Private Fund has a choice of whether to conduct this function by:
- an administrator or another independent third party; or
- the manager or operator, or a person with a control relationship with the manager of the private fund, provided that —
- the cash monitoring function is independent from the portfolio management function; or
- potential conflicts of interest are properly identified and disclosed to the investors of the private fund.
HOW CAN DMS ASSIST PRIVATE FUND MANAGERS?
The most logical service provider for this function would be (i) appointed fund administrator or (ii) the banking institution that the Private Fund retains for its fund operating account. This would allay any independence concerns, and the function already aligns with the operational and regulatory requirements of these providers. Additionally, the required data would already be within the possession of these institutions.
A per DMS’ interpretation of the legislation, DMS Bank is providing this service as an extension of it’s existing banking and custodial service offerings. DMS Bank will:
- Ensure all cash of the Fund is booked in accounts with compliant credit institutions (this would apply only to external clients)
- Reconcile all cash flow movements and perform reconciliations on a daily basis, or when cash flow movements occur
- Implement appropriate procedures to identify, as of close of business each day, significant cash flow movements, in particular those inconsistent with Fund Operations
- Monitor on an on-going basis the outcomes of the reconciliations and notify the Fund/Manager if irregularity has not been rectified without undue delay
- Check the consistency of its own records of cash positions with the Manager/Fund.
- Receive information daily about payments made by or on behalf of investors upon the subscription of units
- Receive all relevant information to ensure that the payments are booked in cash accounts opened in the name of or for the benefit the Fund
- Reconcile the subscription orders with the subscription proceeds and the number of units/ shares with the subscription proceeds
- Reconcile the redemption orders with the redemptions paid and the number of units/ shares with the subscriptions paid
- Verify on a regular basis that the reconciliation procedure is appropriate
- Create and present cash monitoring reports to the fund’s BOD, as appropriate.
DMS has a wide range of sophisticated institutional relationships in the Private Fund space, having been at the forefront of the growth and evolution of this market segment for many years. DMS has worked with leading lawyers and tax advisors in the industry, across a wide range of non-standard, complex structures, and has been in a position to effectively execute on their suggested structures across multiple jurisdictions.