Chapter 8: Daily Calculation
- Accurate books and records are the cornerstone of the Investor Money Requirements (IMR). It is essential that fund service providers be in a position to accurately identify the balance of investor money which it should be holding on behalf of each individual investor, so that they can be swiftly returned to the correct investor, particularly in the event of that fund service provider’s insolvency.
- An illustrative example of a daily calculation is included in Appendix I of this Guidance.
The investor money requirement for a fund service provider
- For any third party collection account held by a fund service provider, the investor money requirement includes:
- cash which is received from investors for pending subscriptions prior to the cash transfer cut-off time on the dealing date of the investment fund(s); or
- cash received from the investment fund(s) as a result of, for example, redemptions / dividends that have yet to be paid to the investors of the investment fund(s); or
- cash rebates, distributions or any other investor related payments.
- These examples are not exhaustive. If in doubt, a fund service provider should be prudent in its approach and act in the best interests of the investors.
- Any investor money held in an account that is not denominated in euro may be included in that currency or may be converted to euro using the Central Bank rate for that day or any other established automatic rate feed.
- A fund service provider should be in a position to demonstrate, upon request, evidence of a calculation and the date upon which such calculation was prepared. This evidence can be in electronic form.
When is a fund service provider required to notify the Central Bank of an excess or shortfall in completing its daily calculation
- The Central Bank will require each fund service provider to assess what level of shortfall or excess is considered material and record this rationale in its Investor Money Management Plan (IMMP).
- The Central Bank expects a fund service provider to immediately notify the Central Bank via the Online Reporting System Central Bank Portal when the level of money it deposits or withdraws from its third party collection account is material and to explain in the notification the reasons for this transfer. The Central Bank, where it considers necessary, may engage with the fund service provider to discuss its funding and its rationale.
- A fund service provider should ensure that each daily calculation has the relevant supporting backup material available to enable the verification of figures in the daily calculation.
- Where a fund service provider outsources the performance of the daily calculation, it should have appropriate oversight of the process to ensure that the third party (including a group entity) has appropriate processes, systems and controls for the performance of this activity. The fund service provider should maintain a record to evidence the oversight of the process.
Daily Calculation Example for a Fund Service Provider
- Daily Calculation example for investor money for 31 July 20XX (carried out by firm on 1 August 20XX).
- This example is based on the assumption that the fund service provider has identified its investor money creditor's. The Central Bank expects a fund service provider to have a process in place to identify when money becomes investor money.
- Step 1: Funds owed to its investors (a fund service provider’s internal creditor's ledger only *) = Investor Money Requirement (“A”)
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Investor List@ 31/07/20XX
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€
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A Smith
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100,000
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B
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A Jones
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70,000
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C
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J Bloggs
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50,000
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D
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B Murphy
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80,000
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E
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Total Creditor's
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300,000
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B+C+D+E
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Unpresented cheques
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60,000
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**
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F
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Total Investor Money Requirement (A)
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360,000
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B+C+D+E+F
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* If an investor on the fund service provider’s debtor ledger is identical to a creditor on its creditor ledger, a credit can be reduced by the amount of the debit for that specific investor,
Or
if there is a legally enforceable set-off agreement in place between investors, a credit can be reduced by the amount of the debit for that specific investor.
** Represents investor money paid to investors via cheque, but which the investors have yet to present for payment (Note: cheques issued to investors remain investor money until cleared by the credit institution).
- Note: A fund service provider should assess what other adjustments may be required to calculate a fund service provider’s total investor money requirement (e.g., unidentified investor money).
- Step 2: Money in third party collection account (a fund service provider’s internal bank ledger) = Investor Money Resource (“B”)
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Bank List @ 31/07/20XX
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€
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Pooled third party collection account held in Bank A
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130,000
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W
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Pooled third party collection account held in Bank B
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100,000
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X
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Segregated third party collection account held in Bank C
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50,000
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Y
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Total Investor Money Resource (before adjustments)
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280,000
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W+X+Y
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Unpresented cheques
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60,000
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***
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Z
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Total Investor Money Resource (B)
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340,000
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W+X+Y+Z
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*** Represents investor money paid via cheque to investors but the investors have yet to present for payment (Note: investor money remain investor money until cleared by the credit institution).
- Note: A fund service provider should assess what other adjustments may be required to calculate a fund service provider’s total investor money resource (e.g. unidentified investor money).
- Step 3: Final step in the Daily Calculation to determine if the investor money resource (“B”) requires funding to meet the investor money requirement (“A”)
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A @ 31/07/20XX
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€360,000
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B @ 31/07/20XX
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€340,000
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A-B @ 31/07/20XX
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(€20,000)
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****
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**** In this example, the daily calculation carried out on 1 August 20XX demonstrates that the fund service provider does not have sufficient money to meet its creditor's for the close business 31 July 20XX. Therefore, the fund service provider is required to put €20,000 of its own firm money into the third party collection account to meet the shortfall. This transfer should be carried out no later than close of business 1 August 20XX.
18. Please note that the third party collection account, which provides for pooling of investor money, may be held by the fund service provider at the level of investor, investment fund, or fund service provider.
Issued: 4 July 2023
Last revision: 5 July 2023