Client Onboarding of a Buy-Side Fund by a Broker/Dealer
Section 1 - Intro
Business Problem / Opportunity
When a mutual fund or pension fund wants to buy or sell stocks, bonds or options, they will typically conduct the transactions through a broker/dealer. Before the fund can start trading through the broker/dealer, they need to establish a formal, legally-recognized business relationship.
The process for establishing this relationship is known as, “Client Onboarding.” It is a complex, heavily regulated, costly, risky and manually intensive process. Participants, the industry and the general public could benefit from faster, more automated and more certain boostrapping of these formal trading relationships.
The current approach to client onboarding of funds by broker/dealers typically involves a combination of processes, data and documents spread out across multiple departments, systems and firms. For example:
Why a Blockchain?
Blockchains could be applied in several different areas to improve client onboarding. For example:
Legal Entity Identifier - Provide an internal and external mechanism to record and lookup unique identifiers for parties to the transactions
AML/KYC/OFAC - Transition OFAC list from a list of textual aliases to governement-issued PKI identifiers for certainty of either whitelist or blacklist lookup and provide non-reputiatable mechanism that check was made and when and by whom
New Business Committee - Provide non-repudiatable, immuttable record for audit and regulatory purposes of who signed off based upon what documentation for establishing the relationships
Legal - Provide a formal, networked mechanism for e-signatures among counterparties, for signing authority attestation and for document transmission and formal legal notices
Ready-to-trade - Provide clear, formal, auditable internal and external mechanism to signal formal readiness for trading to begin
Section 2 - States and Transactions
Section 3 - Requirements