Subscribing to an online investment fund: what is the security?

Over the past two years, many asset management companies have been digitizing the subscription to their funds. Whatever the amount (this can be through FCPR with minimum tickets of €10,000 or feeders starting at €100,000) and regardless of the type of investor (individuals, holdings, institutions), Fewer and fewer subscriptions are done by hand. Covid-19 accelerated this, but it was almost not necessary, the process was well under way.

Ourselves, chez Capsens, we have enabled digitalization of the subscription for Idinvest Partners, HEC Alumni, Takara Capital or Private Corner (not to mention direct online subscriptions at Fundimmo, Lita.co, French Partners, etc.).

While this digitization was rapid, whatWhat about the security and regulatory compliance of these subscriptions ? We are going to look at this from several angles, and understand how this digitalization increases the security and compliance of subscriptions.

Online forms and the automatic generation of documents

A customer knowledge questionnaire is often necessary when a natural person subscribes. This is necessary to prevent money laundering and terrorist financing. And this makes it possible to advise the investor and not to involve him in a subscription that is too large or risky for his profile. In addition, it contains important information for the management company to know its investors from a marketing point of view. These documents look like this and are usually several pages long.

When filled by hand, they are often accompanied by instructions that explain how to fill them properly. At the start This should simplify the subscription and explain elements like “What do we mean by PPE?” But the subscription ends up being more complex and the investor can make a mistake when filling out their forms.

Here's what an online subscription looks like:

It is clearer, allows the elements to be well organized, and especially to display much fewer of them to the investor. So An investor sees around 40% less of fields than on a paper form on average because many fields are conditional. For example: if I checked “yes” I see the following fields, otherwise I move on.

In addition, the web allows you to have contextualized help, that is to say that the help does not appear in an annex page but at the moment when it is needed. Below, it appears when the “i” is clicked when the user is asked if they are a US person within the meaning of FATCA.

So users have less chance of making a mistake by completing their documents which will be generated automatically using the elements filled in the online questionnaire. Because they understand the questions better. Especially since not all answers can be checked by the back office of the management company : a person saying that they are not a “US person” can be without knowing it.

This is why a questionnaire that is easier to read, ergonomic thanks to the conditions on the fields, is more secure.

The electronic signature to subscribe online

Once the documents have been generated by the subscription platform, they must be signed online. This happens thanks to the usual service providers: Docusign, Yousign, Universign, etc.

Legal literature, good synthesized here, explain why this is entirely valid. The most used electronic signatures are those that are said to be “simple” or “advanced”. The simple signature involves a text message or an email with a code sent to the signatory. The advanced signature also involves the transmission of an identity document by the investor to the electronic signature service.

The documents signed by these providers are stored on their servers with a linked certificate that certifies the signature. However, it should be noted that the Registry does not accept some electronically signed documents. This does not mean that these documents are not valid (they are in court in the event of a dispute over a contract for example) but simply that the Registry is not equipped to check whether a document is signed electronically in a valid manner or not.

Finally, as far as payment is concerned, they are made by bank transfer, through successive calls for funds. Fundraising can be made through the platform but payments remain made via the investor's banking interface.

In conclusion, subscribing to an online fund offers more security for the investor and the management fund. It allows you to have reliable documents recognized by third parties. However no security is inviolable, so you have to be careful when managing your passwords. Chez CapSens we advise our customers to carry out an independent security audit just after the launch of their platform.