An ISIN (International Securities Identification Number) uniquely identifies a security and is universally recognizable. ISINs are used for numerous reasons including clearing and settlement. Some banks allow their investor clients to invest in a range of securities, e.g. a hedge fund, directly, via an ISIN code.
The process is:
- The investor orders its bank to subscribe to the fund and provides its bank with the ISIN number and or name of the fund.
- The bank, acting as a nominee, subscribes on behalf of the investor and signs a subscription agreement which is processed by the fund's administrator.
- The bank withdraws the amount of the subscription from the investor's bank account and wires the corresponding amount to the bank account of the fund.
- The nominee bank then books the position on the investor's security portfolio.
The benefits are:
- An investor can see the value of their investment on their account statement.
- Their bank handles the majority of the process for them and they're not required to personally sign a subscription agreement or provide KYC documents.
- If the fund is performing well, a private banker might also recommend it to some of their other clients who have similar profiles.