Church: Issuers Lacked Vital Knowledge around Corporate Actions Challenges

The nature of corporate actions processing might have represented a barrier that has not enabled issuers to fully understand the challenges of corporate actions downstream, according to Chris Church, CEO Americas & global head of securities at Swift, and speaker at the Sifma Financial Services Technology Expo 2010 held in New York in June.

In 2009, Swift, DTCC and XBRL US partnered to create and develop the Issuer to Investor: Corporate Actions initiative, aiming to improve communications between issuers and investors for corporate actions announcements in the US, extending eXtensible business reporting language (XBRL) taxonomy aligned to ISO 20022 to corporate actions. The initiative, which aims to enable the processing of accurate, timely and standardized data through the corporate actions lifecycle, involved all participants in the corporate actions chain, such as stakeholders, issuers, intermediaries and investors, enabling them to have a better view of the risks and costs.

Church said: "The issuers, the first link in the chain of corporate actions notification to shareholders, are not even aware this is a problem. When we first raised this with the issuers, they commented that they simply just did not know this was all happening downstream," he said, adding it is not something that was on their radar as a problem.

"They hand their needs for a corporate actions event to a team of lawyers, then to agents, who publish and post the information, and there is virtually no feedback for the issuers to know how difficult it can be to service the investor and manage the impact of the corporate action on all accounts," he added.

A survey carried out as a part of the initiative among members of the stakeholders group revealed data interpretation, timeliness, accuracy and costs, all factors leading to the need for data validation, poor data quality, manual processes and lack of straight-through-processing (STP) were highlighted as major barriers in this space.

Meanwhile, in June, the three organizations released a set of recommendations for the industry emphasizing the importance around following a single set of globally accepted and adopted information and technology standards, the need for the issuers to tag their corporate actions data with XBRL and for the intermediaries to then disseminate that data in a timely manner and without interpretation.

Church also said that if not tackled, this problem promises to grow further in today's global markets. "In an increasingly global world, with an ever-rising number of public companies, corporate action initiatives will only continue to grow, resulting in more complexity and more information distributed," he said.

"Failing to take definitive and positive steps together as an industry means the problems will not be resolved and companies may begin turning more directly to investors as they look for better ways to tap into the global capital markets," he added.