SIBOS 2009: Three Panels Set Up to Tackle Tagging of Corporate Actions
September 18, 2009
XBRL International’s U.S branch, messaging consortium Swift, and Depository Trust & Clearing Corp. (DTCC) have just created three separate committees of issuers, financial intermediaries and institutional investors to evaluate how U.S. companies can tag their corporate action notifications in the extensible business reporting language format.
The announcement was made at Swift’s annual Sibos conference in Hong Kong this week.
Among the firms participating on the issuer committee are: AGL Resources, Duke Energy, ENGlobal; Pfizer, Inc and United Technologies; agents of issuers include Merrill Corp., NYSE Euronext and PR Newswire, among others. The National Investor Relations Institute has also joined the group to provide an investor relations perspective.
Financial intermediaries will be represented by DTCC and other unnamed custodians and broker-dealers. Representing investors will be AllianceBernstein, Goldman Sachs Asset Management, State Street Global Advisors; T.Rowe Price and Vanguard.
“Each of the groups will provide input, make recommendations and help articulate the pros and cons for electronically capturing data directly from issuers and their agents in a standardized format at the point at which the corporate action is announced,” said a statement issued by XBRL US, Swift and DTCC. “Each group will be tasked with determining what changes would be required if issuers produced corporate action messages in XBRL format aligned with ISO 20022.”
The goal of the initiative is to reduce the potential difficulties – and larger risks – that market infrastructures and financial intermediaries face in reinterpreting information on corporate action events because of inconsistent descriptions from issuers. Intermediaries are financially liable if they give clients bad data on corporate action notifications or provide it too late for a decision to be reached. About 200,000 corporate actions, such as dividends, bond redemptions, rights offerings and mergers are announced each year by publicly traded companies in the U.S.
The protocol allows data to be tagged in such a way that databases, financial reporting systems and spreadsheets can identify the type of information represented by each data entry and the value reported. The data can then be identified and extracted by investors for detailed company analysis.
While financial intermediaries are eager to promote the use of XBRL for corporate actions, Swift, DTCC and XBRL US need plenty of support from issuers who may not be eager to take on the costs or potential liabilities of changing their current practice of simply including corporate action notifications in offering documents, without a requirement from the Securities and Exchange Commission.
David Hands, director of global corporate actions at DTCC, the umbrella organization for clearance and settlement of U.S. securities, said that the groups will be jointly coming up with a cost-benefit analysis of XBRL tagging for corporate actions. He would not elaborate on whether such an analysis would be presented to the SEC, which has mandated that by 2011 all U.S. public corporations and mutual fund companies submit their financial reports in XBRL.
“Corporate actions information, submitted today in free-form documents like press releases and prospectuses, is a logical next step for the use of XBRL,” said John Stantial, assistant controller of financial reporting and analysis at United Technologies. The NYSE-listed firm has 25,000 shareholders and has been filing financial reports in XBRL format with the SEC since 2005.
