Focus On: Operations
Measuring Operational Risk: Part Science, Part Art | Licensing Ops Execs: Great Idea, Bad Execution? | Reducing Operational Errors With OTC Derivatives | A DAY IN THE BACK OFFICE:
Eliminating Operational Risk at a Transfer Agency | Giving a Single Name a Single Identity | TOP OPS EXEC: Timothy Doar, CME Clearing | TOP OPS EXEC: Mike Fish, SWIFT | TOP OPS EXEC: Patrick Kirby, DTCC | TOP OPS EXEC: John McCorvey, Gar Wood Securities | TOP OPS EXEC: Jeff Gooch, MarkitServ | TOP OPS EXEC: James Malgieri, BNY Mellon | TOP OPS EXEC: Hans Hufschmid, GlobeOp Financial Services | TOP OPS EXEC: Conrad Kozak, JPMorgan Chase
A DAY IN THE BACK OFFICE:
Eliminating Operational Risk at a Transfer Agency
May 4, 2011
The Iceberg
That’s just the tip of the iceberg. “Every communication center representative and other employee interfacing with customers had to be taught the basics of cost-basis reporting,” says Jason Stout, senior manager for Computershare’s U.S. communication centers. “A separate dedicated team of phone experts also had to be trained in answering more complicated questions -- such as the types of methodologies Computershare could use to do the calculations,” But they can never cross the line to provide tax advice.
Adding to the operational strains Computershare faces is the simultaneous need to comply with the SEC’s new so-called say-when-on-pay requirement, which took effect on January 21. Corporations at their first annual meetings must allow shareholders to vote on executive compensation in their proxy statement at least once every three years and must allow them to determine whether “say-when-on-pay” votes will take place every one, two or three years or whether they will abstain.
Computershare had to change its proxy cards as well as its online and automated phone service. And it had only three months to do so, the time between the issuance of the final requirements from the SEC and when corporations needed to start mailing proxy cards with the new “say-when-on-pay” question.
The costs of adapting to cost-basis reporting and executive say when on pay?
Computershare executives wouldn’t specify a figure but its annual report provides some inkling. For fiscal 2010, Computershare spent $161 million on technology, globally. That compared to $154 million in 2009.
Computershare will have to spend a lot more on technology if the SEC approves a proposal put forth last year by transfer agents to allow U.S. corporations to send proxy materials to beneficial shareholders directly instead of having to go through banks and broker dealers.
Under the current rules, only financial intermediaries can do so and obtain voting instructions from their beneficial account holders. They have decided to outsource the labor and technology intensive process to Broadridge Financial. That firm, in turn, collects the fees the financial intermediaries are allowed to charge corporations based on rates largely set by the New York Stock Exchange.
