Corporate actions need to be automated
The manual processing of corporate actions is unscaleable and industry-wide automation is needed to reduce the risk of costly investment mistakes, according to DST Global Solutions global head of asset servicing Geoff Harries.
Keeping track of corporate actions events - including share issues, proxy voting, initial public offerings and takeovers and mergers - requires processing millions of decisions and payments each year, DST stated.
"Despite the large value of transactions involved, the financial services sector has under-invested in this area, which typically remains largely manual," he said.
"Most corporate actions require investors to make decisions which have to be recorded according to strict procedures and deadlines, and if information is late or inaccurate the impact on cost can be significant."
Computershare head of intermediary services Scott Hudson said the duplication of processes and the use of paper format was a long way behind where things should be in terms of straight-through processing.
"There's limited standardisation around announcement processing - an announcement goes out, it's advised to the market and then there's a big dumb PDF that's released to the Australian Securities Exchange," he said.
Hudson said automation is the key to changing this process because it allows investment teams to get "key information from two sources in the desired format to enable information to go straight through to the end investor".
"There's transparency, it's auditable, and there's risk mitigation," he said.
For Colonial First State head of investment operations John Paull, one of the biggest challenges his team faces is that it does not receive data at the same time or in the same format.
"Our preference at the moment is to send a fax as it's the process of least variation for us. Custodians want us to log into their system - I have 25 custodial relationships which means 25 variations on that process, which is not scalable for us," he said.
The need for the automation of corporate actions forms part of the Australian Securities and Investments Commission's report (291) into custodial and depository services in Australia.
In it, the regulator has highlighted a low take-up of invoicing improvements put forward by the Society for Worldwide Interbank Financial Telecommunication (SWIFT) and a lack of reconciliation of instructions between financial entities.
"Technology solutions have matured and custodians have agreed to standardise how they send information to simplify the process," Harries said.
"Firms that continue to rely on manual processing now risk being left behind."
Recommended for you
Clime’s disposal of advice licensee Madison “needed to happen yesterday”, managing director Michael Baragwanath has told Money Management, as he concludes a severe cost-out period at the business.
As Viola Private Wealth continues on its growth trajectory, the wealth management firm has appointed a seasoned investment professional to be its first chief investment officer.
Financial advisers who wish to implement artificial intelligence in their practices need to undergo a change in their mindset as to how they use technology.
With United Global Capital expected to constitute a substantial portion of CSLR compensation in FY25–26, what has AFCA ruled in its determinations on the company so far?
