Flexibility and adaptability are key for the corporate actions divisions to keep up with event changes, reclassifications and a rapidly changing wider industry environment, said panellists at this year’s CorpActions 2022 conference in London.
The conclusion was reached during a panel entitled ‘Best Practices In Corporate Actions Automation and The Search For STP’, in which major challenges and potential solutions to some of the industry’s most pressing issues were discussed.
A key issue raised by panellists was attrition issues, something which has only been exacerbated by the COVID-19 pandemic and the rise in remote working, said Louise Wotherspoon, managing director of global delivery at State Street. Younger entrants to the workplace are less willing to work extra hours, and are instead searching for a work-life balance, she said. Wotherspoon added that many do not plan to remain with a company for the long-term. They are more likely to move around the industry and are not necessarily committed exclusively to corporate actions.
This means that companies are spending large amounts of time and money onboarding and training new hires who may have moved on within months. Wotherspoon suggested that companies should invest in increased training and mobility programmes to maintain employee interest and emphasise the potential for progress within the firm.
Governance was also considered as a significant issue, with systems such as TARGET2-Securities (T2S) leading to inconsistencies across European markets, according to Wotherspoon. Although T2S seeks to simplify cross-border securities settlements, corporate events are not always recognised across borders, leading to confusion.
Steven Edwards, EMEA corporate actions manager at Invesco, added that he had seen an increase in index-tracking funds which sees the index remove securities that are undergoing an acquisition the day before the event completes. The fund is then obligated to sell the security which raises the risk of fees due to The Central Securities Depositories Regulation when the sale trade will not settle. The front office generally sees that as the most pragmatic approach as opposed to mis-tracking the index correctly and the potential fees and reputational damage that could cause, according to Edwards.
Considering what the moderator called the “spectre of T+1”, Annelotte de Nanassy, senior product manager of the financial information business unit at SIX, argued that the shortened time to deal with any issues that may arise could lead to cross-border difficulties and ultimately an increase in settlement failures. Edwards agreed, stating that he “cannot see it becoming a global standard” when the lack of harmonisation across borders and different countries’ corporate actions are taken into account.
Looking to the year ahead, de Nanassy stressed that the increase in the volumes of corporate actions, and the costs associated with this, still need to be considered. Wotherspoon added that industry changes are not going away, predicting that industry expectations will be the drive for change.
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