SRD II still in early stages of ‘full and seamless adoption’, says Broadridge
31 March 2021 UK
![Generic business image for news article](https://www.assetservicingtimes.com/assetservicesnews/images/WednesdayMarch3120211617198353.jpg)
The European Commission’s updated Shareholder Rights Directive (SRD II) is still very much in the early stages of a full and seamless adoption across European regulated markets, according to a new report by Broadridge.
SRD II went live in September 2020 and is global in its scope, impacting any financial intermediary that holds or services European equities, irrespective of where the intermediary firm is located.
It applies to all types of financial intermediaries, including banks and brokers, wealth managers and central securities depositories (CSDs).
In terms of market structure challenges, the report suggests the delayed timeline for regulatory transposition in many countries caused a knock-on impact to CSD adoption of the required ISO 20022 messaging for issuer communication in those countries.
The area of shareholder disclosure has been a little easier to handle than other message types related to areas such as general meetings because of the lack of existing coverage by ISO 15022 messaging, according to the author of the Broadridge whitepaper, Demi Derem general manager, bank broker-dealer investor communication solutions.
Mapping has not been necessary between the two message types by intermediaries for shareholder disclosure as five entirely new messages and market practices were created for requests and cancellations, explains Derem.
The paper also explores the lessons learned by asset managers. It stipulates that the introduction of shorter deadlines of no more than three business days for any shareholder action has put pressure on firms to reduce previously manual processes where possible.
“Asset managers with large numbers of custodians have been especially challenged to keep up with the requirements because of the expected increase in the number of notifications that must be processed on a daily basis for their underlying clients,” says Derem.
These firms, according to the report, have also faced challenges in tracking down data for beneficial owners where gaps have been identified, and this will be a significant data maintenance task going forward.
Elsewhere it is explained that a significant impact from the issuer perspective of SRD II could be an increase in the number of class actions taken by shareholders in the future of the voting procedure isn’t deemed by shareholders to be compliant with the directive.
Derem notes that this has meant issuers in the region are keen to see greater intermediary compliance with SRD II and they are communicating directly with their national authorities and the European Commission to ensure late implementers are monitored and, if necessary, appropriate action is taken.
Based on the complexity of the task at hand, and with the backdrop of a tragic global pandemic, Broadridge believes the industry has done a remarkable job to embrace SRD II implementation, despite the fact that some alignment challenges remain across the markets and participants.
Over the next 12 months, Broadridge hopes many of the current operational challenges will be resolved but expects an ongoing high focus in this area, especially for global intermediaries.
Broadridge also predicts investor and regulator environmental, social and governance (ESG) themes and concerns will continue to drive further change.
“Our advice for these firms is to allocate budget and resources to navigate through the challenges that lay ahead,” says Derem.
Meanwhile, those looking for outside assistance are reminded to consider their options carefully. It is noted that the reputational and compliance consequences for SRD II non-compliance can be very high.
“Thus talk to firms that can offer deep domain knowledge, scale, financial stability, the highest digital data security and complete market coverage. This will help your business to meet both its EU market and global compliance obligations,” Derem suggests.
SRD II is a key part of the Capital Markets Union agenda and remains a high-profile, mandatory requirement subject to deep scrutiny over the coming years, including a formal review of the directive’s effectiveness by the European Commission.
Broadridge’s latest industry whitepaper on SRD II extracts learnings from over 350 SRD II client implementations, which should serve as a valuable resource for firms that have yet to implement their SRD II solution, as well as those who met the deadline but continue to refine their processes.
SRD II went live in September 2020 and is global in its scope, impacting any financial intermediary that holds or services European equities, irrespective of where the intermediary firm is located.
It applies to all types of financial intermediaries, including banks and brokers, wealth managers and central securities depositories (CSDs).
In terms of market structure challenges, the report suggests the delayed timeline for regulatory transposition in many countries caused a knock-on impact to CSD adoption of the required ISO 20022 messaging for issuer communication in those countries.
The area of shareholder disclosure has been a little easier to handle than other message types related to areas such as general meetings because of the lack of existing coverage by ISO 15022 messaging, according to the author of the Broadridge whitepaper, Demi Derem general manager, bank broker-dealer investor communication solutions.
Mapping has not been necessary between the two message types by intermediaries for shareholder disclosure as five entirely new messages and market practices were created for requests and cancellations, explains Derem.
The paper also explores the lessons learned by asset managers. It stipulates that the introduction of shorter deadlines of no more than three business days for any shareholder action has put pressure on firms to reduce previously manual processes where possible.
“Asset managers with large numbers of custodians have been especially challenged to keep up with the requirements because of the expected increase in the number of notifications that must be processed on a daily basis for their underlying clients,” says Derem.
These firms, according to the report, have also faced challenges in tracking down data for beneficial owners where gaps have been identified, and this will be a significant data maintenance task going forward.
Elsewhere it is explained that a significant impact from the issuer perspective of SRD II could be an increase in the number of class actions taken by shareholders in the future of the voting procedure isn’t deemed by shareholders to be compliant with the directive.
Derem notes that this has meant issuers in the region are keen to see greater intermediary compliance with SRD II and they are communicating directly with their national authorities and the European Commission to ensure late implementers are monitored and, if necessary, appropriate action is taken.
Based on the complexity of the task at hand, and with the backdrop of a tragic global pandemic, Broadridge believes the industry has done a remarkable job to embrace SRD II implementation, despite the fact that some alignment challenges remain across the markets and participants.
Over the next 12 months, Broadridge hopes many of the current operational challenges will be resolved but expects an ongoing high focus in this area, especially for global intermediaries.
Broadridge also predicts investor and regulator environmental, social and governance (ESG) themes and concerns will continue to drive further change.
“Our advice for these firms is to allocate budget and resources to navigate through the challenges that lay ahead,” says Derem.
Meanwhile, those looking for outside assistance are reminded to consider their options carefully. It is noted that the reputational and compliance consequences for SRD II non-compliance can be very high.
“Thus talk to firms that can offer deep domain knowledge, scale, financial stability, the highest digital data security and complete market coverage. This will help your business to meet both its EU market and global compliance obligations,” Derem suggests.
SRD II is a key part of the Capital Markets Union agenda and remains a high-profile, mandatory requirement subject to deep scrutiny over the coming years, including a formal review of the directive’s effectiveness by the European Commission.
Broadridge’s latest industry whitepaper on SRD II extracts learnings from over 350 SRD II client implementations, which should serve as a valuable resource for firms that have yet to implement their SRD II solution, as well as those who met the deadline but continue to refine their processes.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one asset servicing news source this year, make sure it is your free subscription to Asset Servicing Times
100% ON RETURNS If you invest in only one asset servicing news source this year, make sure it is your free subscription to Asset Servicing Times
![Advertisement](../images/bull-252524.png)