Are there too many committees?

The conference I was asked to Chair last week on Corporate Actions Processing included a presentation from Linda Bookheim, Senior Manager, Custody and Asset Services, SWIFT that catalogued the many different groups/committees and initiatives that are all looking to bring new efficiencies. Now Corporate Actions are complex and tend to bring out the "nerd" in most people but so many different groups, manned by so many people, all looking towards a similar objective, looks like a case of too many cooks.

The effort appears almost manic and uncoordinated. Although SWIFT is acting as a coordinator in many of the groups they do not represent all the processes or entities that are involved in the industry process. For example the tax reclamations process is currently manual and incurs a significant cost burden to the financial services (FS) firm to process claims and for their client if they don't.

Further problems appear internationally with non standard corporate actions data requirements, local market rules and practices. There is a clear gap in the Corporate Actions requirements between the retail market and the wholesale market. There are problems with data and communication both inside the FS firm and externally. In short it is outside of SWIFTs control to be able to lead or direct the complete solution required to gain the objectives set in the Giovannini report.

The conference itself was unsurprisingly unable to present a solution to the corporate actions problem. Instead we received many presentations that only identified the scale of the problem. There cannot be a single solution related to any single initiative. So the many committees trying to tackle the problem have little or no chance of achieving a solution. Even if they could be directed and coordinated by SWIFT they will not succeed under the current industry set up. After all these years of wasted effort it is time to take stock and look for a new way.

My own view is that it needs a global "Group of Thirty" type of set up, to establish bite size chunk objectives, for all markets to achieve by a set date. This could for example be the standardisation of data fields and structure for a corporate action. We know that the DTCC are involved in an XBRL project and perhaps this could be extended to all markets.

I am sad to say that in Europe it may entail a new set of tough legislation detailing exactly how the Corporate Actions process should be implemented. This should include issuers, their agents and then both retail and wholesale markets.

By breaking down the Corporate Actions process we should see an escalation of solutions rather than the big bang approach and the rather uncoordinated attempts we see today. Unless all these existing committees are closed down and a radical new structure put in place, which has strong direction backed by laws and rules, with global coordination of implementation, I cannot see an early resolution to the corporate action problem. Someone said at the conference that it may take twenty years to solve at the current rate. That seems far too long when you consider the technology solutions available from software vendors in the market. This is clearly one of industry management but sadly where too often the industry fails abysmally.