by Edward C. Kellehe
Companies now have the opportunity to simplify, streamline and bring new clarity to the laborious and risk-prone processing of corporate actions.
With the recently published taxonomy for corporate actions, issuers can electronically tag their corporate actions data in XBRL, ensuring that everyone affected by the corporate action receives the same information. The new capability will deliver processing efficiencies along with risk and cost reductions. It will also streamline and speed up communications between issuers and their investors for the reporting of corporate actions announcements and events.
Corporate actions are publicly traded company events such as mergers, dividends, stock splits and other events that may require an investor or financial shareholder to take an action.
Current corporate actions processing requires issuers to publish detailed documents describing the event such as news releases and regulatory filings. Financial intermediaries then interpret and re-key important data from these documents before passing key information on to shareholders.
The advance in processing is attributable to the recent completion of the XBRL Corporate Actions Taxonomy, which is now available for issuer use. The taxonomy is a collection of data tags that align with elements of the ISO 20022 global corporate actions standard. It standardizes free-form text into electronic documents issuers can create to ensure written words hold the same meaning for all parties throughout the corporate actions lifecycle. DTCC, SWIFT and XBRL US collaborated to develop the taxonomy, which covers 94 types of corporate action events.
Meeting market needs
“The goal all along has been to make it easy and inexpensive for issuers to identify and tag key data as they prepare documents for a corporate action,” said Donald F. Donahue, DTCC president and CEO. “Completion of the taxonomy represents a significant milestone in this undertaking and moves us a step closer to straight-through processing.”
Citi is currently working with XBRL US on a pilot program to demonstrate the cost savings and benefits of using XBRL in the corporate actions processing of dividend payment announcements for American Depositary Receipts. XBRL US revised the taxonomy based on input from the industry and Citi’s technology group on various corporate action notices.
The pilot will help determine the feasibility of moving to XBRL processing and its success in transmitting information from issuer to financial intermediary and finally to the shareholder. A total of 40 XBRL-formatted dividend announcements have been created through that pilot program. “XBRL for Corporate Actions provides a streamlined process that can help mitigate operational risk while reducing costs, and we feel that this can be a very valuable tool for our clients,” said Alan Smith, managing director, Securities and Fund Services, Citi.
DTCC has launched a separate pilot program over SWIFT and DTCC’s SMART network to test the new ISO 20022 corporate action messages. The firms involved in the pilot are BNY Mellon, Brown Brothers Harriman, JPMorgan Chase and National Financial Services LLC.
This pilot, which runs through November 2011, is testing all event types for corporate actions announcements including dividends, principal and income, redemptions and reorganization events such as tender offers, stock splits and warrants.
“The market demands greater clarity of information,” said Chris Church, chief executive, Americas, and Global Head of Securities, SWIFT. “XBRL, coupled with ISO 20022, will enable a seamless flow of information across the corporate actions lifecycle resulting in increased transparency, lower costs, less risk and better informed decisions by investors. The key to success is issuer adoption, but through awareness campaigns and industry support, we hope to move the issuer community in that direction.” @
[To read a business case describing the impact of XBRL on the corporate actions process, visit www.XBRL.US, Learn About XBRL, Case Studies. To view or download the Corporate Actions Taxonomy, visit www.XBRL.US, Taxonomies, Corporate Actions Taxonomy 2011.]