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DTCC Connection

by Edward C. Kelleher | March 22, 2013

Whenever a proxy-related event such as a shareholder meeting is announced by an issuer, DTCC’s subsidiary, The Depository Trust Company (DTC), goes to work compiling what the industry calls an omnibus proxy – the proxy that assigns the voting rights of stock held by DTC in its nominee name, Cede & Co., to the corresponding DTCC client.

Omnibus Proxy Goes Electronic
Susan Cosgrove, DTCC Managing Director and General Manager, Settlement and Asset Services

DTCC compiles hefty computer printouts with detailed share and contact information for each bank, broker/dealer and other shareholders. These packages are then mailed to the issuer so they can prepare for the meeting.

Proxies by the thousands

This happened about 16,000 times each year, which is the number of omnibus proxies that DTCC prepared annually – all with the accompanying paper, postage and labor that each requires. That is, until January 24, 2013, when DTCC launched its first electronic omnibus proxies for 11 different firms representing biotech, energy, software and other industries.

Now with just a click on a DTCC link, issuers can securely access their complete omnibus proxy report, listing DTCC clients, the number of shares they hold and assigning voting rights to each. At the same time, DTCC notifies its clients about their position in the issue and the number of shares they are entitled to vote.

Speed and accuracy

“We’ve streamlined and automated what was a time-consuming, manual process and helped reduce costs and inefficiencies along the way,” said Susan Cosgrove, DTCC Managing Director and General Manager, Settlement and Asset Services. ‘The electronic omnibus provides the proxy information quickly and economically, and helps ensure that it goes to the correct individuals at the issuer.”

DTCC began working on the electronic omnibus in 2012 and, despite the interruption that came with Superstorm Sandy, completed testing of the process by January 2013. “We wanted very much to have the electronic omnibus up and running as we moved into 2013, especially as we approached the busy proxy months – March through June – where DTCC handles up to 100 omnibus proxies a day.”

DTCC relied on input from various industry segments, including both issuers and transfer agents, when developing the electronic proxy.

“We worked with DTCC in the months leading up to the January launch of the electronic omnibus proxy and are excited about the benefits it offers issuers and their service providers,” said a senior manager at one of the leading transfer agents. He added that the electronic proxy gives issuers the ability to retrieve time-critical omnibus information in an efficient and expedited manner and reduces the risks associated with hard copy mail.

Gone astray

In the past, hard-copy proxies were mailed to designated contacts at each issuer.

In some cases, the designated individuals had left the company and the omnibus proxy went astray, sat undelivered in the firm’s mailroom or was returned as undeliverable to DTCC, but often long past the due date. When one of these scenarios occurred, DTCC would receive urgent calls from the issuer asking where the omnibus proxy was.

With the electronic proxy, if the designated contact has left the issuer, the email advising that contact of the availability of their electronic omnibus proxy is immediately returned as undeliverable, and DTCC can reach out to the issuer to find out who the proper recipient should be.

To date, DTCC clients have responded positively to the new omnibus proxy, boosting efficiencies for themselves and DTCC – more than 55% of the 500 omnibus proxies created in the four weeks since the launch have been in electronic format. DTCC will continue to reach out to issuers to promote the benefits associated with this new web feature.