The volume of voluntary corporate actions has grown explosively in recent years. In particular, increased volume in the voluntary corporate actions arena has subjected broker-dealers to additional risk and potential cost. For example, stock buybacks reached a record $1T in 2018*.
To help address this situation, we created MIC ReOrg Manager. This important new solution offers brokers an opportunity for the first time to automate the risk-prone manual process of capturing voluntary corporate action elections.
Challenges Faced by Brokers
Public companies – from IPO to enterprise – are adopting newer methods of finance, expansion and/or divestiture in a world of evolving, often disruptive, business practices and an accelerating global competitive environment. Corporate reorganization, restructuring, M&As and attendant rights issues are factors of daily life for today’s investors.
The operational challenge of managing these events is, more than ever, complicating life for brokers. They must approve events for distribution, get them to the correct investor, capture the elections and enter them into their securities processing system. Advisors receive a lot of election offers and struggle to keep track of when they expire and how they voted in the past.
Why MIC ReOrg Manager Adds Real Value
Many technologies have been applied to the complex proxy and annual meeting investor engagement process, including our robust MIC solutions suite. But until MIC ReOrg Manager, automation and technology have not touched the capture of voluntary corporate action elections -- optional dividends, rights issues, tender offers, stock buybacks.
The traditional manual processes that rely on paper election forms, email, and spreadsheets are no longer sufficient. Increasingly, these processes are keeping professionals charged with managing corporate action elections awake at night and for good reason. COOs, heads of corporate actions, directors of client experience and operations staff understand that manual election capture is error-prone and costly.
Rekeying election data into the firm’s securities processing system is the riskiest activity in the chain. For instance, inadvertently plugging in 10 percent of an investor’s shares to be voted for a rights proposal when that investor’s election was actually 100 percent can cost the firm a lot of money. That’s because when the investor incurs a loss, the broker may need to reimburse the shareholder for that loss to preserve the relationship. Multiply this by hundreds, or even thousands, of potential errors and investor losses and the value of eliminating human error through automation becomes immediately obvious.
Paper election forms and email are additional sources of time-consuming mistakes because they don’t have fixed data fields, enabling an advisor or investor to enter invalid elections. For instance, advisors may be required to vote their positions in blocks of 10 but they send back an election in blocks of five. In such a case the broker might either disregard the advisor’s elections or, more likely, chase him/her down to correct the error. Time is money – in more ways than one.
With manual systems, brokers have no comprehensive way of monitoring the chaotic manual process. Brokers can’t tell which advisors have voted and which haven’t, which offers are coming up next and which are due to expire – or which have already expired without capturing elections.
How ReOrg Manager helps:
- Reduces financial losses by automating offer distribution, election capture and entry into the broker’s securities processing system.
- Applies election, price and group constraints to online offers. Reducing advisor options decreases invalid elections and the time Operations spends correcting them.
- Centrally manages offers and elections, letting advisors spend the time saved on working with existing investors and connecting with new prospects.
- Provides reports covering all election data sent from its database to the broker’s securities processing system, including elections that experienced an error during transmission from ReOrg to the securities processing system and account processing exceptions.
Today, it’s more important than ever to automate the voluntary corporate action election capture process and Mediant is pleased to have delivered the solution to do so and reduce financial and operational risk. To learn more about MIC ReOrg Manager or to arrange a demo for your team, please contact Andi Costa.
*Source: Goldman Sachs