Learning from the past and preparing for the future
The Shareholder Services Association (SSA) held its annual conference in Chicago on July 19-22, commemorating 70 years as a trusted resource for issuers, transfer agents and service providers.
A show of hands during a panel on dematerialization revealed that very few issuer attendees have turned away completely from physical stock certificates. Reporting on changes the Depository Trust & Clearing Corporation (DTCC) has made to prepare for shortening the trade settlement cycle to T+2 from T+3 days by mid-September 2017, Jon Ciciola, a director and product manager at DTCC, said the technical design is underway and testing is expected to start in the first quarter of 2017.
A regulatory update from representatives of the SEC, Nasdaq and the NYSE raised the question of whether the three-day protect period that covers investors until they can deliver securities purchased for a tender offer would be changed to match the shorter settlement cycle. The NYSE isn’t requiring companies to guarantee the protect period available for T+2, but Joe Conte, head of the NYSE’s corporate actions group, acknowledged the need to prepare for it given people’s unwillingness to buy a security that can’t be delivered.
‘If you know you’re going to have a corporate action that will have a protect period around September 2017, make sure it’s generic enough to be adaptable to T+2 so that the effective date is after the industry changes,’ advised Katie Sevcik, head of Wells Fargo’s shareholder services operations.
In another session, representatives from Coca-Cola, McDonald’s and Aflac shared their experiences switching from dividend reinvestment plans (Drips) to direct stock purchase plans (DSPPs) in response to investors’ waning interest in Drips due to escalating fees. Karen Danielson of Coca-Cola said 70 percent of Coke’s shareholders now participate in its DSPP.
Tech talk
Among the topics broached by a cyber-security panel was the increase in regulatory scrutiny under the new EU-US Privacy Shield, which the European Union and US Department of Commerce adopted in July. The new framework allows for regular updates and reviews of participating companies to ensure they are following rules, with the threats of sanctions and removal from the list for non-compliance.
Suggested best practices to minimize the possibility of a cyber-attack include establishing multi-factor authentication systems to access company resources. These would require employees to provide three distinct forms of identification in the form of something they know, a physical item they have such as a token and something attesting to who they are (typically a biometric such as a fingerprint). Multi-factor authentication isn’t foolproof, one panelist warned: he cited the Zeus Trojan, a form of malware that spoofs authentication tokens and appears to slow down a computer system while actually launching a transaction like a wire transfer on the back end, asking for a token again after a delay.
A session with Debbie Zumoff, head of Keane’s consulting & advisory services team, reviewed developments in unclaimed property over the past year and explored next steps to be taken. Topics discussed included the Uniform Law Commission’s recent approval of the Revised Uniform Unclaimed Property Act that have been three years in the making. Among the revisions is a statute of limitations that prevents the unclaimed property administrator from bringing an action to enforce the act because of reporting, payment or delivery of property five years after the filing of a non-fraudulent report and a 10-year record retention period after an unclaimed property report was filed or should have been filed.
The session also outlined recent changes to the California State Controller’s Office escheatment policy that have raised concerns among industry experts, including a new interpretation of a section of the state’s Code of Civil Procedure that says a dormancy period can be triggered even without a formal return mail requirement. That could signal a shift to a ‘pure inactivity dormancy standard’ for California.
