Universal and standardised messaging needs to be introduced to automate and streamline corporate action processing on a global level, according to a white paper released by The Association of Global Custodians (AGC).
Formed in 1997 the AGC is an informal group of ten major global custody banks.
The Association white paper highlights costs and handling problems encountered by banks and investors when non-uniform or paper-based methods are used for corporate actions and also identifies action steps to unify messaging protocols and automate communications globally at every stage.
The AGC says its research found that "progressive change at every stage of the communications stream is urgently necessary".
It has called on member banks to demonstrate clear leadership by using the ISO 15022 messaging standard for all corporate action communications.
The standard still is not universally employed across the communications chain, says the paper, and this shortcoming is most evident at the beginning stage of an event, where non-standard and paper-based communications are often used. In turn, these messages are then subject to non-uniform interpretation 'downstream'.
The paper also calls for other organisations – such as issuers and servicing agents - to introduce universal use of electronic facilities and standardised messaging protocols.
Andrew Osborne, SVP at Northern Trust, and chair of the task force that developed the white paper, says previous moves to promote automation and standardisation in the "very troubling area of securities handling" have often focused on isolated problems.
"We thought it would be most useful to the industry to set out in one place a summary of the key problems that exist in corporate action messaging and to identify specific recommended steps to be taken by each of the various constituencies involved in the communications stream," says Osborne.
The research is available on the ACG's Web site and is also being made available through Swift.
Max Mansur, solutions manager for custodian services at Swift's securities industry division, says the ACG's recommendations "underscore the important benefits of automation and standardisation".
"The white paper also reinforces the need to work together actively in reaching out to the originators in the corporate actions cycle," adds Mansur.
You can read the AGC's white paper here:Download the document now 102.5 kb (PDF File)