Banish Your Shareholding Reporting Challenges

By Gaurav Chandra, Product Manager, Global Shareholding Disclosures, Hopeton Lindo, Director, Client Relationships, Asset Management.

Given the many shareholding reporting challenges organizations face in managing complex multi-jurisdictional regulatory requirements to accurately disclose their shareholdings, it is no wonder that those bearing the responsibility may want to wish their worries away.

No Dreamland

Challenges abound as financial institutions strive to run smooth, accurate processes to monitor and disclose when equity ownership breaches certain thresholds across the following jurisdiction-specific scenarios:

  • Accumulation of a significant shareholding in an issuer/security
  • Investment in a sensitive industry
  • Investment exposure to a company that is the subject of a takeover bid
  • Engagement in short selling

Organizations must tackle a slew of complex and nuanced challenges. They must manage an assortment of regulatory regimes and rules, consolidate often widely dispersed position data taking into account entity hierarchies, and overlay all this with the peculiarities of their operating models and fund structures. It is a juggling act where many factors influence correct monitoring calculations and disclosures, and no one wants to drop a ball.

Shareholding Reporting Challenges: The Market Data Nightmare

Shareholding Reporting Challenges: The Market Data Nightmare

In addition to these shareholding reporting challenges, organizations struggle mightily to efficiently and reliably source market data attributes for the security and issuer details that drive correct threshold calculations. They need a minimum of 22 specific market data attributes to maintain shareholding compliance. Without a consistent source of up-to-date market data that delivers these expected attributes, organizations unavoidably make mistakes, attracting unwelcome regulatory scrutiny and penalties.

Here are three examples of situations where market data inputs are critical to performing correct monitoring calculations:

  • Issuer vs. security level calculation: Market data attributes inform the threshold calculation for the denominator (total shares outstanding as determined by a combination of parameters). The required aggregation could be of a class of share or of all classes of share for an issuer. Given that investment managers often hold only one of several share classes, it may not be obvious that the total share number provided by a market data source is lacking the necessary aggregation to capture true total shares outstanding.
  • Jurisdiction test: Ownership stakes vary based on many factors including the country of incorporation, country of listing, and home member state of the issuer. Let’s consider shareholdings in Alibaba Group Holding Ltd., a Chinese multinational company that is:
    • Incorporated in the Cayman Islands, but never processed under Cayman Island rules because there is no general obligation on the holders of securities in companies listed on the Cayman Islands Stock Exchange (CSX) or incorporated in the Cayman Islands to disclose the level of their holding either to the company itself or to the CSX
    • Listed on the New York Stock Exchange (NYSE) and hence processed under US SEC rules because it is a US listed security
    • Listed on the Hong Kong Stock Exchange (SEHK) and hence processed under SFC HK rules because it is an SEHK listed security
    • Not listed on the Shanghai Stock Exchange (SSEC) or the Shenzhen Stock Exchange (SZSE) and hence not processed under China rules

    So, a Chinese multinational company incorporated in the Cayman Islands is processed under Hong Kong and US rules, but not under China or Cayman Island rules. Clearly, if the firm’s market data on Alibaba is incomplete or inaccurate, they can easily misreport without being aware until the disclosure is called into question by a regulator.

    • Takeover panel disclosure: One of the most time-sensitive disclosure requirements is around takeovers. Once it is determined that a shareholding has become the subject of a takeover, the organization must disclose immediately and daily thereafter. To monitor for such circumstances, asset managers must have access to an accurate list of current takeover transactions across the board. This dataset is not easy to find.

Banish Shareholding Disclosure Challenges With AxiomSL

AxiomSL’s Global Shareholding Disclosures (GSD) solution offers clients creative ways to eradicate market data problems and deal with data, rule, operational, and other shareholding disclosure challenges. The end-to-end, automated solution running on the ControllerView® data integrity and control platform, comprises:

  • EquityView – an extensible data dictionary that powers the solution. The data dictionary architecture enables incorporation of market and position data enriched for monitoring calculations and reporting
  • A robust rules engine underpinned by a curated rules library that enables correct application of rules across multiple jurisdictions
  • Monitoring, reporting, and analytic dashboards powered by AnalyticView that enable insight into rules and reportable shareholdings
  • Point-in-time dataset generation required for compliance and audit defense

No More Market Data Nightmare

With AxiomSL, firms can address shareholding reporting challenges and end the market data nightmare in the manner most suited to their operating models. Viable market data management approaches enabled by the solution include:

Creating a golden source using a hybrid approach: Firms can utilize the strength and flexibility of AxiomSL’s ControllerView data management platform to build a golden source of reference data, selecting provider A for designated ISINs and provider B for a distinct set of securities, etc. This approach enables firms to incorporate internal and external source types.

Connecting directly to a source via an adaptor: Organizations can also opt for a path that speeds implementation and quickly establishes a resource-efficient market data business-as-usual stance. AxiomSL’s partnership with Refinitiv, one of the world’s largest providers of financial markets data and infrastructure, enables clients who choose Refinitiv as their provider, to directly connect to DataScope Select via AxiomSL’s adaptor. This technology automatically retrieves more than 160 fields for each ISIN in the client’s position source data. These fields including issuer- and class-level outstanding shares and corresponding voting rights, country of incorporation, and home member state are mapped utilizing the solution’s EquityView data dictionary architecture. Refinitiv also provides the lower issuer threshold datasets that are prevalent in certain jurisdictions including France and Belgium, and automatically provides the difficult-to-source takeover panel (TOP) deal data for more than 15 jurisdictions.

Wishes Granted

Clearly, organizations have a great deal to consider as they grapple with nuanced shareholding reporting challenges, not least among them being the market data conundrum. These challenges demand that firms establish a solid foundation that enables astute data management. To achieve end-to-end automation and gain maximum impact on the success of your global shareholding disclosure reporting program, choose AxiomSL’s Global Shareholding Disclosures solution with its flexible options for managing market data.

Contact us here to learn more.

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