Voting has been a hot topic of conversation for many of us in recent times. As industry figures in Ireland gathered for a webinar to highlight proxy voting changes, the winner of the US election was still unclear – with contentious mud-slinging and claims of voter rigging being the order of the day. Although Ireland’s financial industry is far more civilized than US politics, some of the same discussion points came up with the need for a simplified voting chain with inbuilt transparency and a robust series of checks and balances meeting with universal approval.  

As many of you will be aware, the fallout from Brexit has necessitated a move from CREST towards a new Euroclear Bank system. As with any new rollout there is likely to be confusion and a lack of clarity around certain areas. This webinar gave the opportunity for key industry figures to impart factual knowledge about the new system and embodied the aims of improving communication between investors and issuers.

Andy Callow of Computershare took us through the current market structure and the changes that are on the horizon.  He reflected upon the fact that today’s market has intermediary involvement and is fraught by friction and excessive costs in the end–to–end process.  

When it comes to issuer communications, the ultimate aim has to be to connect the issuers and investors as efficiently as possible.
“Andy Callow – Senior Manager, Global Capital Markets, Computershare”

He highlighted the fact that currently CREST holders can attend and vote at the meeting currently and can appoint end investors as corporate representatives to attend on the day and vote in-person. This gives issuers the opportunity to engage investors after the proxy appointment deadline and change their vote if necessary. 

Under the new system CREST holders cannot be automatically transitioned to Euroclear Bank. The solution to this is that for pre-migration positions to be represented in Euroclear by the CREST international nominee. As a result of this, two additional nominee layers have been added to the voting chain between the issuer and underlying investors. These extra layers of intermediation result in additional friction and a further reduction in transparency for issuers.  

Moreover, there are concerns that post-migration there will be increased levels of intermediation, less time for decision making by end investors, engagement challenges brought about by later receipt of votes and an inbuilt inability for voters to change their vote up to and at the close of meetings.  

From an issuers perspective its really, really important that systems are counting a lot of votes. There’s no point pushing for a system where very few people are using it. Proxymity is owned and run by some major investors in the market.
“Michael Kempe – Business Development Manager, Proxymity”

All of this shows that a new approach is desperately needed. Issuers today will generate the announcement and pass it down through layers until it reaches the end investor. Each step creates friction, Chinese whispers and delays. Compared to today the two new layers will result in a longer process for announcements to flow through the voting chain. As Link’s Graham Butcher highlighted during the webinar, the current model offers poor governance as it isn’t designed in a way that allows transparency and effective communication between affected parties. 

This is where Proxymity comes in. It is able to assist in the Post CSD migration by offering direct communication between the issuer and their agents, and their investors. Proxymity provides an easier and more transparent system for both issuers and investors to manage the voting process. Unlike other systems it’s been purpose built and simplifies the complex voting chain by cutting out unnecessary intermediaries in the voting chain. 

A solution to the Irish market that will work alongside the Euroclear Bank system and that is compliant to SRD-II standards is desperately needed. Proxymity is that system.