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Securities Technology Monitor, June 14, 2011 article


SIFMA TECH 2011: Transfer Agency Model is Outdated, Broadridge Contends

June 14, 2011
Chris Kentouris

Broadridge Financial may have made its mark as the world's largest proxy distribution and voting firm for beneficial shareholders, but that won't stop it from quickly expanding into the transfer agency business for registered shareholders.

And not the way current shareholder recordkeepers do it. "Our transfer agency model is a disruptive one," asserted Richard Daly, chief executive of Broadridge in a question and answer session following his speech at the Securities Industry and Financial Market Association's technology event in New York on Tuesday morning. "The ghost transfer agents are fighting is street ownership."

Transfer agents are hired by corporations to service the accounts of registered shareholders -- those who hold their shares in their own name on the books of the transfer agent. Among their functions: to issue and cancel share certificates, mail dividend checks, respond to customer calls and mail statements. With more investors choosing to hold their accounts in the name of their bank or brokerage firm, transfer agents have been faced with dwindling revenues and profits.

"We want to talk to issuers about servicing all of their shareholders so they can forget about having to pay those annual fees," said Daly. Broadridge is hired by banks and brokerage firms to mail out proxy materials and tabulate votes on behalf of beneficial shareholders. The fees it can charge U.S. corporations are in large part capped by guidelines set by the New York Stock Exchange. Transfer agents, by contrast, charge issuers annual fees to service each registered account including sending proxy materials to registered shareholders. In some cases, the fees are bundled and are not lowered even if the issuer decides to use Broadridge to mail its proxy materials to registered shareholders.

Broadridge wants those issuers to move over their registered accounts to Broadridge as well. And Broadridge is betting that those accounts will eventually switch over to Street-name ownership. "I can guarantee they will never have physical certificates," said Daly, who touted his firm's sophisticated technology as a key selling point. That technology includes proxy voting through mobile phones, electronic shareholder meetings and electronic shareholder forums.

"There is no reason why issuers should spend money running shareholder meetings in physical locations," said Daly. "It's a matter of recognizing the inefficiencies of the current process."

Broadridge's acquisition of transfer agency StockTrans in March gave it control of the transfer agency work for 200 U.S. corporations and Computershare's proposed takeover of Bank of New York Mellon's shareholder services unit for $550 million announced in late April could pave the way for additional business from potentially disgruntled BNY Mellon clients.


©2011 Securities Technology Monitor and SourceMedia, Inc.




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