HSBC and Proxymity
HSBC’s Joe Mernagh and Proxymity’s Nigel Little talk to Jenna Lomax about their new partnership, SRD II and what’s in store for both institutions in the coming months
HSBC has selected Proxymity’s Shareholder ID solution in an effort to meet the compliance requirements for the EU’s Shareholder Rights Directive (SRD II). Why did HSBC choose Proxymity in this instance? What did Proxymity offer that other competitors perhaps did not?
Joe Mernagh: HSBC has been processing shareholder identification requests in compliance with the SRD II since September 2020. HSBC developed an in-house vendor solution that met the requirements, but by moving to Proxymity, HSBC has since been able to gain more operational efficiency due to outsourcing to a disclosure specialist.
HSBC has greater flexibility in regards to the forwarding of the shareholder identification request to intermediary clients, and benefits from what we hope will become industry standard management information and reporting.
As an investor, it is important to have a strategic partner in Proxymity. The goal is to utilise Proxymity’s full best-in-class suite of products and services wherever applicable to HSBC.
Capital Market Union’s ‘Action 12: Facilitating shareholder engagement’ talks about the evolving nature of SRD II and the use of new technologies to get rid of paper-based prototypes, which are still so prevalent in Europe. There is an active push from the European Commission to move our industry toward platforms such as Proxymity — moving away from everything paper-based.
How will Proxymity’s Shareholder ID solution make a significant change to HSBC’s SRD II compliance effort?
Mernagh: The only true SWIFT message format that allows clients full compliance is the ISO 20022 series of messages. HSBC has developed the ability to receive, respond and import the various ISO 20022 messages created for the purposes of shareholder identification or SRD II.
However, it was evident in September 2020, and even now, that some intermediaries in the chain were not, or are still not, able to comply with the ISO 20022 messaging standards. Some intermediaries have continued to utilise the old ISO 15022 messaging type to forward requests to HSBC.
In addition, not all of our intermediary clients at HSBC have the ability to consume the new ISO 20022 messages.
By using Proxymity, HSBC has the ability to support both formats, as well as email.
Through this, we are able to offer our intermediary clients the best chance of compliance possible.
The solution has so far had a successful rollout in the UK and Europe, with plans to introduce the solution to clients in Asia very soon. What refinements to the service have been necessary to meet the proxy requirements of Asian markets?
Mernagh: In terms of the product offering, the service itself did not need any refinements at all. HSBC, like most Tier 1 banks, has a robust third-party vendor management process, and of course, we provide custody services to a global client base.
It is important to note that while the use of cloud computing has become more common globally, there are still some domestic markets that require deeper scrutiny with cloud-based technology, and where local regulatory approval is required to roll out a service with that cloud element.
We are working through these approvals and once we have them all, we aim to go live in Asia as well.
HSBC also plans to deploy Proxymity’s Vote Connect proxy voting solution later this year. How will this fit into, and improve, HSBC’s current meeting announcements and voting processes?
Mernagh: Once HSBC has the full end-to-end deployment in place, our clients will benefit.
Currently, instant message meeting notifications or general meetings to investors can be up to 96 hours lost or stolen.
These artificial deadlines will be replaced by market deadlines, giving more time for investors to make those decisions on those agenda items and true confirmation vote will be received as standard.
In the first instance we will connect to markets, where Proxymity has a complete coverage and a high level of issuer connectivity.
Once the value chain is aligned — essentially once the issuers, the sub-custodians and the custodians are all connected — then these benefits can be fully realised.
Nigel Little: HSBC’s goals will align with their markets, but every market has a different nuance. Part of our product roadmap at Proxymity is to expand on our market coverage and our product offering.
The more we do that, and the more issuers we get on board, the more benefit there is for HSBC and also other intermediary clients out there. We are proud of the amount of progress we have made in Europe so far and continue to explore new markets.
How do you anticipate the partnership will progress over the next year to 18 months?
Mernagh: In addition to being a user of Proxymity’s services, we are also an investor in the company.
We are continually collaborating with the Proxymity team on the strategic roadmap covering new markets, products and services, as well as leveraging HSBC’s network with Proxymity’s digital capabilities.
What else has HSBC got in the pipeline for 2022 in terms of product management?
Mernagh: As always in the custody world, there are numerous market changes in revenue rollouts. India’s recent move to T+1, Finland’s Trace Project and the Uncleared Margin Rules are all key initiatives that we will be working on in 2022.
We recently launched Iceland as a new market in our network. We also have the emergence of digital assets coming down the road, as well as the further reduction of settlement cycles.
The vision of our global product is to provide local market insight to clients, connecting their growth and investment ambitions with future-proof digital data solutions.
An example of that is the further rollout of our digital gold capabilities.
Moving data servicing into Europe, along with the continued provision of multiple digital channels, such as application programming interfaces or evolved platform chat bots, will enable clients to choose how they connect towards providing rich data to enable fees automation on their side.
Our continued objective is to deliver a product proposition across asset classes while supporting market developments. This objective covers both delivery in 2022 and the future developments within the China market, which are always evolving.
What can we expect from Proxymity in developing its proxy and investor communications solutions and extending its market coverage?
Little: For shareholder identification, we are primarily focused on having intermediaries, such as HSBC, utilising our solutions. But we are also working on a secondary, semi-automated solution, Shareholder ID Access, designed for smaller Tier 2 and Tier 3 intermediaries.
In the industry, we are still finding a lot of disclosure responses sent by unsecure emails, which is really not a good thing for any semi-automated solutions to be doing. With this in mind, we are going to make our Shareholder ID Access solution available to smaller intermediaries who wish to move away from that.
On the proxy voting side, we continue to onboard new issuers globally. On the intermediary side, we want to continue to onboard Tier 1 banks such as HSBC, as well as investor clients on to the Proxymity Vote Connect platform.
To do that we need to keep increasing our market coverage.
Partnering with HSBC has given us the opportunity to evolve — with HSBC we have more weight to enable the development of some of the legacy markets in Europe.
There are many solutions in Europe that still need to recognise the benefits and move into the digital world, which will of course go beyond 2022.
