The annual B.I.S.S. Research benchmarking report which reviews the corporate actions market has found that many large financial institutions are suffering from a chronic lack of experienced corporate actions staff. Firms are loaded with temporary employees to try and plug the gap with quantity, when quality is what’s required. The rates for experienced corporate actions staff has increased by over 40% over the last two years and has been driving many of the best corporate actions professionals onto the temporary job market. The result of this shift is a narrowing of permanent corporate actions employees at a supervisory level and a complete lack of clerical staff with the necessary industry knowledge of corporate actions processing.

Senior corporate actions professionals are at a premium, which has created a strong market for the head hunters. Financial services companies have to pay increased salaries to try and keep their best people but this short term measure is not preventing the long term trend of defections. One senior investment banker disclosed that they have had six new managers in the corporate actions department over the last three years. This is causing a destabilisation of the department and unrest with employees.

The corporate actions department is where most manual procedures still exist in the majority of financial services firms. Despite an increase in sales of corporate action systems over the last 5 years many firms still insist on maintaining their legacy functionality and plugging the gap with people. The reliance on inexperienced staff to plug gaps in corporate actions systems is opening up the firms and their clients to risks of financial loss.

Regulators appear to be in as short supply of corporate actions processing knowledge as the firms they are regulating. Too many firms are passed through regulatory control points, which in fact, are assisting firms to maintain out of date systems and practices.

There are training and examination services offered in the UK by the Securities and Investment Institute but even these welcome attempts to increase the quality of corporate actions staff is missing vital training concerning the use of technology and systems within the corporate data supply chain as well as broad industry understanding of the complete process.

The current economic crisis is unlikely to have contributed in creating an environment where these long term weaknesses in corporate actions will be dealt with let alone encourage the much needed investment in new technology. Financial services firms and regulators need to establish an action plan to resolve the long term problem of corporate actions people and systems.

Firstly to ensure that training and examinations should be set at the correct level to produce highly educated staff with broad industry knowledge of corporate actions. Importantly the regulators must be first in line to take these exams.

Secondly there should be a plan to retain employees within the corporate actions department and investment by financial services firms in cross training utilising better the knowledge and understanding of their senior staff.

Thirdly the financial services firms should be compelled to modify their corporate actions systems or invest in new technology where necessary to help reduce risk.

By Gary Wright