VOLUME 4 No. 21 - 2007 ISJNEWS.

COM
£ 25 - UK, ROW
$ 45 - America
INVESTOR EUR 35 - EMEA

S ERVICES
JOURNAL

PIECING IT
TOGETHER
EVOLVING EUROPE

SPECIAL REPORT - CANADA ITALIAN STALLION - CONSOLIDATION

RBC DEXIA - OUTSOURCING FRED FRANCIS RETIREMENT - SEC LENDING
ASIA PACIFIC - REGIONAL STANDARDS LUXEMBOURG - REGIONAL PROFILE
TARGET2 - SECURITIES STANDARD ACTION - CORPORATE ACTIONS

THE GLOBAL SECURITIES SERVICES INDUSTRY JOURNAL

Global Reach_Client Focus (GSS) 1 1 4/9/2007 9:51:54 AM
ISJ21 1-16 FINAL 1/5/07 5:28 pm Page 1

HARD COPY

INVESTOR Ever Evolving Europe

S ERVICES It has been an exciting twelve months in
Europe.
JOURNAL New and pending rules, such as Basel II
and the Markets in Financial Instruments
Directive (MiFID) place an onus on the
VOL 4 No. 21 - 2007 investor services provider to have enough
capital and the systems to report the
details of every transaction, while Target 2
looks to break down the barriers that exist
between different European parties for
clearing and settlement. The issue of safety
and accountability are at the core of most
investment policies and financial regula-
tors continue to exert their influence to
ensure investors’ interests are protected.
This month sees the latest instalment in
our Market Guide series with a focus
European Custody, and this issue of ISJ
follows suit with Europe as its focal
theme.
Focussing on consolidation, Brian
Bollen analyses the recent takeover moves
seen in Italy allowing the country to host
the Eurozones third and fourth largest
banks. Brian looks at the effects consoli-
dation is having on Italian custodians and
to what extent this is stimulating or sti-
fling growth in the market.
Recent changes in legislation by the
Luxembourg Parliament concerning collec-
tive investment schemes reserved for
institutional investors will potentially open
the Luxembourg market further. Alison
Ebbage looks at the merits of the new
Specialised Investment Funds law (SIF)
and what affect this is likely to have on the
market.
With the increasing importance of risk
management and investors ability to take
advantage of cross-border market integra-
tion in the euro-zone, Giles Turner looks
at prospects and challenges for the clear-
ing and settlement of securities and what
affect initiatives such as Target 2 securities
will have.
On the other side of the globe Andrew
Warburton analyses to what extent back
office services in the Pacific Rim countries
are regulated and what further work needs
to be done in the quest for transparency
and regulated standards.
In this months special report, which
focuses on Canada, number of partici-
pants in the Canadian market give an
update on the market and the outlook for
2007.
With issues around the data used in risk
calculations and the ever-blurring bound-
aries between the data used in the front,
middle and back office, ISJs panel discus-
sion this month looks at the importance
of data services in the global securities
industry and how good, accurate data is
imperative for back office processes such
as corporate actions.
Finally, we also have our regular basket
of delectable goods for you to sample with
our personal profile looking at the retire-
ment of Fred Francis from RBC Dexia and
the securities lending industry, the Analyse
This section covering the legal side of
financial services, and last but no means
least, Rising Stars.
Alan Duerden

Editor: Alan Duerden (Alan.Duerden@ISJforum.com)

Reporters: Giles Turner (Giles.Turner@ISJforum.com), Andrew Warburton (Andrew@ISJforum.com)
PPA MAGAZINE AWARDS Contributing Editor: Brian Bollen. Contributors: Christine Senior, Alison Ebbage
PUBLISHER OF THE YEAR
HIGHLY COMMENDED Account Managers: Ben Katzler (Ben.Katzler@ISJforum.com),
MEMBER - PERIODICAL PUBLISHERS ASSOCIATION Monique Theart (Monique.Theart@ISJforum.com)
Directory Sales: Daniel Ryder (Daniel@ISJforum.com)

General Manager: Kevin Lawrence (Kevin@ISJforum.com)

Systems Manager: Jon Gunnarsson (Jon@ISJforum.com)
Sales Administration: Leya Clayton (Leya@ISJforum.com)

TOTAL NET CIRCULATION 11,188 Publisher: Justin Lawson (Justin.Lawson@ISJforum.com) investor

Analysis for the Audit Issue Vol 3, No 14 distributed June 2006. Managing Partner: Mark Latham (Mark.Latham@ISJforum.com) intelligence partnership
Source: AUDIT BUREAU OF CIRCULATIONS, www.abc.org.uk
INVESTOR SERVICES JOURNAL
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ISJ21 1-16 FINAL 2/5/07 2:04 pm Page 2

CONTENTS

VOL 4 No. 21 - 2007

Special Report 54 Going but not forgotten
18 Canada - RBC Dexia’s
- A number of industry Fred Francis on his
participants give an retirement from the
update on the market industry
and the 2007 outlook.
Regulars
58 Events - Fund Forum
Infrastructure
26 Analyse This 62 Disaster Recovery
- Leagal issues
64 Rising Stars
This Months ISJ
30 Asia Pacific
Has a distinctly 65 Mandates 10 News Analysis
European theme, - Questions have been - Changing Faces
looking at Italy, asked of the state of
Luxembourg and 66 PeopleMoves
Target 2. accounting standards.

ISJ Directory
Custody
1 Hard Copy 69 The Directory of
34 Italian Stallion
- Editors Letter Securities
- With recent
4 Letters Services Providers
consolidation moves in
Dear Sir...
the country is Italy on
Hindsight/Foresight
News the assault?
80 Fortis looks back into
6 Global Snapshots
the future
- Roundup of securities Technology
services headlines 38 Panel Discussion
from ISJforum.com - The evolving and 34 Italian Stallion
changing landscape of - Consolidation
10 News Analysis corporate actions
- Reading between the
lines. 46 Standard Action
- Changing standards
Funds in corporate actions.
12 Domicile Reports
- Jersey, Ireland and Sec Lending
the Isle of Man give us 50 Reaching Capacity
the lowdown. - Market growth

14 Luxembourg 52 RBC Dexia

- What does the future - Outsourcing
hold under the newly 29 Walking the line 56 Fred Francis
passed SIF law? - Asia Pacific - Going but not forgotten

2 INVESTOR SERVICES JOURNAL

ISJ21 1-16 FINAL 1/5/07 5:29 pm Page 3

2
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Getting you there.

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Merchant & Private Banking

ISJ21 1-16 FINAL 1/5/07 5:29 pm Page 4

LETTERS TO THE EDITOR

If you are affected by,

or have an opinion
on, any aspect of guidance, global investment banks are grail across all sectors of the global finan-
investor services
now actively soliciting CSA business to cial markets, and never before has so
please write to us...
attract order flow. Yet with this trend, much attention been afforded to how effi-
Alan.Duerden@ISJforum.com there is a broad concern from the invest- ciently trades are processed.
ment management community that the However the problem is that all too often
Commission Sharing Arrangements investment banks may be unfairly STP is not actually straight-through. eflow
Investors thrive when portfolio managers advantaged from the information that regularly sees that STP stands for Straight
have access to detailed market data, this new business line brings. An invest- To Paper, where part of a so-called STP
industry experts and customized research ment manager will pay a premium price process is automated but fails to link to
to make informed investment decisions. for research, partly because of its exclu- subsequent processes systemically. True
Increasingly, investors are relying sivity. Naturally, investment managers hands-free STP should mean no human
more on independent, bespoke research do not want to reveal the identity of intervention whatsoever from trade exe-
and less on the traditional bundled those analysts and consultants they rate cution through to settlement.
research widely distributed by global most highly. Surprisingly, even today many trading
investment banks. As ever, the market offers solutions. strategies are limited by what back office
systems can actually process, meaning
Increasingly, investors are relying more on organisations can find themselves unable
independent, bespoke research and less on to trade certain products until suitable sys-
tems have been implemented. With a
the traditional bundled research widely hands-free philosophy, institutions can
distributed by global investment banks. trade and process according to market
drivers rather than being hampered by
In 2005 the FSA, (as did the SEC in the The need to maintain confidentiality in inadequate processes. And as mentioned in
United States), made clear that all research procurement is met by firms the article, they can reap the cost benefits
research, whether from investment banks offering specialist commission manage- of increased efficiency at the same time.
or independent sources, should be treat- ment solutions such as BNY ConvergEx’s Exception processing is the key to true
ed equally, the FSA further stated that Westminster Research Associates. hands-free STP. It must be fully automat-
Commission Sharing Arrangements Additionally, firms like Code Red and ed and integrated in the trade process
(CSAs) would offer a suitable payment Tamale now offer research valuation and flow; exceptions must be detected as soon
mechanism. Such regulatory approval on management tools to portfolio managers as they arise, and must be viewable to
both sides of the Atlantic has paved the and analysts. operators who can repair and redirect
way for analysts to start up new consul- Increased competition among execu- them without intervening. Only by pre-
tancies with confidence. tion and research products, along with senting the maximum trade detail and his-
CSAs offer the new standard method transparent pricing, efficient payment tory available can hands-free resolution
for payment of all research, including mechanisms and commission manage- take place. And by having all trade infor-
alternative independent, third party ment solutions clearly benefit both mation stored in one easily accessible
research. Using CSAs, investors can now investment managers and their clients. facility, firms will also be able to prove best
trade at preferred brokers and ask those John D. Meserve execution far more easily than at present,
brokers to share a portion of their trading President, and satisfy directives such as MiFID.
commissions with third party research Westminster Research Associates The article raised some interesting
providers. points, but eflow believes that the heart of
This new pricing mechanism has What is STP... really? the problem is that the market is not
helped boutique research providers and I read with interest your article “STPlease” demanding enough and vendors’ pricing
consultancies to compete more effective- in ISJ Vol 20, which highlighted the many and tariff structures aren’t currently flexi-
ly with investment banks, by allowing disparities in the straight-through-pro- ble enough to support the full range of
investors to more accurately quantify the cessing (STP) arena. The article rightly institutions’ requirements. The benefits of
cost and value of all research products. highlighted how some firms are still pro- true hands-free STP provides institutions
Additionally, it has helped execution-
only brokers such as those providing Even amongst tier one banks, STP levels for
electronic and agency brokerage and
crossing networks, to compete more structured products processing can be low
effectively with investment banks. This cessing their trades manually, and how with the opportunity to change their oper-
enhanced level of competition in both even amongst tier one banks, STP levels ations for the better and be more
execution and research is surely benefi- for derivatives and structured products demanding with their suppliers in order
cial to the long-term interests of processing can be low. to achieve their strategic goals.
investors. True hands-free STP and fully automat- Marsha Parker
As expected, with the new regulatory ed exception processing remains the holy CEO, eflow.

4 INVESTOR SERVICES JOURNAL

ISJ21 1-16 FINAL 1/5/07 5:30 pm
NEWS
FUNDS &
ADMINISTRATION
London - Aberdeen Asset
Management PLC, the UK-
listed global asset manager,
has announced that it has
entered into an agreement
with Deutsche Australia
Limited to acquire certain
Australian fund management
businesses. The cash consid-
eration for the 'Australian
Target Businesses' is not
expected to exceed AU$148
million. The consideration is
subject to adjustment in
respect of revenues generat-
ed from the Australian Target
Businesses, and net asset
value, at or shortly after com-
pletion.
New York - Ziegler Exchange
Traded Trust has selected
JPMorgan Worldwide
Securities Services to provide
a full suite of services to help
launch the NYSE Arca Tech
100 ETF. JPMorgan will pro-
vide fund accounting, fund
administration, transfer
agency and custody services
for the new ETF that repli-
cates the NYSE Arca Tech
100 Index, which represents
100 companies in the tech-
nology field and related
industries.
London - Taylor Young
Investment Management
Limited (‘Taylor Young’), the
private client, pension and
charities investment special-
ist, has announced the
expansion of its existing serv-
ice and product range with
the launch of two new funds.
6 INVESTOR SERVICES JOURNAL
Page 6
The new funds, the CF Taylor
Young International Equity (£
bias) Fund and the CF
Taylor Young
Opportunistic Fund, will
be officially launched on
3 April 2007 in response
to demand from existing
clients to extend Taylor
Young’s product offering
across the risk spectrum.
New York - JPMorgan
Worldwide Securities Services
has announced the launch of
new investment improve-
ment tools to help institu-
tional investors boost risk-
adjusted returns. The new
tools – Manager Consistency
Analysis and Marginal Risk
Analysis – are the latest from
JPMorgan, and are designed
to help asset managers and
pension and endowment
fund executives achieve
greater risk-adjusted returns
for investment portfolios.
MARKET INFRASTRUCTURE
The Hague - AEGON
strengthens group pension
business with acquisition of
OPTAS N.V, a Rotterdam-
based life insurance company
specializing in employee ben-
efit products and services.
The acquisition of OPTAS will
strengthen AEGON's top two
position in the group pension
market in the Netherlands.
The combination of OPTAS
and AEGON's existing pen-
sion activities will lead to a
more efficient platform to
serve the group pension mar-
ket. The transaction will have
a slightly positive effect on
AEGON N.V.'s earnings per
share.
Stockholm - The National
Depository of Ukraine and
the Central Austrian
Depository, Oesterreichische
Kontrollbank, have signed a
memo on correspondent
relations. Volodimir Ulyanov,
Deputy of Head of The
National Depository of
Ukraine, reported that this
can concern relations
between the two Depositories
to allow adjustment of securi-
ties’ settlement and provision
of payment guarantees. This
can be looked upon as an
intentional agreement
between the two organiza-
tions.
Oslo - The Board of Oslo
Børs has approved the final
rules and admission require-
ments for Oslo Axess.
Feedback from the market is
positive and a number of
companies have indicated
that they want to be listed on
Oslo Axess, so everything is
now ready for the launch of
the new marketplace, which
will open for business in May.
Oslo Børs received authorisa-
tion in December 2006 to
establish a new authorised
marketplace for shares and
primary capital certificates.
The marketplace will be
known as Oslo Axess. Since
receiving authorisation, Oslo
Børs has circulated the pro-
posed rules for Oslo Axess,
together with proposed
changes to the rules for the
existing stock exchange mar-
ket, for consultation with
interested parties including
market participants.
London - The Bank of New
York has been appointed by
Dutch transport insurance
company TVM Verzekeringen
as its global custodian. The
Bank will hold over ¤ 300
million in assets from TVM’s
insurance companies and the
related pension fund. Dirk
Jan Klein Essink, CFO, TVM
Insurance, said: “We wanted
to consolidate our custody
needs with one high quality
provider and The Bank of
New York demonstrated that
it was capable of understand-
ing our specific needs. We
will benefit from significant
economies of scale and are
looking forward to working
with the bank to further opti-
mize our asset servicing
requirements.” Clive Gande,
managing director, The Bank
of New York, said: “This pres-
tigious Dutch win shows how
we are able to meet the
demands of our clients. This
also underscores our contin-
uing commitment to growing
our share of the custody mar-
ket in continental Europe and
particularly in The
Netherlands”.
Zurich - Comit, a wholly
owned subsidiary of
Swisscom has agreed to
acquire International
Financial Business Solutions
(IFBS AG) and its Securities
Lending, Repo and OTC
Derivatives Collateral
Management suite of solu-
tions, FINACE®. Felix
Oegerli, CEO of IFBS said,
“Through our acquisition by
Comit, we are able to access
a more powerful distribution
system, are closer to our
clients and are able to rapid-
ly scale up for project deliv-
ery. The size and quality of
our parent, Swisscom, will
also augment our value in
the vendor risk assessments
of our future clients. This is
clearly more than a medium
term financial and support
services strategy for IFBS, but
is an important milestone
towards our long term strate-
gic goal to become the mar-
ket leader in Securities
Finance and Collateral
Management IT”.
CUSTODY
Paris - BNP Paribas
announced that they have
signed an agreement to
acquire RBS International
Securities Services, a 70:30
joint venture between The
Royal Bank of Scotland
International and The Bank of
New York. Commenting on
the agreement, Jacques-
Philippe Marson, chief execu-
tive officer of BNP Paribas
Securities Services said: "As
part of our global growth
strategy and our commit-
ment to servicing clients,
RBS International Securities
Services stood out as an
attractive opportunity to rein-
force our position in the
buoyant UK offshore market,
and further answer clients'
growing needs in this arena.”




ISJ21 1-16 FINAL 1/5/07 5:30 pm Page 7
ISJ21 1-16 FINAL 1/5/07 5:30 pm
NEWS
Brussels - Euroclear Bank is
to open a representative
office in Frankfurt in the com-
ing weeks to further support
its clients in the region with a
local, dedicated team of secu-
rities-services professionals.
Yannic Weber, Managing
Director and head of
Euroclear’s Commercial
Division, stated: “The open-
ing of a representative office
in Frankfurt underscores
Euroclear’s commitment to,
and belief in, the continued
growth of business opportu-
nities in Europe’s largest
economy. As we already settle
the majority of cross-border
transactions in German gov-
ernment bonds, we look for-
ward to expanding our client
base across even more prod-
ucts. We welcome Katherine’s
business knowledge and
expertise to lead our new
Frankfurt-based team in mak-
ing our clients in the region
even more satisfied with the
service and care they receive
from Euroclear.”
New York - JPMorgan
Worldwide Securities Services
has announced plans to
expand its Fund Services
operation in Boston, hiring
new employees and leasing
larger office space. JPMorgan
has hired more than 150 new
employees in the past year
and plans to hire more this
year to provide custody,
accounting, investment oper-
ations and fund administra-
tive services for U.S. mutual
fund companies. “We have
won several key client man-
dates and are expanding to
ensure we can continue to
provide services at the same
high level of quality,” said
Mark Kelley, head of
JPMorgan’s U.S. Fund
Services business.
“JPMorgan will keep invest-
ing in all the people, prod-
ucts and services required to
be a premier provider in the
funds services industry.”
TECHNOLOGY
Connecticut - Telekurs has
announced that Mellon
8 INVESTOR SERVICES JOURNAL
Page 8
Financial has chosen the
Valordata Feed from Telekurs
Financial as part of its enter-
prise-wide, global reference
data infrastructure. Mellon,
leveraging subsidiary Eagle
Investment Systems’ data
management solution, will
use the Valordata Feed to
integrate a broad range of
securities reference data from
VDF - including security
descriptions, ID cross-refer-
ence and corporate
actions/events - into Mellon’s
Eagle PACE solution.
London - SunGard has
announced that Standard
Bank of South Africa, the
largest African bank with
$139 billion in total assets,
has reached a milestone in
its adoption of Basel II com-
pliance by implementing
SunGard’s BancWare Capital
Manager. Johannesburg-
based Standard Bank has
implemented BancWare
Capital Manager’s wholesale,
retail, asset securitisation
and consolidation models to
help facilitate Basel II compli-
ance across the group.
Massachusetts - Interactive
Data Corporation, a provider
of financial market data, ana-
lytics, and related services,
has announced that its
Pricing and Reference Data
business has been selected
by HedgeSpeed Technology
as a main source of financial
data for its middle-office liq-
uidity management software
platform.
Zurich - The ASTEC
Consulting Group has
announced another major
upgrade to Lending Pit, its
daily reporting service for
institutions that loan and
borrow securities. ASTEC has
dedicated new resources in
its Zurich operations center
to enable Lending Pit(SM) to
be updated at the start of the
business day in London.
Now, securities lenders and
borrowers in Europe will have
access to timely loan pricing
and market colour, based on
loans that were on the books
at the close of the previous
trading day.
Amsterdam - Getronics has
announced the launch of its
MOVE (Migration to Office,
Vista and Exchange) pro-
gramme. MOVE has been
designed to give organisa-
tions that are considering
adopting the new wave of
Microsoft technologies a
structured framework for
evaluation, planning and
implementation. The pro-
gramme helps decision-mak-
ers to determine why, when
and how to transition to
Microsoft’s newly launched
technologies.
New York - Paladyne
Systems has announced it
has formed an alliance with
Microsoft Corp. to service
the hedge fund industry with
the PALADYNE™ product
line powered by the
Microsoft software develop-
ment platform. As a
Microsoft Gold Certified
Partner, Paladyne will have
access to the latest technolo-
gy offerings and related sup-
port services within
Microsoft to further enhance
its product offering to the
hedge fund marketplace.
Microsoft will benefit from
Paladyne’s expertise in serv-
ing the capital markets
space, to enhance and target
their technology solutions
more aggressively to the
hedge fund marketplace.
London - Standard & Poor’s
and ICAP have announced
an agreement to offer ICAP’s
global market data to
Standard & Poor’s clients.
Standard & Poor’s Securities
Evaluations will provide the
ICAP data through
MasterFeed, its consolidated
securities reference data and
end-of-day pricing feed serv-
ice. Access to ICAP’s com-
prehensive and authoritative
pricing data can help
Standard & Poor’s clients
improve overall portfolio
management and risk
FREE NEWS DAILY AT WWW.ISJNEWS.COM
assessment.
TECHNOLOGY
Taipei - Osaka Securities
Exchange Co., Ltd. and
Taiwan Stock Exchange
Corporation have announced
that TSEC and OSE have
signed a Memorandum of
Understanding. The objective
of this MOU is to facilitate
the development of the secu-
rities market both in Taiwan
and Japan by improving
cooperation in PR activities in
each market and promoting
information exchange. Mr.
Michio Yoneda, the President
& CEO of OSE said, “We
hope this MOU will not only
improve developments in the
Japanese and Taiwanese mar-
kets, but also provide a sub-
stantial advantage for
investors in the entire Asian
region as well as the world-
wide investors.”
Auckland – The New Zealand
Superannuation Fund has
announced the appointment
of eSecLending as its third-
party provider to manage its
securities lending pro-
gramme. The Fund decided
last July to implement a secu-
rities lending programme to
capture additional revenue by
lending its securities to
approved borrowers. The
Fund decided on
eSecLending to manage this
programme, following a com-
prehensive selection process.
London - Deutsche Bank and
Standard Bank have been
mandated to arrange a
US$100 million Syndicated
Term Loan Facility for
Ukreximbank. Deutsche Bank
and Standard Bank (together,
the "Mandated Lead
Arrangers") will arrange a
US$100m Syndicated Term
Loan Facility for JSC The
State Export-Import Bank of
Ukraine. The loan has a one
year maturity and pays a mar-
gin of 80 bps pa. The trans-
action represents
Ukreximbank's first syndicat-
ed loan since 2003.

ISJ21 1-16 FINAL 1/5/07 5:30 pm Page 9

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ISJ21 1-16 FINAL 1/5/07 5:30 pm Page 10
NEWS ANALYSIS
The
Domino
Effect
The ABN Amro story could
have far-reaching
implications for the future
of hedge fund activism.
A BN Amro’s initial agreement to be
purchased by Barclays for $91 billion
(33% more than the bank’s price when
talks were first announced) is looking
decidedly less concrete. What would have
been the largest ever takeover in the histo-
ry of European financial services – creat-
ing a business worth £80 billion – could
well be scuppered by the rival consortium
bid from the Royal Bank of Scotland,
Santander and Fortis, worth 72.2 billion.
Whilst meetings with the ABN Amro
board were originally cancelled after the
CEO of RBS called for clarification over
reports that ABN had agreed to sell La
Salle Bank to the Bank of America, the
consortium is now looking for other
major European banks to underwrite its
offer.
Although the events themselves are by no
means insignificant, there is a particular
element to them (which people haven’t yet
begun to speak about) that could have far-
reaching consequences. What many have
noted is that the ABN talks, which have
seen their share-price rocket, followed the
news that The Children’s Investment
Fund, citing poor performance and a con-
sistently undervalued share price, had
called for the bank’s break-up. Whether
the fund’s demands were instrumental in
the board’s decision to enter talks with
Barclays has not yet been clarified, but if it
is proved that hedge fund action has
resulted in the sale of a major European
bank it could have far-reaching implica-
tions in terms of the behaviour of activist
hedge funds. The ‘domino’ potential of
this kind of activity is obvious. TCI’s sug-
gestion was quickly followed by the news
10 INVESTOR SERVICES JOURNAL
All fall down...?
that Toscafund, another major sharehold-
er, had written an open letter to the bank’s
board calling for some kind of action: "It is
evident that over the past five years the
management of ABN AMRO has failed to
deliver acceptable returns. Accordingly, we
believe that all the stakeholders would
benefit by way of a merger with another
large group which has a proven track
record in adding value." The trend to con-
solidate has thus been given a further
push, this time not from external compe-
tition but from an entirely new, internal
source. As the ABN story draws to a con-
clusion, can we expect to see more hedge
funds calling for similar corporate actions
when their investments don’t seem to be
paying off, perhaps resulting in a tighter,
more efficient and streamlined market, a
market oriented towards the shareholder?
Only time will tell.

Citi
Slicker
Is consolidation causing
problems for company
branding?
B ack in late 2006, the Bank of New
York and Mellon merged to create the
world’s largest securities servicing and
asset management firm globally with
around $16.6 trillion in assets under cus-
tody. In the journalistic world this amal-
gamation was soon spoken of as BonY M,
after the criminally underrated pop ad
disco group Boney M. Whilst it is likely
that the Bank of New York will just add a
Mellon on the end of it’s name when the
time comes to official rebrand, changing
the company name means often accom-
panies a brand overhaul, which means a
lot of work for the back office.
After a quick chat to a friend at a pres-
tigious advertising company in London, I
found out that they couldn’t care less
about how much it will cost to correct
and change every single new logo, all that
matters is that the brand serves the pur-
pose. This is understandable, but just try-
ing to change your email signature can be
laborious enough, let alone changing a
whole companies image. In February
Citigroup decided to ditch its famous
umbrella logo and instead use its red arc
design. According to Citigroup, the
design, originally the logo of an insur-
ance company once owned by the bank,
was more suited to insurance, not a glob-
al powerhouse. The above insurance
company has now bought back the
umbrella. On top of this, from the second
quarter onwards, Citigroup will no
longer be called the rather evil, industri-
al ‘Citigroup’, but the bright and cheerful
‘Citi.’ The reason behind this change is
hard to fathom. Chuck Prince, the cur-
rent CEO of Citi, announced plans to cut
costs by more than $1 billion. He has
already upset the unions by announcing
ISJ21 1-16 FINAL 1/5/07 5:30 pm Page 11
Changing Faces
a 17,000 job cuts, euphemistically named
a ‘global redundancy programme.’
However it remains unknown how much
this rebranding will cost as Citigroup
refuse to say, but will indeed eat into Mr.
Prince’s proposed ‘billion dollar cut’. The
sale of the umbrella rights will, according
to company blurb, offset the cost of
future rebranding. This is unlikely. The
cost of rebranding AT&T if it goes ahead
with it’s merger with BellSouth will be
around $2 billion, according to one
Forbes article. Whilst Citi’s change will
not be as costly, the expense will not be
small for the worlds largest banking
group, which makes you wonder whether
the back office could be spending it’s
time increasing efficiency rather than
changing stationary.

Is
Integration
Integrated?
Data integration is
becoming increasingly
important, but is data the
crux of the matter?
L ast month the results of a study, pro-
duced by Forrester Consulting for
Progress Software Corporation, highlight-
ed that IT professionals are still mired in
manual processes and ad hoc fixes.
While the report illustrated that data
integration efforts were increasing across
most major industries as a result of the
demand for real-time globally accessible
data, according to the findings, manual
efforts remained the dominant approach
for integration of data silos.
Streamlining data to be used between
different data silos across and organisa-
tion can be achieved through service-ori-
ented architecture (SOA) that is increas-
ingly becoming a growing solution in
achieving end-to-end data management
and integration results. SOA allows data
to be unified by connecting up all the
numerous software applications that a
financial organization has accumulated
over time to process front, middle and
back office data.
Speaking to a number of IT profession-
als and vendor this month, the feeling is
that data integration is definitely on the
increase and the end is in sight for ad hoc
fixes and solutions.
Hub Vandervoot, CTO, Enterprise
Infrastructure Division, Progress Software
Corporation believes: “These results are a
clear call to action for the vendor com-
munity to prove minimally invasive and
easy-to-use tools while providing support
for data federation without the need for
extensive schema changes.”
In the financial industry the impor-
tance of data integration and its potential
influence on a company’s business is
changing. Where changes in data genera-
tion and usage were previously dominat-
NEWS ANALYSIS
Power of the people
ed by technology professionals in the
middle and back office, the push for data
integration is now coming from a board
level with the emergence of data man-
agers taking more senior roles in financial
institutions.
Technology changes and software over-
haul projects are notoriously slow mov-
ing beasts and are not renowned for their
ability to make corporate hero’s. Coupled
with this is the time it takes for the bene-
fits of the data project you are trying to
accomplish to be seen. Both of these fac-
tors, plus the internal politics of trying to
get different departments within an
organisation to work together are putting
pressures and strain on the accomplish-
ment of data integration.
While it may be the case that data
integration is being taken more seriously
in financial institutions the resounding
problem that seems to be apparent
behind the data integration drive is
people.
The technology and the know-how has
been around for a number of years, and
as soon as the people side of data integra-
tion become integrated then financial
institutions will be able to free themselves
of the shackles of manual integration
processes and the legacy hangover.

INVESTOR SERVICES JOURNAL 11
ISJ21 1-16 FINAL 2/5/07 2:05 pm Page 12
DOMICILES REPORT
Ireland
Growth Spurt
The net asset value of Irish domiciled funds
grew 25 per cent in 2006, from ¤585 billion
at the end of 2005 to ¤730 billion in
December 2006 and is already up 3.6 per
cent in the first month of 2007 to ¤756 bil-
lion. Add this to the net asset value of non-
Irish funds being serviced by the Irish indus-
try, estimated at close to ¤600 billion, and
the total value of the Irish funds industry is
over EUR1.3 trillion.
The continuation of such strong growth is
encouraging for the industry and it is being
complemented by the continuing expansion
of industry companies outside of Dublin.
The latest company to announce such a
move was Daiwa Securities opening an
office in Dundalk, on the east coast of
Ireland. Daiwa plan to hire 300 people in
Dundalk which will be its second facility in
Ireland, focusing mainly on hedge fund
servicing. This brings to 9 the number of
fund servicing companies who have expand-
ed their operations in Ireland outside of
Dublin over recent years and is certainly
resulting in positive returns for fund pro-
moters and managers who are benefiting
from the competitive costs and supply of
highly skilled resources available in these
locations in Ireland.
It has been well documented how the Irish
economy has been growing steadily for the
last decade or so and consequentially the
introduction of a new immigration system in
early 2007 was welcomed by all, especially
those in the funds industry, as many of the key
roles in the industry have been included as eli-
gible for the new green card system, which
should make it easier for funds companies in
Ireland to attract and retain how calibre staff
from non-EU countries if needed. The return
of the intra-company transfer scheme is also
beneficial to the industry. And overall this
much needed revision and improvement of
the process should make Ireland a more
attractive place to work for many highly skilled
non-EU workers going forward.
Other issues on the horizon include
CESR's consultation on hedge fund indices
to which the industry is responding. The
industry is also gearing up for its annual
industry conference which is taking place in
June, 5-7, in Carton House, Co Kildare. The
programme is full of hot issues this year
including panel sessions on; alternative
investments – anticipating the challenges
before they arise; new and evolving fund
products like ETFs within UCITS, enhanced
yield cash funds and securitised CDOs with-
in a fund structure; and global distribution
strategies, brand versus performance and
impact of costs on distribution. ISJ have
been selected to publish the official confer-
ence supplement which promises to be full
of informative and educational
12 INVESTOR SERVICES JOURNAL
Isle of Man
pieces emanating from the conference.
Hopefully some of you may join us there.
P.S. if you like golf you may enjoy the con-
ference even more!
Deirdre Norris, Director, Marketing and
Communications, IFIA.
Reformation
In the Isle of Man’s 2007 budget speech,
delivered last month, the Treasury Minister
announced the completion of a major
report to review the Island’s fund sector.
This report was produced by the Funds
Review Group, formed to identify reforms
and enhancements which will secure the
future growth and development of the
industry, and with the ultimate objective of
achieving the Fund Management
Association’s vision of having USD 100 bil-
lion of funds under administration and
USD50 billion of funds under management
on the Island by 2010.
The Review was chaired by international
funds expert Paul Smith, ex-Global Head of
HSBC’s Alternative Fund Services Division,
and produced ‘The Smith Report’ which
announced a number of recommendations for
the future of the Island’s funds sector. These
recommendations include an investment of
over £500,000 from the Marketing Initiative
Fund, the introduction of a new more flexible
funds package to attract City based fund man-
agers, and changes to the current investment
business licensing system.
A new specialist fund has also been pro-
posed, featuring a $100,000 minimum initial
subscription, flexibility to base management
and/or administration in other jurisdictions,
no restrictions on investment strategies, and
a ‘light touch’ regulatory approach.
This and other suggested reforms are
designed to make the Isle of Man attractive
for the domiciliation of specialist institu-
tional funds (focused on the alternative and
closed fund sector), and to position the
Island as the preferred offshore location for
the establishment of front and middle office
operations for fund managers.
If the recommendations outlined in the
Smith Report are introduced, the impact on
the Isle of Man funds industry, as well as the
wider benefits for the financial services sector
and the Island as a whole, will be far reaching.
Outcomes are expected to include an
increased tax contribution from the funds
industry, a cohesive, consistent and well-
resourced marketing programme, and the
attraction of specific functions of alternative
fund management to the Island, which will
bring high value jobs consistent with the
Government’s economic strategy.
Further, the implementation of the recom-
mendations will result in a more competitive
platform on which to develop business; it will
provide the Isle of Man with the ability to devel-
op a funds industry which will better utilize the
Jersey
intellectual capital of the workforce and pro-
vide an environment of higher job satisfaction
and career opportunity and development.
Jean-Jacques PICARD,
Director Communication, ALFI.
Shouting about it
Jersey’s funds sector refuses to stay quiet.
Confidence in the future of the Island’s
funds sector is highly visible, with a number
of firms demonstrating their belief in the
future potential it offers by entering or
affirming their presence in Jersey.
A recent deal, for example, has seen BNP
Paribas sign an agreement to acquire RBS
International Securities Services (Holdings)
Limited, the Bank’s funds and custody busi-
ness, which has its headquarters in Jersey. In
closing this deal, BNP Paribas has shown a
real commitment to Jersey as a jurisdiction
which can bolster its offshore funds services.
Meanwhile, the States of Jersey, the Jersey
Financial Services Commission and the
funds sector still work tirelessly together to
improve the regulatory regime. Whilst fur-
ther improvements are expected to be
announced later this year, the current frame-
work, including recent amendments to the
Expert Fund regime, continues to prove
attractive for institutional investor funds in
particular.
Indeed, the institutional investor market is
one that has formed a substantial portion of
Jersey’s funds work over the years and,
thanks to Jersey’s world class supporting
network of legal and accountancy services,
together with its excellent reputation for
quality service provision, sophisticated insti-
tutional investors remain a key part of the
Island’s funds business, for both specialist
and traditional fund types.
The latest statistics also indicate that ’spe-
cialist’ funds are performing particularly well.
Whilst, at the end of 2006, the overall Net
Asset Value of funds under administration in
Jersey grew to another record level of almost
£180 billion, around half of these assets were
specialist funds, including property, hedge
funds, fund of funds and private equity. This
significant proportion of specialist funds can
be attributed to Jersey’s low touch regulation
that is mindful of the specific requirements of
promoters and investors.
Private equity was also a feature of this
year’s Jersey Finance London Conference,
held at the Mermaid Conference Centre,
Blackfriars in late April. One of the expert
speakers, Noel Ainsworth, Head of Private
Equity Funds at Simmons & Simmons in
London, gave a very positive talk focusing
on how the offshore private equity sector
interacts with, and indeed benefits, global
finance markets.
Graeme McArthur, representative of the
Jersey Funds Association and Managing
Director of Northern Trust in Jersey.
ISJ21 1-16 FINAL 1/5/07 5:30 pm Page 13

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ISJ21 1-16 FINAL 1/5/07 5:30 pm Page 14

LUXEMBOURG

P retty much all of the better known

fund jurisdictions now have in
place a specialised or experienced
investor fund. Targeted at institutional or
high net worth investors they allow a sig-
nificant amount of flexibility when it
comes to fund structure and contents. The
regulatory framework for such funds is
also much lighter than for retail funds, the
presumption being that investors of this
type know what they are doing.
Until recently the Luxembourg authori-
ties allowed only institutional investors to

The two extensions allow for greater flexibility

and should open up the Luxembourg market
to smaller investors or promoters.
benefit from these funds. But the new
Specialised Investment Funds (SIF) law of
February 13th, 2007 now repeals the old
law of 1991 and replaces it with a new
regime, catering for institutional, profes-

The Lux Capacitor sional and high net worth investors.

The new law is very much about who a
specific fund is marketed to and has a lib-
eral approach to a fund’s underlying
assets. The previous law of 1991, had been
pretty good in its day but was now per-
Alison Ebbage looks at the ceived to be limited in today’s investment
merits of the new Specialised world.
John Parkhouse, head of the investment
Investment Funds law passed unit at PwC in Luxembourg comments:
“The initial law of 1991 allowed fund
by The Luxembourg Parliament. providers to target institutional investors
and in this context included a specific def-
inition of institutional which excluded
investors such as high net worth individu-
als. The law did provide a flexible and
effective regime but, with its expiry in
February of this year, the industry has
constructed a replacement regulation
which better meets the needs of today's
The SIF law: fund promoter.”
The new SIF law now allows for profes-
1.Broadens the scope of eligible investor – informed investors with a minimum sional and high net worth investors, who
of E125,000 or assessed as appropriate by an investment firm. are expected to become increasingly
2.Widens the range of permitted investments with no quantitative investment involved in the alternative investment
limits – although the principle of diversification remains space. The minimum investment in a SIF
3. Does not require the investment manager to be CSSF approved is Euro 125,000 but in theory this could
4. Reduces the custodian’s role. Central administration must still be done in also be lowered in special cases.
Luxembourg but duties are limited to safekeeping and general supervision. In addition the criteria for eligible fund
5. Requires no prior approval from the CSSF but an application for approval promoters has been widened as well.
must be lodged within one month after launch. Previously fund promoters would need to
6. Has less onerous reporting requirements – there is no mandatory informa- go through a series of rigourous checks to
tion required rather the SIFs must disclose only sufficient to allow potential ensure that their proposed fund was fit for
investors to evaluate risk. purpose and that their pockets were deep
7. Now allows new corporate forms – no longer limited to SICAVs. enough to compensate investors, should
8. Is taxed at 0.01 per cent per year on net assets. the fund go horribly wrong.
In combination the two extensions allow




14 INVESTOR SERVICES JOURNAL
ISJ21 1-16 FINAL 1/5/07 5:31 pm Page 15




for greater flexibility and should open up
the Luxembourg market to smaller
investors or promoters looking to set up in
a lightly regulated environment but with
the reputation of the Luxembourg fund
authorities to back them.
Geoff Cook, managing director at BBH
in Luxembourg comments: "What was
missing in Luxembourg was an updated
institutional/ qualified investor law with a
reduced administrative burden. We did
away with the long form report and the
promoter no longer needs to have the
deep pocket concept, because the focus is
now on the experience and relevance of
the fund's board members."
Indeed investors can now work directly
with their advisors to create a product
according to their specific needs and
invest in a wider range of asset classes. The
only proviso is that the principle of diver-
sification within a fund must be met.
Parkhouse comments: “The scope of
investments is extremely flexible with the
key primary requirement being that the
fund is considered to be diversified. Since
there is no pre-approval requirement for
such funds, it is anticipated that the indus-
try providers in Luxembourg being well
established and experienced will be very
able to judge what will be permitted by the
regulator and what should be checked
beforehand to avoid issues. As ever, a prag-
matic approach is expected in this area.”
And further opportunity is expected in
the way of smaller promoters, who previ-
ously would not have had the track record
to launch this type of fund out of
Luxembourg. Indeed it is hoped that such
promoters, who previously would have
had to go to the Caribbean will enjoy the
reputational comfort of Luxembourg but
in an environment that is less restrictive.
Jean-François Fortemps, local CEO
Fortis Investments, Luxembourg says:
“With the new law the CSSF, the
Luxembourg regulator, does not need to
approve the promoter, nor verify its finan-
cial capabilities so high net worth individ-
uals looking to create their own funds will
be able to set up here. This will make
Luxembourg one of the most competitive
places to set up a fledgling fund.”
But allowing smaller, less established
operators in does mean a degree of risk for
the Luxembourg authorities. How will the
light regulatory touch and enhanced flexi-
bility marry with attracting only the right
sort of promoter?
Stephane Ries, head of business develop-
ment at Kredietbank in Luxembourg says
that the CSSF is well aware of this conun-
drum. “It will not take any chances,” he
says. “It will still look at the filings made by
promoters and take retrospective action,
should it see the need. It will also approve
the board of directors only if the experi-
ence of each individual is in line with the
investment policy of the fund. It will also
approve the custodian and other services
providers. In fact all third party services
providers must exercise caution in who
Allowing smaller, less established
operators in does mean a degree of risk
for the Luxembourg authorities.
they deal with and due diligence is now in
their court. If the promoter has home
county regulation then that goes in their
favour as well,” he says.
But perhaps crucially the CSSF will be
looking to grant a retrospective permit
within a month of any new fund being
started. And there is also the expectation
that any sensible promoter wishing to
launch a fund with a completely new
underlying structure would engage with
the regulator before that particular fund
was launched.
Fortemps comments: “It is strongly rec-
ommended that if it is a brand new struc-
ture than discussions with the authority
with regard to viability take place before
launch. Provided that diversification prin-
ciples are respected though then theoreti-
cally any structure will be permitted.”
Sonia Biraschi, head of State Street in
Luxembourg comments: “The CSSF are
always looking to discuss the basic princi-
ples of new structures prior to launch and
sensible fund promoters realise this. But in
LUXEMBOURG
fact the information actually required in
the prospectus is less than for UCITS III
funds.”
Indeed, fund promoters will have much
more say in the contents of their sales doc-
umentation and there will be no specific
framework to work around. The fund pro-
moter will instead decide what informa-
tion is relevant, and what degree of detail
is needed for the fund’s prospective
investors. As far as reporting is concerned
then the minimum requirement will now
be for NAV to be calculated yearly and
there is no requirement to have full disclo-
sure of the portfolio.
This had been a concern for many funds,
according to Parkhouse. “It was felt that
full disclosure was putting some at a com-
petitive disadvantage. Funds of hedge
funds, for example, are often very sensitive
to disclosure of their underlying invest-
ments and the approach of the regulator
under the new regime is more to ensure
informative disclosure is provided related
to positions rather than prescribing that
all positions be listed." he says.
This light touch means, of course, a
much quicker time to market; something
that is absolutely essential in this space.
Cook comments: "From a reputational
perspective this should make Luxembourg
a more attractive option for start up funds
and the time to market, one of the most
important factors, should be shorter."
Does all this though, placed an increased
burden of responsibility on services
providers to ensure that the people they
are dealing with are reputable?
Parkhouse says that whilst the funds are
still regulated by the CSSF, because there is
no longer a need to approve the fund pro-
moter, the industry as a whole will need to
be more focussed on their appropriateness
when looking at new fund promoters. He
points out that the reputation of




ISJ21 1-16 FINAL 2/5/07 1:46 pm Page 16
LUXEMBOURG
Luxembourg is extremely important not
only for the regulator but also for the key
service providers operating within the
Grand Duchy.
Timing
The timing for a new law could not be
better. As with the hedge fund area,
Europe’s real estate market, as well as pri-
vate equity and venture capital, have been
booming and have all now evolved to
become a mainstream investment for both
institutions and individuals.
The real estate market is expected to be
particularly popular.
Parkhouse comments: “Luxembourg
expects to see particular value in its real
estate business where it is the regional cen-
It is expected that that the transformation of
all pre-existing 1991 funds will take some time.
tre of excellence. It has also been very suc-
cessful in attracting sophisticated UCITS
funds that we are now seeing a natural
convergence between mainstream and
alternative strategies under the UCITS
structure. Within this context, the SIF
offers the real opportunity to allow fund
promoters to consolidate mainstream and
alternative product within the one domi-
cile which did not readily exist before.”
The SIF can also be used as a tax efficient
vehicle and Cook, for one, thinks that
Opening up better solutions for
your fund market application needs
3924 ISJ
Australia - New Zealand - India - Hong Kong - Thailand - England - Scotland - Luxembourg - South Africa
future developments could lie this way.
"Providing the underlying vehicle type is
appropriately chosen to access European
directives or double taxation treaties, the
SIF should be able to efficiently invest in a
wide range of securities and alternative
investments in many jurisdictions.
Additionally it could have further use as a
tax transparent vehicle for certain types of
investors."
But short term it is expected that that the
transformation of all pre-existing 1991
funds will take some time. By its very
nature the SIF structure will encompass a
fairly diverse range of funds and will, in
future include more and more funds with
underlying assets like real estate, deriva-
tives, synthetic hedge funds using OTC
instruments.
So how will Luxembourg take things for-
ward? The law is in the context of there
now being little distinction between rep-
utable jurisdictions and so in this environ-
ment the best opportunity might well be
for fund promoters to consolidate their
entire fund range in one place. This would
allow for economies of scale as regards
administration and the provision of other
services. It would also allow for entire fund
ranges to be linked more seamlessly into
• Transer Agency
• STP Financial Messaging
• Pensions
• Investment
• Life Insurance
• Fund Accounting
private banking arms thus extending the
concept of the one stop shop.
But clearly more education is needed to
alert promoters to the possibilities
Biraschi comments: “Now that the infra-
structure is in place what is needed is a
good marketing campaign. ALFI has
already launched a number of initiatives
and was very proactive in presenting this
to the industry at its conference in March.
It is also to conduct a roadshow in the US
later this year. Several of the law firms have
also been proactive in explaining the
changes to their clients.”
Cook says that there has already been
significant interest in the SIF and this will
only increase over time as a competitive
qualified investor vehicle compared to
other domiciles.
"The SIF has arrived in the wake of
UCITS III becoming the de-facto global
funds structure sold into markets
excluding the US. This has also coincided
with the market upturn and the
consequent launching of new products.
Confidence breeds confidence and, with
the infrastructure proven and in place,
Luxembourg is exceptionally well
positioned."
“These changes come at a time when the
industry is dealing with the
implications of implementing MiFID and
the priorities set out by the EU work
paper on asset management. Together
these will make 2007 another significant
year of change in the investment
fund industry,” he says.

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ISJ21 17-33 FINAL 2/5/07 4:31 pm Page 18
CANADA FOCUS
Four major presences in the
Canadian market, CIBC Mellon;
Lionhart; RBC Dexia and Statpro
discuss the state of Canadian
securities services.
Canada is chomping
at the bit
T
he Canadian securities lending
market is large and well developed.
Industry surveys have ranked it
between the second and the fourth largest
in the world over the last few years. The
Canadian market has experienced signifi-
cant growth in size, as well as an increase
in the number of new products intro-
duced. A majority of large Canadian insti-
tutional investors (including pension
plans, endowments, insurance companies,
pooled funds, governments and mutual
funds), participate in securities lending,
Collateral Flexibility
One of the key drivers in the Canadian
market’s strong growth is collateral flexi-
bility, which has also been the case in other
securities lending markets.
Historically, custodial lending in Canada
was done primarily on a non-cash collat-
eral basis. In the past few years acceptable
types of non-cash collateral have expand-
ed to include global debt and equities.
More recently, plan sponsors and other
institutions have embraced cash collateral,
recognizing its ability to generate greater
total returns.
18 INVESTOR SERVICES JOURNAL
Impediments to Cash Collateral
Acceptance
There have been some impediments, how-
ever, to the acceptance of cash collateral in
Canada.
For example, some participants inter-
preted that the 1992 guideline issued by
the Office of the Superintendent of
Financial Institutions (OSFI) for pension
A majority of large Canadian institutional
investors participate in securities lending.
funds as stipulating a minimum of 105 per
cent collateral. The guideline required
that lenders “hold adequate collateral to
protect themselves against the risks associ-
ated with securities lending.” The guide-
line further stated that the amount of such
collateral “should reflect best practices in
local markets. In Canada, the current mar-
ket practice is to obtain collateral of at
least 105 per cent of the market value of
the securities lent.” For some transactions,
Rob Ferguson
105 per cent exceeded the acceptable over-
collateralization of the borrower, resulting
in a capital charge for the borrower.
Fortunately, in September 2006, OSFI
issued Pension Benefit Securities Act
Update 26, which concluded that “given
current market practice, it is acceptable at
this time for pension plans to obtain col-
lateral of at least 102% of the market value
of the securities lent.” This clarification
puts pension plans on equal footing with
mutual funds in Canada and abroad.
Budget 2007
Elimination of Withholding Tax on
Interest
The March 21, 2007 federal budget pro-
posed measures that should positively
affect the Canadian securities lending
market as early as 2008. With the intent of
making Canada’s international tax system
fairer and more competitive, the govern-
ment announced that Canada and the
United States had agreed to update the
Canada/US tax treaty, eliminating the
non-resident withholding tax on interest
payments. This is of particular signifi-
cance to securities lending as a 10 per cent




ISJ21 17-33 FINAL 2/5/07 4:32 pm Page 19




withholding tax was applied to cash
rebates paid from most Canadian lenders
to US resident borrowers. This withhold-
ing tax essentially limited cash collateral
opportunities to government and quasi-
government lenders (who were exempt
from the withholding tax) and to loans of
specials where there was a negative or zero
rebate. The elimination of the withhold-
ing tax could take effect as early as 2008
and it will remove a significant impedi-
ment to accepting cash collateral from US
borrowers.
Changes to Prescribed Markets
The Income Tax Act currently provides a
list of prescribed stock exchanges for a
variety of provisions in the Act. These
include determining eligible investments
for registered retirement plans, the
exemption from the requirement for capi-
tal gains clearance certificates in respect of
the disposition by non-residents of shares
of certain Canadian corporations, and
rules relating to securities lending. In
determining whether a stock exchange
should be prescribed, the most stringent
requirements must be met for all purpos-
es, even when a less stringent test would
have been appropriate for a specific pur-
pose. In its 2007 budget, the government
proposes to streamline this process by cre-
ating three categories of recognition for
stock exchanges that will better reflect the
purposes for which the exchanges are ref-
erenced in the various provisions of the
Act.
For securities lending, a category called
“Stock Exchange” will be created. Any
stock exchange, regardless of location, will
be included, as will all designated and rec-
ognized stock exchanges. As in the case of
a recognized stock exchange, there will be
no process by which an entity is formally
identified as a “stock exchange.” Instead, it
is intended that the general legal and com-
mercial meaning of the term will govern.
This change will significantly expand the
list of countries whose securities can be
loaned by Canadian lenders.
Modern Legal Framework
The 2007 budget recognizes that efficient
capital markets require a modern legal
framework for financial transactions
including securities financing transac-
tions. The budget proposes changes
intended to resolve legal uncertainties
around the ability of creditors of bankrupt
or insolvent counterparts to realize collat-
eral in a timely manner. The proposed
changes are similar to those made in
Europe and in the United States, in
advance of the Basel II Accord coming into
effect.
The plan also proposes a review of secu-
rities transfer provisions in federal statutes
to ensure they support current market
practices and to complement the efforts of
the provinces to develop a harmonized
and seamless legislative regime.
Changes to Government Borrowing
Beginning in 2008, the federal govern-
ment plans to consolidate the borrowing
needs of three Crown corporations, result-
ing in enhanced liquidity in the
Government of Canada bond market.
Conclusion
The recent changes by OSFI and the
recent proposed measures by the govern-
ment will continue to strengthen the
Canadian securities lending market for
institutional investors. The effect will be to
Not only is Canada rich in metals and minerals,
it is also a global forerunner in producing and
trad
ding alternative energies.
help minimize the uncertainties around
collateral perfection, bringing collateral
margin requirements in line with those of
other jurisdictions, and expanding cross-
border cash collateral lending with U.S.
borrowers. This will allow institutions to
maximize returns from their lending port-
folios.
Rob Ferguson, Vice President,
Product & Client Service, Global Securities
Lending, CIBC Mellon Global Securities
Services Company.
I
n an uncertain world, investors will
always look for assets they can rely on.
In the current climate, with the US
dollar showing weakness and the next big
financial market failure casting a continu-
ous shadow, natural resources are becom-
ing increasingly popular investments.
As global mineral supplies and energy
reserves begin to dry up, practically every
commodity can be described as precious.
Even vast energy reserves from the Gulf of
Mexico to the North Sea are now viewed as
limited, causing prices to spike upwards.
Investors who recognized this trend early
on have made handsome returns by taking
CANADA FOCUS
up hard asset commodity strategies.
Today’s early birds will have to identify
companies, strategies and markets that are
involved in less-publicized ‘tight’ com-
modities industries to reap similar
rewards.
Powerful Alternatives
Canada has emerged as a strong candi-
date for savvy investors. Not only is it rich
in metals and minerals, it is also a global
forerunner in producing and trading
alternative energies, clean air and fresh
water. Canada also has a system of stock
exchanges, investment bankers and global
investors as well as a focus on raising cap-
ital, delivering management expertise and
developing key projects. The following
examples show how recent market devel-
opments are opening up a wealth of
opportunity for investors.
In terms of energy, current volatility in
the energy markets means interest in
renewable fuels is on the rise. Canada’s
vast production levels of corn, soybeans
and wheat mean that it is a key player in
the ethanol market and a hotbed for those
looking to invest in alternative energies.
The past few years have seen the emer-
gence of companies such as Iogen (expect-
ed to go public soon), Western Canada’s
Lignol Energy and Toronto-based
SunOpta, which is looking to spin out a
biofuels business from its core organic
foods business.
Furthermore, with nuclear power now
considered a green source of power, there
has been a rush over the past 24 months to
find and lock up prospective uranium
lands in well-known uranium areas.
Canada’s Athabaska region is home to one
of the richest and largest producing urani-
um deposits in the world and has also
helped foster the largest uranium miner,
Cameco Corp.
One of the biggest problems in the
power industry is price volatility. Since
almost all power produced is immediately
consumed, it is virtually impossible to cre-
ate the storage needed to stabilize the mar-
ket. Canadian companies such as
Vancouver based VRB Power Systems are
at the forefront of research into vanadi-
um-based batteries, which will enable
INVESTOR SERVICES JOURNAL 19
ISJ21 17-33 FINAL 2/5/07 4:32 pm Page 20
CANADA FOCUS
Mike Smyth
large volumes of power to be stored,
potentially bringing much-needed levels
of stability to the market.
Investment in Canada’s natural resources
sector is currently thriving.
Investing in Expertise
A crucial element, which makes Canada
a centre for investment in hard assets is its
thriving financial infrastructure. For
instance, the Toronto Stock Exchange
(TSX) has attracted large numbers of hard
assets firms through its unique capital
raising and project matching system. The
system enables early stage high risk capital
providers to create a capital pool company
(CPC), seek out a private qualifying entity
and start trading on the TSX Venture
Exchange. It will also enable capital
providers to find private investment proj-
ects more easily. CPCs give private owners
a liquidity vehicle to raise capital and
allow them to keep a percentage of the
public entity, grow their business, manage
succession issues and offer stock options
to obtain key expertise and key board
members. As per a recent Price
Waterhouse Coopers survey on the TSX,
in 2006 this method – and others –
enabled mining exploration companies to
raise $1.2 billion Canadian dollars in share
20 INVESTOR SERVICES JOURNAL
capital – a 253% increase over the 2005
figures. Furthermore, the total market
capitalization of the top 100 Canadian
junior mining companies surveyed was
over $27 billion, an increase of 86% from
2005.
Thanks to this reputation as a centre of
expertise for investment in hard assets,
companies from numerous countries rich
in oil, metals and minerals choose to list in
Toronto and benefit from the country’s
financial expertise. Firms in China, South
Africa, Australia and Venezeula are listed
with the TSX and call upon Canadian
investment bankers and commodities spe-
cialists to help them develop and advance
key projects. Finally, Canada’s stock
exchanges and supporting investment
bankers finance an estimated 75% of all
mineral projects in the world.
As a result of their familiarity with
industries based on commodities,
Canada’s management teams, board mem-
bers and supporting legal and accounting
firms are now being courted by investors
to add their expertise to developing other
hard asset projects in the Congo,
Kazakhstan, throughout South America
and even for gold in Nevada, USA.
The New Bandwagon
Investment in Canada’s natural resources
sector is currently thriving. Examples of
rising interest in Canada’s resource stocks
can be seen in escalating daily trading vol-
umes and rising prices. At the end of
2007’s first quarter, trading volumes for
each of the top 10 TSX leaders were aver-
aging 40 million shares per day, and the
more junior TSX Venture Exchange at 13
million shares per day. The average
increase over the quarter of the top 10 TSX
movers was 30%, while the more junior
Venture Exchange saw the top movers at
90%.
A key market for M&A activity, Canada
attracts investors from all over the globe,
including Brazilian miner CVRD, which
recently paid US$17 billion for global
Canadian nickel miner Inco. Swiss based
Xstrata equally picked up Canadian base
metals miner Falconbridge Noranda.
Additionally, Australia’s largest zinc miner,
Zinifex is seeking to acquire Wolfden
Resources’ for its large gold/ zinc deposits.
There’s no doubt that Canada represents
a wealth of opportunity for today’s
investors. As with any market, it is those
who arrive first that will realize the great-
est returns. However, to make the most of
the opportunities Canada has to offer,
experience is crucial. Accessing the best
opportunities means enlisting partners
that can demonstrate a long-standing
Canadian presence, knowledge based on
regular dialogue with the teams handling
key projects and a commitment to devel-
oping the expertise required to identify
strategies that offer attractive returns at
acceptable risk.
Mike Smyth, Research Analyst and Portfolio
Advisor, Lionhart
Mr Smyth joined Lionhart in February
2006. He is responsible for research into
investment opportunities in mining, energy,
alternative energies (e.g. wind, solar, river
run power), water treatment and environ-
mental reclamation.
He joined from Geoinformatics
Exploration, a worldwide minerals explo-
ration company, where he was President
and CEO. He has been involved with natu-
ral resources since 1986, having worked for
Trasnscanada Pipelines, LAC Minerals and
Oakville Hydro/Ontario Power Generation.
anada is hot. While the country
C may not be renowned for its tropi-
cal climate, the performance of
Canada’s investment markets is certainly
raising the temperature. Canadian mutual
fund assets stand at almost CAD700bn
(EUR460bn), while assets under manage-
ment by Canadian pension funds topped
CAD1trn in 2006. Unlike many other
developed countries, Canada’s pension
fund sector is in good shape, with funding
ratios averaging 97pct, according to recent
research by Greenwich Associates.
With strong growth in domestic equity
markets and a healthy environment for
retail and institutional investors, Canada is
attracting a lot of attention from foreign
banks keen to capitalise on the opportuni-
ties. Major domestic firms are beginning
to make names for themselves interna-
tionally: earlier this year, for example,
Power Corporation of Canada acquired
Putnam Investments, a US asset manager
with nearly USD200bn of assets under




ISJ21 17-33 FINAL 2/5/07 4:51 pm Page 21

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CANADA FOCUS




management.
The growing globalisation of major
Canadian financial services companies
like Power, Manulife and CI Financial
means that providers in the domestic mar-
ketplace must adhere to international best
practice when servicing clients. Strong
competition from both local and foreign
providers has ensured that Canadian insti-
tutions are well served by their global cus-
todians. In part, this explains why major
clients rarely move their mandates to
newer entrants or specialist suppliers: the
established providers in the market are
already operating at extremely high levels
of operational efficiency and service qual-
ity.
Like other markets, however, the chal-
lenges continue to come thick and fast.
Custodians are constantly being asked to
progress further up the value chain, so
that services such as portfolio and risk
analytics, transition management, securi-
ties lending and collateral management
are all considered today to be essential ele-
ments of the product proposition. Clients
are also looking to us to come up with
global solutions to the challenges of cross-
border sales and distribution support,
which can include a broad range of local
administrative services in both developed
and emerging markets.
Following the groundbreaking decision
by CI Financial to outsource its fund
administration back in 2001, the out-
sourcing market has gathered significant
momentum. Other major clients have fol-
Brent Wilkens
22 INVESTOR SERVICES JOURNAL
lowed, including Manulife, and there is no
doubt that the concept of fund adminis-
tration outsourcing is as well established
in Canada as it is in the UK, and much fur-
ther advanced than in the US.
Inevitably, much of the Canadian mar-
ket’s attention has been focused on alter-
native investments. Hedge funds may have
caught the spotlight, but Canadian pen-
sion funds are also major investors in a
very broad spectrum of alternative assets.
Infrastructure investment is just one
example: the Ontario Municipal
Employees Retirement System (OMERS)
holds a one-third share in the company
that owns and operates the Confederation
While the country may not be renowned for
its tropical climate, the performance of
Canada’s investm ment markets is certainly
raising the temperature.
Bridge in Canada. OMERS therefore gen-
erates income by taking a share of the
bridge tolls.
We have seen an increased appetite for
alternative investments, which will ulti-
mately drive a major shift in asset alloca-
tion strategies. Although major Canadian
institutional investors have been able to
enjoy strong returns from domestic equi-
ties in recent years, there is a definite trend
toward diversification of assets and a
heightened focus on generating alpha.
Investment administrators need to be in a
position to offer a holistic administrative
solution for these investors, as well as serv-
icing the complex needs of alternative
investment managers.
On the regulatory front, the Canadian
Securities Administrators has issued a pro-
posal that would require the registration
of hedge fund managers. If ratified, regis-
tration would have four key objectives: to
ensure that they have the resources to
carry out their functions, or to properly
supervise the functions if they are con-
tracted to a third party, and to provide
proper services to investors; to ensure that
they manage their conflicts of interest; to
ensure that they have adequate capital and
insurance to provide protection for
investors and minimize the risk of loss and
disruption to them; and to ensure that
they have sufficient proficiency and
integrity to carry out their functions.
Another important regulatory initiative
in the Canadian market is the ongoing
implementation of National Instrument
24-101, which introduces same-day trade
confirmation. This is an important step in
moving the entire market forward and
Canadian custodians have played an
important role in convincing the regula-
tors of the need for change. All custodians
would benefit greatly from receiving
instructions earlier and having more time
to deal with the exceptions.
Under the aegis of the Canadian Capital
Markets Association, same-day trade con-
firmation has become one of the most
important post-trade issues in the
Canadian securities markets. Its imple-
mentation is expected to have a very posi-
tive impact on the timely receipt and pro-
KN
cessing of trade instructions. The
Instrument took effect on April 1, 2007.
Canada is a dynamic and thriving mar-
ket and institutional investors have grown
accustomed to demanding and expecting
the very highest levels of service. Increased
globalisation of the investment manage-
ment business will lead to new opportuni-
ties for Canadian firms looking overseas,
and for those providers able to deliver
comprehensive solutions to growing chal-
lenges of complexity.
Brent Wilkens
RBC Dexia
T
here have been numerous develop-
ments for Canadian custodians
that can all be boiled down to one
word: ‘more’. Some of these are in areas
that are obvious and upfront - compliance
and risk monitoring are getting more
attention from regulators and clients alike.
Performance measurement is moving
from simple rate of return calculations to
more sophisticated attribution reporting
for equities and fixed income instruments.
The dividing lines between these areas are
blurring as needs arise to assess compli-
ance, risk and performance on a more
consolidated basis. These are not new
issues but an extension and growth of the
existing landscape.
Custodians have invested vast sums of
time and capital in the acquisition and use
of software systems to support their busi-
nesses. They also need to be able to gather
vast amounts of market information for a
ISJ21 17-33 FINAL 2/5/07 5:18 pm Page 23

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ISJ21 17-33 FINAL 2/5/07 4:33 pm Page 24

CANADA FOCUS

variety of purposes – from simple state-

ments to NAV calculations for a mutual or
pooled fund. Most people tend to think
about market prices as equities and bonds
valuations from domestic and interna-
tional markets. Significant efforts are
spent on gathering and verifying this data.
Simple bonds are evolving with instru-
ments like Airbag, Asian drag, Compound
Cliquet and Galaxy bonds - all in use
today. But it is market values for the

Custodians have invested in vast sums of time

and capital in the acquisition and use of software
syystems to support their business.
growing, highly sophisticated and con-
stantly evolving world of derivatives and
alternative investments that could cause
the most risk and problems. Valuing a
forward or a swap requires data, comput-
ing systems and knowledgeable staff. How
does one value a new one-off deal that has
multiple complex terms and conditions;
and do so in a timely fashion? In addition
to the terms and conditions struck
between the two parties, these valuations
require powerful computing systems, staff
with advanced degrees in mathematics
and large amounts of historical data to
feed into a pricing model – often to value
a single security. This will all come at a
cost that is commensurate with the effort
to perform these valuations.
Custodians are often put in a position of
valuing these instruments. However this
may not be a business function that they
wish to take on. Having taken on the valu-
ation function, they will have to consider
any liabilities that go along with perform-
ing this task.
Certainly there is an opportunity for
data vendors to service this area that is
under serviced today. There is no reason
that data vendors cannot meet this need –
challenges yes, but reasons no.
The area of market pricing for deriva-
tives and alternate investments is relative-
ly young. How the challenges will be met
and the solutions that prove themselves
out will be uncovered in the not too dis-
tant future. What we can be sure of is
‘more’ – an increasing numbers of highly
complex and diverse securities that will
demand solutions.

Robert Strike, Executive Vice President,

Development, North America
Statpro Robert Strike

24 INVESTOR SERVICES JOURNAL

ISJ21 17-33 FINAL 2/5/07 4:33 pm Page 25

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HSBC SECURITIES SERVICES the securities industry and share views and

UNICREDIT MARKETS & INVESTMENT BANKING

NORTHERN TRUST
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JP MORGAN NETWORK MANAGEMENT Senior VP, SIS SEGAINTERSETTLE AG

(attendee at IIR’s 6th Annual Network Management Forum in Prague, June 2006)

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SUMITOMO TRUST & BANKING CO. (USA)

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EUROCLEAR

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BRITISH BANKERS’ ASSOCIATION

CLEARSTREAM • What is the future of the sub-custody business?

BARCLAYS CAPITAL • Current challenges facing the network manager

BROWN BROTHERS HARRIMAN • Target II Securities, Code of Conduct & the impact to local

MAYER, BROWN, ROWE & MAW custody in Europe

MELLON • The buying criteria focus: trends in client evolution

NORTHERN TRUST

CITIGROUP • Investigating the emergence of an increasingly complex

BCS PLC alternative post-trading infrastructure

STATE STREET • Making sense of pre-emerging markets: what price

Others to be announced coverage?

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ISJ21 17-33 FINAL 2/5/07 4:38 pm Page 26
ANALYZE THIS - LEGAL REVIEW
The Legal
Lowdown
WHAT IS THE IRISH
FINANCIAL REGULATOR
DOING TO HELP FUND
PROMOTERS?
Michael Barr ,
A&L Goodbody
Fund promoters can have a Qualifying Investor Fund (QIF)
authorised on the day after the fund documentation is filed
with the Financial Regulator. This should assist fund promot-
ers who need to ensure speed to market for such funds.
Because QIFs are sold to ‘sophisticated’ investors who meet
certain minimum net worth and minimum subscription tests,
they are not bound by the regulatory limits relating to invest-
ment strategies or leverage which apply to retail funds and are
therefore seen as needing less intensive regulatory scrutiny
prior to authorisation. The process requires finalised QIF
documentation to be filed with the Financial Regulator by
3pm on the day before authorisation. The documentation
includes an application form, prospectus, constitutional docu-
ment, the material contracts and various letters of confirma-
tion. The documentation must reflect the necessary authori-
sation requirements. Any derogations from the Financial
Regulator’s requirements will need to be cleared in advance
and reflected in the documentation. The Financial Regulator
encourages applicants to discuss innovative proposals in
advance to avoid delays. The various parties to the QIF must
be approved by the Financial Regulator before the application
for authorisation can be made.
An Irish QIF has a minimum subscription amount per
investor of 250,000. Only Qualifying Investors may invest in
a QIF, meaning a natural person with a minimum net worth
(excluding main residence and household goods) in excess of
26 INVESTOR SERVICES JOURNAL
1,250,000 or an institution which owns or invests on a dis-
cretionary basis at least 25,000,000 or whose beneficial own-
ers are qualifying investors in their own right. Exceptions can
be made for the investment manager and certain of its
employees. A QIF established as a closed-ended scheme must
also comply with the approval requirements of the Prospectus
Directive Regulations.
For QIFs who seek a listing , the Irish Stock Exchange cur-
rently operates a limited checklist for Financial Regulator reg-
ulated investment funds and is very aware of the importance
of speed to market for QIFs. Listed closed-ended QIFs have
to follow the Prospectus Directive approval processes.
I have been delighted with my clients’ appetite for the new
regime. In Ireland, where the existence of a robust but fair
regulatory regime is often used a selling point, the balance
between being able to meet the fund promoters’ needs and
maintaining an appropriate regulatory regime is crucial so
developments such as this are most welcome.
THE US CAPITAL MARKETS:
MUST WE FORFEIT INVESTOR
PROTECTIONS TO REMAIN
COMPETITIVE?
Tony Gelderman
Counsel, Bernstein Litowitz Berger & Grossmann LLP
If you have picked up an American business publication in the
last 5 months, chances are you have seen headlines describing
studies which suggest that the US capital markets are now signif-
icantly less competitive than markets elsewhere.
These headlines have been driven by a report entitled
“Sustaining the US’s Global Financial Services Leadership” pub-
lished by McKinsey & Company and more recently a US
Chamber of Commerce study entitled “The Commission on the
Regulation of US Capital Markets in the 21st Century.” It is no
secret that these studies are agenda-driven. According to both,
onerous governmental regulations and securities litigation are
damaging the ability of American markets to attract new list-
ings. At the same time, these studies make no mention of the
higher costs and fees of American markets, or of the geographi-
cal and cultural advantages to companies selling their shares in
their own countries.
The timing of this well-coordinated effort to shape public
opinion is poor at best. Indeed, the headlines touting these
recent studies and dubious conclusions are giving stiff competi-
tion to those describing how the US stock market is at an all-
time high and how Wall Street’s largest financial firms raked in
record profits, producing more than $25 billion dollars (US) in
bonuses last year alone.




ISJ21 17-33 FINAL 2/5/07 5:24 pm Page 27

ANALYZE THIS - LEGAL REVIEW

Further, the media attention that this campaign has
received in the US rivals the headlines of just a few years
ago. Those headlines were, however, quite a bit different -
describing the largest wave of white collar crime in history.
Financial scandals and accounting frauds such as
WorldCom, Enron, Cendant, HealthSouth, Tyco, Global
Crossing, Lucent, McKesson, and Adelphia (just to name a
few), were unfolding. Over the last ten years, in fact, secu-
rities fraud has resulted in the destruction of over one tril-
lion dollars (US) in market capitalization and shareholder
value in the US.
In the last decade, in response to the wave of corporate
fraud, securities lawsuits have generated their own head-
lines by returning nearly $70 billion dollars (US) to

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INVESTOR SERVICES JOURNAL 27

ISJ21 17-33 FINAL 2/5/07 4:38 pm Page 28
ANALYZE THIS - LEGAL REVIEW
defrauded investors and yielding significant corporate gover-
nance improvements by insisting that management reforms be
part of the resolution of these actions.
This is not the first time that big business has sought to demo-
nize securities litigation and in the process erode investor pro-
tections. Twelve years ago, the business headlines in America
paralleled those we see today. At that time, the US Congress was
putting the finishing touches on the Private Securities Litigation
Reform Act which made it significantly more difficult for
investors to bring securities lawsuits. What followed were the
largest corporate frauds in history. These catastrophic frauds
then ultimately led to additional legislation (the Sarbanes-Oxley
Act of 2002) which was required to increase market transparen-
cy and rebuild investor confidence.
Now, as the US markets experience unprecedented profits, a
coalition of pro-business interests again seek to manipulate the
headlines. Each of the wordy tomes produced by these study
groups offer variations on the same theme: relax Sarbanes-
Oxley requirements, erase securities litigation and diminish cor-
porate accountability at the expense of investor rights.
What’s even more disturbing is that for the first time in histo-
ry, the US Securities and Exchange Commission (SEC) is now
advocating on behalf of companies and against the investors
whom it is supposed to protect. In Tellabs, Inc. v. Makor Issues
& Rights Ltd., a case currently before the US Supreme Court,
the SEC contends that the standards for bringing private securi-
ties fraud lawsuits should be raised to make it even more diffi-
cult for investors to file a claim. This is a major departure from
long-standing SEC policy, the agency created to regulate our
capital markets and prevent corporate abuses.
If the SEC and the pro-business lobby get their way, many of
this country’s most essential investor protections will disappear
forever. As recent headlines suggests, there is a direct relation-
ship between limiting a shareholder’s ability to sue and the
prevalence of securities fraud. Simply put, private enforcement
of the securities laws keeps corporate disclosure honest in the
US - a key strength of the American economy. Having just
emerged from the rash of corporate scandals that eroded
investor confidence in our capital markets, one has to conclude
it is risky indeed to suggest that further limits on private litiga-
tion should be the order of the day.
ARE CAYMAN MUTUAL
FUND CHANGES SECURING
THE ISLANDS "OFFSHORE
LEADER" STATUS?
Jonathan Law, Associate in the Cayman Corporate and
Commercial practice of law firm Appleby
28 INVESTOR SERVICES JOURNAL
Around four months have passed since the enactment of
the Mutual Funds (Amendment) Law 2006 and the status of
the Cayman Islands as the offshore hedge fund capital seems
to have been unaffected.
The November 2006 revisions to the Mutual Funds Law
followed upon the report of a working group made up of
government officials and industry representatives charged
with revisiting the Law with a view to identifying areas for
improvement. The flexibility of the existing legislative
regime is well known internationally and has been instru-
mental in the Cayman Islands' development into the pre-
eminent offshore jurisdiction for hedge funds. The legisla-
ture in the Islands did not adopt all of the recommendations
for change made by the working group but instead picked
up a limited number of amendments to certain key provi-
sions in the Law, namely:
- The Cayman Islands Monetary Authority ("CIMA")
can now formally waive the ordinary requirement that
a fund file its audited accounts annually;
- Funds established in overseas jurisdictions can now
be administered by Cayman based administrators
without the need for that overseas fund to register
with CIMA;
- The minimum required subscription per investor for
registered funds has been increased from US$50k to
US$100k.
The audit waiver is an important addition to CIMA's for-
mal discretions and will for example allow funds which delay
their launch to seek a waiver and make the associated cost
savings.
The increased allocations of pension funds to alternatives
is reported in the US as fuelling a growth in the use of third-
party administration. The increased flexibility and cost com-
petitiveness for Cayman based administrators in removing
the requirement for foreign funds administered in Cayman
to register with CIMA should allow Cayman based service
providers to compete for an increased book of business
overseas.
The rise in the investment minimum per investor for regis-
tered funds to US$100k follows the recommendation for an
increase made by the IMF as part of their March 2005 super-
visory and regulatory assessment of the Islands. It also tracks
investment minima in a number of other jurisdictions and is
intended to further control the participation in certain col-
lective investment schemes by investors for whom the invest-
ment is unsuitable.
Fund managers and sponsors continue to select Cayman as
their preferred offshore jurisdiction and it would seem that
the November 2006 amendments to the Mutual Funds Law
have achieved a balance between the need for continued
simplicity and flexibility in the Cayman legislative regime
and the requirement to modernise certain provisions of the
law to allow for continued growth in the funds industry in
the Islands.

ISJ21 17-33 FINAL 2/5/07 4:38 pm Page 29
Walking the Line?
Voices have been raised across the
industry of late on the questionable
state of Asia Pacific accounting.
Andrew Warburton sniffs out the
scandal in the East.
W hilst Asia has undoubtedly made
great leaps forward in terms of
economic growth, back-office
processes have often struggled to keep up.
A history of accounting scandals in Japan,
China, Taiwan and South Korea bear wit-
ness to what some see as a need to inter-
nationalise Asia Pacific standards, whereas
others have argued that what we are seeing
is merely a period of adjustment. Whilst it
is easy to downplay the scandals by com-
One mustn’t overlook the significant rectifying
steps that all the Asian countries are taking.
paring them favourably with Enron, the
events themselves, though contextualised
by comparison, hardly pale into insignifi-
cance. They may not have reached the
heights of fraud that have been seen in the
Western world, but according to some
ASIA PACIFIC - REGULATION
they represent deeper problems than those
pointed out by the US scandal; for this
reason alone, they deserve investigation.
To do justice to Asia Pacific regulators, it is
important to recognise the steps that have
been taken to improve the region’s
accounting standards: it may seem worry-
ing that an economy as advanced as Japan
should suffer from troublesome flaws, but
one mustn’t overlook the significant recti-
fying steps that all the Asian countries are
taking.
Japan
Controversies in Japan have centred round
the nation’s third largest stockbroker,
Nikko Cordial, whose profit-padding
activities have led commentators to invoke
INVESTOR SERVICES JOURNAL 29
ISJ21 17-33 FINAL 2/5/07 4:38 pm Page 30
ASIA PACIFIC - REGULATION
memories of Enron. In January, the firm
were forced to revise their books two con-
secutive times after it was proved that pre-
tax profits for the year March 2005 to
March 2006 were 11 per cent lower than
initially reported. After the firm had orig-
inally denied any involvement by top
management in the affair, the new regime
declared that former managers should
bear “grave responsibility.” This followed
news that former executives had been paid
retirement bonuses to the value of hun-
dreds of millions of yen.
The financial industry’s reaction to the
scandal was mixed. Whilst the Japanese
Financial Services Authority announced
that they were fining Nikko a record sum
Scandal has thrown the cosy
relationship between Japanese firms and
their auditors into stark relief.
of 500 million yen, calls for Nikko to be
de-listed from the Tokyo Stock Exchange
have been ignored, despite warnings that
their continued listing could effect
investor confidence in the region. Above
all, the scandal has thrown the cosy rela-
tionship between Japanese firms and their
auditors into stark relief.
At the centre of these controversies is the
auditing firm Misuzu, who appear to have
serviced a number of scandal-hit firms in
the region, including Nikko and Sanyo
Electrical Company, who have recently
been cooperating with FSA investigations
into reports that they have written off
loses of 190 billion yen. The FSA began
questioning Misuzu on 20th February;
this was followed by the news that Misuzu
were to transfer all its operations and pub-
lic accountants to other firms by the end
of July this year, effectively dissolving its
business. What makes these events so
shocking is that Misuzu were hardly a
small firm trying to make good; they did,
in fact, boast an impressive list of clients,
Nippon Steel among them. Prior to their
demise, regulators usually turned a blind
eye to any involvement by accountancy
firms in the illegal activities of those they
serviced, which meant that Japanese firms
were under little pressure to develop good
corporate governance and compliance
practices. In this light, Misuzu’s treatment
can be seen as a major development for
30 INVESTOR SERVICES JOURNAL
Japanese accounting standards.
Whether the recent controversies are
symptoms of a deep flaw in the Japanese
financial services industry is something
that is being hotly debated. Commentators
argue that an unhealthy relationship
between Japanese firms and their auditors
is a historical problem and that an atmos-
phere of unquestioning trust has often
prevailed over rigour and business sense.
The news of Misuzu’s failure to report
consistent errors has led the FSA to pro-
pose tough new rules. At present the FSA’s
regulatory authority is limited to issuing
warnings or, in the most extreme cases,
ordering the cessation of business or a full
dissolution. The new rules would allow the
FSA to fine firms involved in fraud, force
auditing firms to report illegal findings
and lower the maximum length of time for
which auditors can serve any given firm
from seven to five years, hopefully dis-
couraging ‘cosy’ business-practises from
taking hold.
This is the latest regulatory step in a
chain of events that suggest Japan is taking
its accounting responsibilities seriously. In
November 2006, representatives of the
Accounting Standards Board of Japan met
with the US Financial Accounting
Standards Board in an attempt to form a
dialogue about the “global convergence of
accounting standards”. This was the sec-
ond time the Japanese board had met with
its US counterpart in the course of a year,
whilst the next meeting has already been
planned for May this year.
Whether these developments signal a sig-
nificantly better future for Japanese
accounting standards is yet to be seen.
Critics argue that the new rules will over-
stretch auditing firms who are already suf-
fering from a shortage of qualified
accountants – a problem that has been
reported across the Asia Pacific. On 22nd
February 2007, The Financial Times
reported that Japan had just 22,000 quali-
fied accountants against a need of approx-
imately 30,000 – a disparity that’s expect-
ed to be exacerbated by the recent rash of
fraud arrests. Japan is not the only country
struggling with a shortage of qualified
accountants. As Mr. KK Tse, Head of State
Street’s investment services business in the
Asia Pacific, points out, “[The problem]
goes back to… the supply and demand of
the accounting profession in Asia…
Unless you are working for a well-
resourced company, like a listed company,
it will really take time to improve your
internal standards while you cannot hire
good personnel in the market.”
Asia Pacific companies have long regard-
ed accounting as a mere “mechanic
process”, a requirement lying somewhere
on the outskirts of “real” business. The
biggest challenge the region is facing is the
integration of its accounting into the fab-
ric of its corporate life, and for this reason
it is a necessary to view back-office
processes as equally important to the suc-
cess of a business as front-office manoeu-
vrings. “Accounting,” says Mr. Tse, “is a
core component of management process.
With the ever-increasing demand for cor-
porate governance and the increased stan-
dards of accounting around the world, I
think many management boards need to
wake up and use accounting and auditing
as a competitive edge for themselves.”
When – and how – this can be done with
Asia’s limited resources is another ques-
tion entirely.
China
China has made a big show of improving
its accounting standards. In February
2006, the Chinese Finance Minister, Jin
Renqinq, oversaw an ostentatious unveil-
ing ceremony of his country’s plan to
bring its accounting standards in line with
globally recognised International
Financial Reporting Standards, designed
to make financial information more reli-
able for investors. Whilst Mr. Jin described
the move as a “milestone” for the account-
ing industry in China, it is worthy point-
ing out that there are important excep-
tions to the Chinese rules. That regulators
are not always consistent in applying the
standards is a phenomenon that can be
witnessed across the Asian world. “In
China, for instance,” says Mr. Ivaylo
Gueorguiev, Business Development
Manager of Trade Processing at Reuters,
“[the standards] only apply to the listed
banks, not to all the regional banks, so it
isn’t compulsory for all small banks [to
adopt them]… So there are different vari-
ations of standards. The generic standard




ISJ21 17-33 FINAL 3/5/07 1:39 pm Page 31




is there but… you might see variations of
the standard and this is down to applica-
tion by the regulator. The regulator might
say it’s compulsory for all banks or that it’s
compulsory only for the listed banks.” One
reason smaller banks may adopt the stan-
dards voluntarily is the desire to be listed
on a national stock exchange, but this, as
yet, remains the only impetus towards
nation-wide application.
A more encouraging sign is that a senior
official from the Chinese Securities
Regulatory Commission is set to join
the International Accounting Standards
Board in July 2007. As Mr. Tse points out,
it is only the latest in a chain of events:
“China has been trying to upgrade
its accounting standards for many years…
China has been one of the most
forward countries in the world in terms of
updating themselves so they can be more
competitive.”
There is more to worry about, however,
than simply implementing a legal frame-
work. Due to the complex process of
transferring from one set of standards to
another, China faces structural problems.
Mr. Gueorguiev explains: “[T]he standard
in general is open to interpretation.
Because of that… very often the institu-
tion that implements the standard needs
expert advice. And also because of that,
very often the bank or any institution that
is implementing the standard might
require external help, and this external
help might come in the form of an auditor
or consulting firm or accounting firm.” As
with Japan, however, the fundamental
strength of China’s accounting industry –
i.e. the number of certified accountants,
quality of knowledge, education and
training – leaves much to be desired. The
Chinese Institute of Certified Public
Accountants, as reported by The Financial
Times, has a mere 140,000 members, of
whom only half are practising. The short-
age of trained accountants who are able to
advise firms on implementing the stan-
dards represents a major problem.
According to Mr. Tse, “a lot of fresh grad-
uates trained in auditing problems…
move on quickly. They move on into fields
such as fund management. So it would
seem that the requirement is very high
and the supply is still limited.” China has
responded to this situation by calling in
foreign organisations such as the
Association of Chartered Certified
Accountants with the intention of receiv-
ASIA PACIFIC - REGULATION
ing help in retraining its accountants, but,
as mentioned by The Financial Times, “a
lack of local accountants with any training
at all will hamper them.”
The problems that have been discussed
are by no means isolated to Japan and
China. South Korea and Taiwan have also
experienced their fair share of scandal. (In
March, an investigation into the Rebar
Group ended with the uncovering of
numerous banking and accounting viola-
tions, resulting in the prosecution of 107
Taiwanese business-people and their fam-
ilies.) But these countries, too, have begun
to improve their standards. The fact that
scandals are still being witnessed even
after standards have been established
The region is in desperate need of a strong
and confident accounting profession.
shows that a lack of regulation is not the
major cause of poor accounting in the
Asia Pacific. As has already been stated, the
region is in desperate need of a strong and
confident accounting profession. The
pressure of media exposure may have gone
some way towards improving the regula-
tory environment, but little has been done
to improve the accounting industry itself.
Some, in fact, would argue that the
accounting profession is looking even
less attractive. That investor confidence is
strong at all – if slightly shaken – has
undoubtedly been helped by regulatory
change. Mr. Tse explains: “Accounting in
the Asia Pacific has been going through a
very strong period of internal
standardisation… A lot of the govern-
ments are subscribing to international
accounting standards and that definitely
helps the country and the stock
exchanges and listed companies to prove
to investors that they do take these kinds
of things seriously.”
‘Seriously’ is definitely the word. What
ministers, regulators and corporate bosses
know is that the strength of the
economy depends upon global
competitiveness; it is only by developing
transparent international standards that
the East will continue to grow. The Asian
back-office might leave much to be
desired, but if recent developments are
anything to go by, we’ll soon see it agile
and nimble on its toes.

INVESTOR SERVICES JOURNAL 31
ISJ21 17-33 FINAL 2/5/07 4:38 pm Page 32
CLEARING & SETTLEMENT
Target2 securities are
set to introduce
sweeping changes to
Europe’s settlement
scene.
Giles Turner probes the
issues.
Targeting
Change
T
he media has made surprisingly
little of the proposed European
Central Bank (ECB) initiative to
expand the payments system used for
central bank clearing and settlement
operations (Target1). The ECB’s new
scheme, the appositely named Target2
Securities, aims to increase the central
bank’s reach to securities settlements
across the Euro-zone. This initiative has
led to cries across the private sector that
the ECB is encroaching on territory that
is the domain of private financial institu-
tions, not an independent central bank.
The world of securities settlement is not
a sexy topic, yet the ECB’s attempt to
The crux of the argument behind the
ECBs drive to put in place Target2
focuses around efficiency.
push through Target2 Securities touches
on the rather more ardent debate of pub-
lic over private ownership. Outside of
Europe, the Western press presumptu-
ously threw up its arms in disgust over
the Shell/Sakhalin2 affair – where
32 INVESTOR SERVICES JOURNAL
Russian authorities are in the process of
‘reclaiming’ the Sakhalin oil and gas fields
from a Shell led consortium – yet little
attention has been paid to a private/pub-
lic problem the introduction of Target2
Securities presents to Europe. Oil and gas
fields are tangible, physical property
being central to Western governance. The
world of securities settlements, essential-
ly an abstract flow of data, is a much
harder topic to stir the imagination and
passion of moribund journalists. This
does not, however, make it any less
important.
The crux of the argument behind the
ECBs drive to put in place Target2
Securities focuses around efficiency. At
present, the numerous European central
depositories (CSDs) are affected by
regional regulations; the ECB website
proposes an efficient alternative: ‘With its
single technical platform replacing the
multiplicity of platforms of the current
Target system, Target2 Securities has
increased the pressure for a common
European solution for the settlement of
securities transactions.’ The benefits of
such a system ‘would potentially bring
large cost savings as a result of the high
level of efficiency and technical harmon-
isation that it would entail for market
participants, particularly in the field of
cross border business.’ Back in January,
an article in the Financial Times stated
that ‘The [ECB] believes it can slash the
cost of securities settlements by up to 90
per cent by pressing ahead with its con-
troversial plans to force financial integra-
tion in the 13-country region.’
It is at this point that the ECB has run
into opposition. Whilst the media may
not be keen to pick up on this story, the
European Central Securities Depositories
Association (ECSDA), made up of 42
settlement bodies, has written to the ECB
asking it not to go ahead with Target2
Securities unless more information is
available. If these settlement bodies
haven’t been privy to enough informa-
tion regarding Target2 Securites, it seems
presumptuous for the central bank to
declare that savings of 90 per cent are
even possible. Edward Lopez, Director of




ISJ21 17-33 FINAL 2/5/07 4:38 pm Page 33




Sales, EMEA, Wealth Management
Solutions, at SunGard states, “I don’t
think there has been enough analysis
done to see how this will positively affect
the individual CSD. They are in theory
losing economies of scale because they
are moving business off to the ECB. One
of the main concepts is that this will be
limited only to settlements, and the asset
services portion will still be done at the
local CSDs. That’s just one example of a
new complexity that’s out there. I really
think it is premature to estimate how
much savings there are going to be.” John
Shepherd, Product Manager, Global Plus,
Wealth Management Solutions at
SunGard highlights another important
potential problem, “If a London firm
decided to settle through Target2
Securities, you’ll be trading mostly
through sterling, therefore who’s going to
be incurring the cost of FX? I think the
statement of 90% is therefore very opti-
mistic and very aggressive.”
This lack of information was a problem
highlighted in the early stages of Target2.
In July last year the ECB announced that
it was evaluating the possibility of pro-
viding securities settlement services
within the eurozone. One month later the
ECB issued a questionnaire to the indus-
try on the possible structure of this new
service. Euroclear’s response highlighted
the need for more transparency in the
project at this early stage: “Euroclear wel-
comes the fact that the ECB is seeking
input from the market at this early
stage… It is therefore entirely
understandable that critical details of the
proposal are still lacking. It is neverthe-
less vital that substantially more precise
information be provided to the market
soon, both on the proposed approach
and on its likely operational, financial
and risk consequences for the market and
for CSDs.”
Half a year on, and little seems to have
been done regarding placating the indus-
try; so little that the regions top antitrust
watchdog has felt it necessary to tell the
ECB that it will come under close scruti-
ny regarding Target2 Securities. This will
have pleased the private sector as it is
unlikely that the banking industry will
want to welcome the possibility of an
independent financial behemoth that can
barely be held accountable for its actions.
However, if the ECB goes through with
such initiatives as Target2 Securities, it
may in the long run undermine its influ-
ence. Professor Willem H. Buiter, Chair in
European Political Economy at the
London School of Economics, explains
“Fundamentally, the ECB can do what it
wants, when it wants to. However, since
the clearing and settlement of securities
transactions is clearly not part of mone-
tary policy, the ECB, by branching out
into these unrelated activities, would
make itself vulnerable to interference and
meddling by various Ministry of Finance,
regulators or supervisors outside the
ESCB etc. This could even undermine its
independence in the area of monetary
policy. I believe the ECB recognises that
while formally the Treaty makes the ECB
The ECB wants to become the Supervisor /
Regulator of the European banking system, the
European non-bank financial institutions and
the European financial markets.
independent, it really only makes the
ECB independent in the area of monetary
policy.” This effort by the ECB to get
stuck into the back office world of securi-
ties settlement is perhaps going one step
too far. Any effort to reduce costs is
admirable, but giving everyone a helping
hand is not the main reason behind the
ECBs initiative as Mr. Buiter explains,
“The reason the ECB is trying to branch
out into clearing and settlement of secu-
rities is obvious. It is not clearing and set-
tlement itself the ECB is interested in.
That's as exciting as the plumbing and the
wiring in your house - you only notice it
when it goes wrong and then you want
someone else to fix it. No, the ECB wants
to become the Supervisor/Regulator of
the European banking system, the
European non-bank financial institutions
and the European financial markets. This
is not in the Treaty (which only men-
tions, once, the need for the ECB to sup-
port financial stability), but it is also not
something that is ruled out by the
Treaty.”
It would be too easy to demonise the
ECB for attempting to increase the red-
taped tentacles of bureaucracy. Each of
the regional CSDs are highly regulated by
the countries they reside in. It may well
be beneficial to have one large body tak-
ing hold of settlement within Europe, but
CLEARING & SETTLEMENT
could this service offered by Target2
Securities be delivered by the private sec-
tor? With Target2 Securities, the ECB is
putting itself directly in competition with
Euroclear and the rest of the private sec-
tor. Mr. Shepard of SunGard believes that
“the private sector is moving along a
model where communications between
CSDs and the ultimate transfer agencies
are going to be more harmonised. As a
result there will be greater realisation of
savings in settlement activity versus what
has been proposed by Target2 Securities.”
The European financial landscape is
changing fast as Mr. Buiter explains,
“European banks are emerging fast. We
don't yet have any banks incorporated
under the EU corporate statute, but that
will come. We increasingly have 'cross-
boundary' EU banks (ABN-Amro &
Antonveneta; possibly Barclays and ABN-
Amro). We already see regulatory and
supervisory arbitrage in the discussion
between ABN-Amro and Barclays as to
where and by whom they will be regulat-
ed. There will be an EU-wide banking
regulator, for the largest and most impor-
tant banks - the ones with a cross-border
multi-country identity. Banking supervi-
sion will have aspects of what we current-
ly see in the US with the largest banks
regulated by the Fed and the FCC and the
smaller banks by the FIDC and the state
regulatory agencies. There may even be
an EU-wide FSA in due course. This vac-
uum the ECB wants to fill. Getting their
hands on some key financial markets
infrastructure is a means to an end.” It
therefore remains to be seen whether the
private or the public sector is most suited
to the role of settlements and if the ECB
gets its way, this question will remain a
‘What if?’ What is definitely certain is that
the private sector is nonplussed by the
ECB's encroachment onto new territory
and that the socio-economic discord over
private versus public is no longer the
realm of economists and activists, but
also that of the back-office of securities
settlement.

INVESTOR SERVICES JOURNAL 33
ISJ21 34-52 FINAL 2/5/07 7:12 pm
ITALIAN CUSTODY
Italian
Stallion
Is Italy poised to take
its place amongst the
world’s elite
sophisticated and
liquid capital markets?
Brian Bollen reports.
The long-overdue consolidation of the Italian
banking market is beginning to take place.
34 INVESTOR SERVICES JOURNAL
Page 34
I s Italy a corruption-ridden, un-
trustworthy, anarchy-plagued, crypto-
communist third world market in
which it is virtually impossible to do
meaningful business? Or is it poised to
take its place amongst the world’s elite
sophisticated and liquid capital markets?
These questions are not deliberately
polarised and provocative, though readers
could be forgiven for thinking just that,
but bear in mind that this writer has
Italian blood coursing through his veins,
courtesy of the migration of his maternal
great-grandfather from Cava di Tireni
near Naples, to Glasgow, in the early years
of the 20th century. They arise honestly
from a consideration of developments that
have taken place in the Italian custody
market in recent years, and from discus-
sion of likely future developments.
Those once and future developments are
largely driven not by primary movements
initiated by banks keen to exit or enter the
custody business in Italy, but by strategic
moves in the broader banking world
which have an unavoidable ripple effect
upon the custody world. The one striking
exception to this rule of thumb is, of
course, the purchase early last year of the
Unicredito securities services business - 2S
Banca S.p.A. - by Société Générale
Securities Services (SGSS).
SGSS describes the 548m acquisition of
the custody and fund administration of
UniCredit Group as a central plank of the
strategic plans to transform SGSS into a
major pan-European custodian with an
innovative and dynamic business model.
2S Banca is already the second-largest cus-
todian in Italy with more than 455bn in
assets under custody and nearly 80bn in
funds under administration. It offers sig-
nificant opportunities for further signifi-
cant growth, allowing SGSS to tap into a
new customer base and offer local
investors who have been accustomed to
dealing with local banks the option of
holding foreign assets with SGSS. It will
also allow SGSS to offer its own existing
French and international customers ready
access to local custody services in Italy.
The business acquired with 2S Banca
includes custody, clearing and settlement,
a depositary bank, fund administration
and transfer agency for clients in Italy,
Luxemburg and Dublin. SGSS retained
UniCredit’s existing organisation and
teams in order to ensure continuity in the
existing partnerships between UniCredit
and its clients. A total of 435 staff, of
whom 376 are based in Italy, were trans-
ferred to SGSS.
The long-overdue consolidation of the
Italian banking market that is beginning
to take place reflects the movement of tec-
tonic plates elsewhere, and is set to follow
the pattern set by the virtual disintegra-
tion of the home-grown market in the UK
in the 1990s, a number of market partici-
pants predict. In this world view, the ten-
tacles of the European Union are starting
to creep into areas that have previously
stoutly ignored the increasing power being
wielded by Brussels, and have an impact




ISJ21 34-52 FINAL 2/5/07 7:12 pm Page 35
on the local financial markets that local
politicians would never have been able to
propose, let alone impose. The loss of
funds by Italian investment houses to for-
eign competitors is also starting to fray the
nerves.
“The market will change because Italian
funds are haemhorraging assets at the rate
of around 4bn a month, partly because of
the way custody and fund administration
fees are levied on the funds in question
rather than paid by the asset managers,”
says Carlos Sanchez, of RBC Dexia in Italy.
Costs are also disproportionately high in
Italy because the vast majority of the busi-
ness is captive, with custody and asset
management being provided by the same
group; there is no incentive to cut fees, and
the asset manager cannot take a unilateral
decision to move the assets because a
change of provider will hit the parent
bank’s profit and loss account.
Another aggravating factor is the way
assets are taxed in Italy, with a tax of
12.5% being levied on a theoretical non-
realised capital gain and paid yearly. “The
pain is becoming enough for the
Government to react,” Carlos Sanchez
continues. “It is too big to ignore. Alarm
bells are ringing, yellow lights are flashing.
As the funds bleed away, the Government
loses its annual 12.5% tax; even the
Government will one day take out its cal-
culator and see what it’s losing.”
The loss of funds, of course, means the
loss of work, therefore the loss of jobs,
therefore the loss of tax, as vicious a circle
as any Dante painted of Hell. That could
come as an exceptionally rude awakening
for a country where, because of strong
unions and labour laws that are heavily
slanted in the worker’s favour, it has tradi-
tionally been impossible for companies to
shed labour, even in extreme cases of out-
right incompetence and theft from the
company. “I know people who take one
job after another, and openly inviting dis-
missal, because they collect their salary for
two years after dismissal, and find another
job straight away,” says one observer. “It’s
an easy way to get rich.”
Which rather indicates that foreign insti-
tutions could be well advised to give the
country a wide berth, but still they come.
Of the five largest custodians in Italy, four
are foreign: BNP Paribas, Citigroup,
SocGen and Deutsche Bank. They domi-
nate the market. Only Intesa Sanpaolo is a
significant and growing player in custody
in its native land, and that is not because
of a strategic view on custody as a busi-
ness, but because of the spate of consoli-
dation that created the bank, the former
Cariplo, Banco Ambrosiano Veneto and
Banca Commerciale Italian being rolled
into it during a concentrated period in the
late 1990s, with San Paolo IMI joining in
the fun as recently as August 2006. The
creation of such a large bank created a
large player in securities, by default, but
the enlargement of the group has been
interpreted as a defensive move to protect
the organisation from a possible foreign
predator rather than a growth-oriented
manoeuvre.
The consensus view amongst those inter-
viewed in the preparation of this article is
that more consolidation will take place in
Italy’s banking industry, with both purely
local deals and cross-border transactions
featuring, for two quite different reasons.
Firstly, smaller banks who currently pro-
vide custody as a logical add-on to existing
services to meet client needs, will find
themselves faced with the same dilemma
that UK custodians faced in the 1990s,
namely that as markets and products
become more complicated and technolo-
gy-led they will need to decide whether to
make the necessary investment or exit the
business. Secondly, those with reasonably
sized custody businesses could well set out
ITALIAN CUSTODY
Custody in Italy
Express Briefing by Alain Closier, Global Head of
Société Générale Securities Services for
Investors (SGSSI).
How would you describe the changes that have
taken place in the custody landscape in Italy over
the past 10 years or so?
In Italy the Custody market should be divided
into two broad sectors: Global Custody and the
Agent Bank Market (local custody). The first has
historically been in the hands of the two ICSDs
and foreign Global Players, mostly the American
ones. The Agent Bank market has been in the
hands of BNP Paribas Securities Services and
Citibank (mostly servicing American customers
of its network) among foreign banks, and Intesa
and UniCredit of the local indigenous Banks.
Some smaller players have appeared now and
then but did not leave a substantial footprint.
What do you think the key developments will be
in 2007 and beyond?
I think that we will finally see the birth of the
Pension Fund industry. This factor, combined
with consolidation (via the outsourcing of back
office functions) of post-trading business will
provide new opportunities in the medium term.
How willl these be different from current and
recent trends?
Until now the market has been a captive market
with little price elasticity in the sense of competi-
tive commissions and added value services.
How do you think the market will continue to
evolve in Italy?
Outsourcing and asset servicing products will
become more and more important. Custody is a
commodity; players need added-value products
and smaller players tend to concentrate on their
core business and not on post-trading activities.
Do you think we will see any major player exit
the custody industry in Italy?
The only one left is Intesa and it could be possi-
ble that sooner or later they would follow the
example set by UniCredito.
Wouuld you like to forecast any specific changes?
In Italy there will be some consolidation at the
level of Banche Popolari, and other institutions
that are larger but are still not large enough.
XXXTFCTFNC
ISJ21 34-52 FINAL 2/5/07 7:12 pm Page 36
ITALIAN CUSTODY




to use the proceeds raised from the sale of
that business to finance growth ambitions
in other areas, as UniCredit is widely
agreed to have done.
“UniCredit needed cash to buy HVB in
Germany, so sold its custody unit to
SocGen,” observes Carlos Sanchez.
“Perhaps others will follow them, but it
doesn’t currently make sense for Intesa to
do so.” RBC Dexia’s strategy, meanwhile, is
to try to find partners or to make acquisi-
tions to reach critical mass and establish a
sound market position, he says, in a mar-
ket that is 20 years behind the times but
“could catch up quickly with the right
changes in the regulatory environment”.
Consolidation has been most dramatic
in the last three years in three categories,
Of the five largest
custodians in Italy,
four are foreign.
argues James Woods, Head of Financial
Intermediaries, Italy, at BNP Paribas
Securities Services. “One, market level
consolidation. Italy is now unique in
Europe in that it has consolidated its fixed
income and equity markets, and has
achieved vertical integration with the cen-
tral securities depository and exchanges all
operating under the Borsa Italiana banner.
Two, banking has been consolidating, with
a number of transactions having their
seeds in the changing climate of the 1990s
when banks began to list on the stock
exchange; once you list, you introduce the
potential for investors to come in and for
consolidation to take place.”
The nature of the consolidation taking
place has begun to change too, he notes.
“Mergers were infrequent in the past, and
only between local players, but when BNP
Paribas bought Banca Nazionale del
Lavoro, the sixth-largest bank in Italy,
everything changed. Borders began to
blur. Thirdly, and lastly, consolidation
began to happen in the custody business,
when UniCredit sold its business. As a
regional player ourselves, we believe you
need to be in multiple markets in Europe
and it would seem that UniCredit recog-
nised the need for regional connections.
The single market player has a limited
future in Europe.”
His colleague Alessandro Gioffreda, not
unsurprisingly agrees with him. “That sale
has created a big precedent in Italy, and
there are many rumours in the market
place that a number of other Italian banks
36 INVESTOR SERVICES JOURNAL
are deciding either it makes sense
to invest or not in this business,”
he says. Product diversification is
a further driving force behind
realignments in the market, they
suggest. “Regional players take on
a new importance for Italian fund
management clients because the
underlying investors who were
once upon a time satisfied with
local instruments, increasingly
want access to other products in
other markets.” BNP Paribas says
that in the past four years it has
doubled both the volume of assets
under custody and the number of
transactions that have taken place
involving those assets. It sees its
future in Italy as one that is based
primarily on organic growth,
combined with acquisitions
where suitable opportunities
present themselves. By the end of
the first half of this year, James
Woods believes the bank will have
completed the integration of the
BNL custody business and can
begin taking a fresh look at what
might be available in the market.
“As a dominant player with a
track record and a regional and
local presence we are well posi-
tioned to benefit from the fallout
that we expect to see in the mar-
ket,” he says.
Deutsche Bank, meanwhile,
claims to have registered a triple
digit growth rate in the volume of
assets under custody over the last
two to three years. “We are 100%
committed to the market and
have been very successful in
acquiring new mandates, winning
them away from local providers,”
says Michael Gedigk, Head of
Sales & Client Relations. “The
Italian banking market is less pro-
tectionist and less problematic
today than it has been in the past,
and going forward we think local
markets will become more pan-
European, although there is a long
way to go before we have a single
European infrastructure. But we
have passed the point of no return
in Italy; we believe a series of
takeovers of smaller banks will
unfold over the next few months,
and foreign banks can come into
the market more easily than ever
before,” he concludes.

Custody in Italy
Jean-Marc Crepin, head of State Street’s investor services
business in Italy
How would you describe the changes that have taken place
in the custody landscape in Italy over the past 10 years or
so? How and why did that happen? Do these broadly mirror
the changes that are takinng place in Europe and elsewhere?
Over the last few years, Italy has seen a significant con-
solidation of the local mutual fund industry. Local Italian
asset managers suffered from flows out of the captive
Italian fund products into foreign captive and non-captive
products, a helping hand to the success of foreign asset
managers entering the marketplace.
One of the three main reasons for the outflow is the guid-
ance provided by the local distribution networks -mainly
banks- to the retail investors, usually on a the back of fiscal
and performance differences between onshore and offshore
products.
The second reason is the lack of support provided by the
Italian asset managers’ in-house custodians and back
offices, in terms of price and quality. If Italian asset man-
agers continue to demonstrate excellence in the creation of
products and in the utilisation of complex instruments, they
often cannot count on their custodians for the settlement or
pricing of such instruments, let alone for the creation of
complex fund structures.
And finally, in line with the European trend, we see the con-
tinuation of the consolidation of asset management facto-
ries into a one single European structure.
Flight to quality: over the next few months and years, the
investment servicing landscape in Italy, including global
custody, will see some profound changes. Italian banks,
asset managers and insurance companies will continue to
challenge their competitors, and will team up with players
that will allow them to grow well beyond European borders.
They will be looking for experienced local investment serv-
icing providers that understand the needs of the most
sophisticated clients in the world and that do not compete
with them in Italy or in Europe, for example for their retail
or corporate clients.
What challenges/opportunities does that present? What is
your own strategy in the country?
Over the last four years, State Street has built an unrivalled
local Italian expertise based on a solid technology platform,
the same used by our most sophisticated clients worldwide,
and on the quality of our Italian staff, entirely and genuine-
ly focused on client needs. State Street is uniquely posi-
tioned to grow as the preferred investment services
provider in the country, thanks to its established presence
and the total absence of conflict of interest with our clients.
Our strategy is simply to provide the highest quality to our
clients, leveraging State Street expertise around the world.
Will we see more alliances and joint ventures in 2007? What
are the hot topics likely to be in the coming year?
Yes and not only. Ranging from the largest domestic
providers struggling to grow internationally and looking for
joint venture partners, to sales of custody-related activities
to raise cash to fund acquisitions, or to domestic providers
recognising investment servicing is not part of their core
activities, I am sure 2007 and 2008 will be the most active
year on all fronts in decades.
ISJ21 34-52 FINAL 2/5/07 7:12 pm Page 37

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ISJ21 34-52 FINAL 2/5/07 7:12 pm Page 38

CORPORATE ACTIONS

ISJ Evolution.
Our panel of experts
Panel Debate debate the evolving
nature of corporate
Brett Lancaster
DTCC Corporate Actions actions...

Brett Lancaster, Vice President, The Depository Trust & Clearing

Corporation. Mr Lancaster is the Business Manager of Global
Asset Solutions, LLC, the wholly owned subsidiary of DTCC,
which was created to deliver specialized business-processing out-
sourcing solutions to financial intermediaries globally. The major
product offering of Global Asset Solutions is the Global Corporate
Action Validation Service. He came to DTCC with 15 years prior
Gert Raeves experience as a senior management consultant working within the
Goldensource financial services industry in UK and US.

Gert Raeves, VP Marketing and Business Solutions,

Goldensource. In his role as Head of Marketing and Business
Solutions for GoldenSource Mr Raeves is leading the company's
global strategic marketing initiatives and drive for brand growth.
The role includes responsibility for market assessment, cus-
tomer/market segmentation and all market communications
activities. Working closely with sales, product management and
development, Mr Raeves is helping to steer strategy and product
planning to ensure harmony with market driven needs and cus-
Nat Sey tomer facing activities.
Interactive Data
Nat Sey is Reference Data Business Manager, Interactive Data
(Europe). Mr Sey is a member of ISITC Europe, the Reference
Data User Group (RDUG) and its corporate actions working
group. He is also Interactive Data's representative and co-chair
of the Market Data Provider User Group (MDPUG) as well as
one of the representatives on the MiFID Joint Working Group.

Darryl Twiggs, Product Manager SmartStream. Darryl Twiggs is

Product Manager for TLM Corporate Actions; responsible for the
Daryll Twiggs design and development of SmartStream’s market leading applica-
SmartStream tion. Darryl has worked with financial institutions across the
world offering consulting and implementation services to assist
firms automating their Corporate Actions processing.

Richard Newbury, Head of Product Services, Telekurs (U.K.)

Ltd. Mr. Newbury joined Telekurs Financial's UK subsidiary as
Head of Product Services in June 2004. His primary focus is
the development of customised solutions for clients. Before
joining Telekurs Financial, Mr. Newbury worked for the
Financial Times group's financial data vendor unit, FT
Interactive Data.
Richard Newbury
Telekurs
38 INVESTOR SERVICES JOURNAL
ISJ21 34-52 FINAL 2/5/07 7:12 pm Page 39
What is the impact of poor quality reference data within an
organization?
Lancaster: The impact can be severe, if you are talking about all types
of reference data. If you don’t have good data, or accurate data, or any
data at all in some cases, you may not be able to settle. In the more
specific area of corporate actions, which I deal with on a daily basis,
you may not know when corporate actions are occurring that you
will be held responsible for by your clients. That risk can be huge.
And you may be trading without knowing that a corporate action will
impact the securities you’re trading, leading to bad trading decisions.
In short, bad reference data can run the gamut from simply losing an
organization money to literally killing a firm outright.
Raeves: At the risk of sounding trite – it is very difficult to overesti-
mate the impact of poor quality reference data. In a scripless/dema-
terialised securities industry, managing investments or money opera-
tionally translates into manipulating data. Any bank, broker or invest-
ment manager is a participant in a reference data supply chain, and
there is a very direct link between the quality of the data in that sup-
ply chain and the profitability of the organisation.
Take the example of financial instruments only: there are three main
reference data classes within a typical security master: static/funda-
mental data, pricing, and corporate actions. If the static is out, it is
impossible for traders to identify which asset they are buying or sell-
ing. If the price is stale, it is impossible to accurately report perform-
ance or measure exposure. If the corporate actions data is incorrect,
the firm and its clients could be liable for missing or incorrect distri-
butions of cash or stock, and value portfolios incorrectly. These are
just a few simple examples that show how data quality and availabil-
ity impact operations, investment performance, risk, and compliance.
It gets even worse if we include customer and counterparty refer-
ence data. The need for accurate legal entity data, corporate hierar-
chies, credit, risk and operational information is not a luxury. Know
Your Customer (KYC), MiFID and other regulations are increasingly
driving organisations to accurately classify and monitor client profiles
and investment activity in real time.
On the flipside of the same argument, having trusted reference data
available is a necessity for pursuing a cost-effective growth strategy, as
a successful enterprise data management platform removes most of
the typical barriers to organic and non-organic growth. Being able to
move into new territories, developing and investing in new products,
expanding share-of-wallet with existing customers, and taking on
new customers are all straightforward growth strategies that have a
very obvious dependency to how you acquire, manage and share crit-
ical reference data in your organisation.
Sey: Poor quality reference data can create serious repercussions for
the user. For example, the delivery of incorrect information on a div-
idend payment – whether this relates to the amount payable to the
shareholder or the critical dates involved – can mean disruption to a
paying agent’s daily workflow as he may be faced with an over or
under-payment situation. It can also damage the reputation of the
paying agent in the marketplace.
With the advent of the Transparency Directive, compliance depart-
ments also require high quality data. Even seemingly minor items,
such as a stock’s liability to Stamp Duty, can cause inconvenience if
the reference data provided is not reliable.
Newbury: During the 2005 Tsunami in Asia, Tsunami warnings were
issued, but because they were not understood by all affected areas,
they were ignored. Hundreds of thousands of people died. Although
CORPORATE ACTIONS
no-one loses their life when departments of a bank misunderstand
each other, people can still lose their shirts and incur huge losses –
either through failed trades, or through missing or misunderstanding
corporate actions. Banks need to maintain large teams of people to fix
multiple pools of reference data. They need to subscribe to multiple
sources of reference data to ensure global coverage and what they take
to be full reliability. All this costs money. It costs money in vendor
licence fees, human resources and the cost of the risk that - often
manual - processes entail.
Twiggs: Reference data is the backbone of any data architecture and
all systems use reference data to a greater or lesser extent. Without ref-
erence data, duplication of information and data integrity become
daily operational issues. Reference data should be singular to provide
Having trusted reference data
available is a necessity
for pursuing a cost-effective
growth strategy.
a consistent, reliable and integral data architecture which can be
accessed by all processing systems. Ultimately poor quality data
results in higher operational costs and an increased risk of failing to
meet deadlines, leading to claims.
Without clean and complete reference data, daily operation is focused
on discrepancies, issue resolution and late processing. This is one of
the fundamental issues facing the implementation of successful STP.
In an increasingly regulated market, and with the growing demand
for accurate, high quality data, will we see more of a trend towards
in-house data production or the need for external data providers for
managing market, credit and operational risk?
Lancaster: I think it will be a mix. As it relates to corporate actions
information, firms are increasingly outsourcing it. It takes an enor-
mous amount of very experienced manpower to gather and verify the
data, especially as it becomes necessary to track corporate actions
globally rather than just nationally, as more and more investors move
capital all around the world in search of better returns. For most
companies, this isn’t a core competency, and provided they can find
someone who can provide at least as good data as they can produce
themselves, most companies are delighted to offload it. One of the
things DTCC is doing is re-engineering its corporate actions process-
ing systems to eliminate some 60 legacy applications into a single
integrated platform, and to adopt ISO standards and an XML stan-
dard for dissemination and processing, as a way to make it easier and
faster for firms to outsource.
Market and credit risk probably require in-house systems, since that
changes with each trade, and a lot of departments (such as compli-
ance and risk management) within a company need to be aware of
every change and how it impacts the firm’s overall risk management.
Operational risk is one of those things you may be able to outsource
to someone else, so simply having a capability outside your own sys-
tems that you can use in the event your operations are damaged is all
that is required. However, many firms may also choose to build their
own systems to reduce that risk.
Raeves: It is probably not an either/or equation: the one thing that all
these drivers (internal and external) have in common is an extraordi-
nary hunger for more data, and it is likely that both data production
and data consumption levels will go up across the industry. New busi-




INVESTOR SERVICES JOURNAL 39
ISJ21 34-52 FINAL 2/5/07 7:12 pm Page 40
CORPORATE ACTIONS
ness drivers require higher quality data, more granular data, more
timely data – mitigating market, credit and operational risk cannot be
achieved by choosing for a straightforward in-sourcing or outsourc-
ing model. The most active market participants today will take on
additional roles in data manufacturing and distribution, and will
themselves become data suppliers as well as data consumers.
What we are seeing with some of our largest customers is a combi-
nation of the two models, where their in-house data management
platform validates and enriches consolidated data feeds from service
providers and data vendors, before publishing a golden copy record
to the business.
Sey: A wide scale move towards in-house data production would
seem unlikely, especially given the increasing complexities that are
now being seen in corporate actions.
With the provision of more and more complex options, and the
associated creation of temporary ISIN codes, it is not uncommon for
prospectuses – particularly in the M&A sector – to run to over 500
Firms have to be more
automated than they ever were.
pages, and the extraction of data that is actually relevant from such
documents can be an extremely laborious task. The difficulty of
obtaining a reliable source for reference data, together with the some-
times prohibitive costs involved, can be an additional hurdle, not
mentioning more traditional problems such as information provided
in a local language.
There is a shift in the way firms collect, access and consume data
driven by such factors as increasing regulation. The amount of mar-
ket data infrastructure firms have to deal with is extremely significant.
Also, firms are generally not able to source all the data they need for
their applications from an exchange and have to source data such as
cross reference and corporate actions externally and then integrate it
with the direct exchange data. This integration can be complex, labo-
rious and costly. Data vendors still look to be the most viable option
– at Interactive Data we have already developed services to help firms
meet their increased credit, market and operational risk management
requirements. These include our risk and analytical data service,
business entity data service, EUSD data service, as well as evaluations
for thinly traded securities, high quality reference data and ISO 15022
formatted corporate actions data.
Newbury: We will see the continuation of both. Data vendors, long
proud of their own offerings are increasingly looking at partnerships
in the creation of new data sets and services. Banks similarly will look
for more data externally as well as continuing to use their own data.
Regulation and changes to International Accounting Standards, espe-
cially, will mean that banks will need to look more for independent,
third party sources of data.
However, banks themselves are an important source of data. It is not
hard to imagine that strength being leveraged. MiFID specifically
recognises that data has value and banks will no doubt look to release
that value – either by using it in the place of services they would pay
for or by selling it to third parties. Releasing value is a difficult area –
where does the value really lie? Should a bank charge a data vendor
simply to carry data? Or is the value only released when a client con-
sumes it? From a vendor point of view, it is most certainly the latter,
but banks themselves may have a different view.
Twiggs: There will continue to be a mix of sources of reference data.
Firms in the reference data market are seeing an opportunity to pro-
40 INVESTOR SERVICES JOURNAL
vide cleansed data, however issues remain over the accuracy of this
data. Users will have to consider this issue when comparing the risk
of using external data with producing the data internally.
Many firms have projects in progress to rationalise their data archi-
tectures consolidating the storage and access of reference data across
their operational systems. Such projects are a major undertaking as
most firms have a mix of new and legacy systems to integrate into a
single data architecture platform.
How has MiFID been a driver within the data services industry?
Lancaster: MiFID requires that firms find the best price within a
range of trading platforms in Europe. It means that new platforms
are being developed, that data will have to be available instantly from
all of them, and that systems are available to take advantage of that
data and act on it within fractions of a second. It’s made trading
more complex, but potentially much better for investors in terms of
getting the best price, wherever that is. But it has certainly put a
whole set of new demands on the data services industry. Increasingly,
it means that firms have to be more automated than they ever were
just to make sure they can get and have accessible all the data they
need to make good decisions.
Raeves: MiFID has not yet been a significant driver for technology
investment at individual firms. It has been a driver for groups of peer-
level organisations to look at how they should organise themselves in
order to collectively meet the new requirements. There have been two
marked trends in the past 12 months: existing data suppliers (ven-
dors, exchanges, clearing houses) have developed or expanded their
product and services to cater for MiFID, and at the same time the
industry has tentatively started creating a small number of new cen-
tral utilities (such as BOAT and Turquoise). So the way this industry
is going to ‘solve MiFID’ looks very likely to be the use of a shared or
centralised data aggregator, rather than building out individual capa-
bilities.
Sey: MiFID is a pervasive directive that will have serious implications
for the operations of affected organisations. In addressing the
requirements of MiFID, organisations have to review how their data
needs will change in terms of sourcing and processing the additional
market data that will become available.
Besides obtaining additional data, affected organisations may have
to publish pre- and post-trade data, and in many cases this is a new
function for them. It is likely that significant investments in data pro-
cessing systems will be required.
Pre- and post-trade reporting requirements will generate vast
amounts of additional data that might be published by a number of
methods and in a variety of formats. It is likely that this proliferation
of data will result in a fragmented view of market activity …and there
may be an amount of duplicate data reporting. Careful validation
and consolidation of the data will be required to provide a clear pic-
ture.
Newbury: Different areas of data users have seen different impacts.
Front office sell side companies have taken most action – they have to
be aware of new trading venues and devise best practice policies
under the new regime. The buy side, back offices are seeing less
impact, although there will be new challenges for reference data.
The dismantling of the concentration rule by MiFID towards the end
of 2007 potentially will have a huge impact on the quality of reference
data available in the markets. At the moment Regulated Markets, as
they are now to be known, have an impact on standards of reference




ISJ21 34-52 FINAL 2/5/07 7:12 pm Page 41

When it comes to trading,

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decisions. In fact, according to a recent study by Oxera, a U.K. economics consultancy, such data is
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ISJ21 34-52 FINAL 2/5/07 7:12 pm Page 42
CORPORATE ACTIONS
data – by standardising naming conventions, ticker codes and so on.
Although MiFID relates in different ways to different instruments,
the increased roles of Systematic Internalisers, Multilateral Trading
Facilities and investment firms themselves may lead to an erosion of
the power of the regulated markets in the reference data area. In risk
management, counterparty information is gaining in importance.
The forthcoming ISO standard 16372 will introduce an International
Business Entity Identifier (IBEI). Various national numbering agen-
cies have already committed to issuing IBEI for companies domiciled
in their regions. Although the standard is not yet finalised, all parties
have agreed to issue identifiers in the manner currently under discus-
sion and to take into account any changes that ISO introduces. The
acceptance and implementation of this code will help firms with the
implementation of both MIFID and Basel II rules.
Data vendors in particular have been busy preparing their respons-
es to MiFID. We have to be ready when our clients need us and it has
been difficult to build solutions for people who are not quite sure
what they will need yet, based on requirements which have not yet
been finalised. Making sure that as many venues as possible are cap-
tured in services, meaning both coding and infrastructure upgrades,
as well as defining reference data requirements have pre-occupied
vendors. The goal has been to provide as simple a solution as possible
for clients at as reasonable a cost as possible.
Regulations such as MiFID can
affect every area of an
investment firm’s business.
Twiggs: The impact of new regulatory measures such as MIFID is yet
to be realised. However transaction risk and the requirement for
transparency will become the major drivers behind the uptake of
automation within the corporate actions domain. The contribution
to operational risk when processing a corporate action will need to be
fully analysed and can only be confidently achieved through the
deployment of technology.
How close is the financial services industry to integrating data silos
between the front, middle and back office? And, what further meas-
ures are needed to aid this process?
Lancaster: In the case of corporate actions, what we are seeing with
many of the leading firms is an attempt to flow data throughout the
organization without any human intervention. They have set up
repositories of data where the information comes in, and then is
available to be called up immediately by trading desks, compliance,
risk management, back office, or whatever other department needs to
see the data in real time.
This kind of information is no longer able to simply reside in the
back office only, and we are seeing more and more firms move in this
direction. However, I think it’s fair to say that most of the industry is
still in the silo mode. It’s a major commitment of IT resources to
make this data available throughout and organization, and it’s going
to take time for firms to bite the bullet and commit the amount of
resources necessary.
Raeves: It is an old problem, it has not gone away, and it has proba-
bly become worse in the past three years. The speed with which deriv-
atives and alternative investments have gone mainstream has created
more data-silos, because it is still the rule that innovation and growth
are viewed as purely a front-office concern.
There is no quick fix – the usual mix of standardisation, interoper-
42 INVESTOR SERVICES JOURNAL
ability and technological innovation will catch up with last year’s
front office innovations, while at the same time the latest new thing is
out there now creating a brand new data silo of its own. Enterprise
Data Management, like STP, is not a one-off project: it is a sustained
and continuing process, which requires a flexible approach to disci-
plines like data modelling in order to scale with new business
demands.
Sey: The old school means of handling data used to be individual
data silos focusing solely on the requirements of each business func-
tion. An investment bank will typically have teams split by business
function such as valuations, accounting, corporate actions and so on,
with each team often having the ability to go out and purchase their
own content and applications without necessarily having to conform
to an ‘approved supplier’. This can result in a number of disparate
systems.
As with many developments in the industry, regulation is playing a
major role in shaping the data requirements of each business func-
tion. MiFID is already starting to have a major impact on how invest-
ment firms consider their data requirements, and the need to move
away from proprietary data standards for both data format and secu-
rities identification will help the integration process.
Regulations such as MiFID can affect every area of an investment
firm’s business, including the need to quote prices and report trading
activity, accurately report corporate actions, and manage securities
and entity relationships to avoid conflicts of interest. These unified
requirements should see investment firms consolidating their data
silos into integrated repositories that are able to improve efficient
workflow throughout the enterprise.
Newbury: This is a very difficult question to answer. Using a term like
“the financial services industry” is not meaningful in this instance.
Over the last week, I have spoken to a top ten European bank which
has risen to the challenge and has introduced almost an “open mar-
ket” idea internally, attempting to get all data into a single “set of silos”
– allowing normalisation. I have also spoken to a top ten global bank,
where one department told me they still check prices manually – by
searching the internet!- and where they were pretty sure that “all of
[their] ISINs [were] invalid” . Different companies are at different
stages of integration. Some companies are almost there and some
companies have not even begun. How can the process be helped?
Through an understanding of the cost of maintaining separate silos
along with an analysis of the cost/benefit of integration. A lot of
attention is paid to reports of trade failures caused by incorrect refer-
ence data, but it is hard to find any useful analysis of the costs of ref-
erence data differences between different areas of the same company.
Twiggs: In general terms, all firms are still trying to resolve the issue
of a single architecture platform across the front, middle and back
office. The technology obstacles in the integration of a heterogenous
mix of new and legacy systems are largely unresolved. New n-tier
architectures are a big part of unlocking the problem. However new
technology alone will not overcome the holistic problem of a nor-
malised information access and processing architecture which can be
supported by open access n-tier technologies.
To what extent are pockets of disparity between custodian and
investment manager, in the interpretation of best practices, a prob-
lem in the corporate actions space?
Lancaster: I’m not sure what “pockets of disparity” you are referring
to. I think there is general agreement between custodians and invest-




ISJ21 34-52 FINAL 2/5/07 7:13 pm Page 43
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ISJ21 34-52 FINAL 2/5/07 7:13 pm Page 44
CORPORATE ACTIONS
ment managers about what the practices should be. There may be
some disagreements about timing or some other minor points, but
we get the feeling that everyone is looking for a simple, easy solution
to getting accurate, timely data distributed through the industry for
all corporate actions, no matter where they occur. The bigger prob-
lem is getting that data in a timely fashion and making sure it is accu-
rate. Probably the best way to accomplish that is by working directly
with issuers to ensure the data is distributed widely is by having
issuers use standards such as XBRL or XML when they create corpo-
rate actions announcements. Then that data can be grabbed and dis-
seminated without no human intervention. Unfortunately, we’re
probably some years away from that. So having services that can
gather, verify and disseminate data globally is probably the most effi-
cient step that can be done right now.
However, one of the things we have seen in using ISO 15022 for cor-
porate actions announcement from custodians, which we process
through DTCC’s Global Corporate Action Validation Service, is that
many custodians will tag an event as “other” rather than adding the
necessary granularity. In fact, about 35% of all events are tagged
“other.” While that kind of announcement uses 15022, it does noth-
ing for straight through processing, and that’s an area that needs
some work.
Raeves: The disparity exists, and it is a problem, but there are some
The bigger problem is getting that
data in a timely fashion and
making sure it is accurate.
encouraging signs that the extended use of standards such as
ISO15022 is helping with convergence. Most commercial data ven-
dors and many exchanges now supply corporate actions data in the
ISO formats, and while there are still different flavours and interpre-
tations around, there is now some proper momentum behind the
generalised adoption of a single standard.
The advances in middleware, reconciliation and data management
platforms make it a lot easier to automate the standardization and
matching of multiple conflicting sources, and crucially are making it
possible to accurately measure and monitor compliance with best
practices.
Sey: A challenge for the entire industry is to engage issuers or their
agents into the process. Custodians, data vendors and software ven-
dors have probably each built up thousands of man-years of experi-
ence in dealing with the opacity and interpretative nature of the cor-
porate actions notification process.
Custodians generally receive corporate action announcements in
widely varying formats, in native languages, and from a variety of
sources (data vendors, issuers, exchanges, etc), increasing the possi-
bility of misinterpretation. In addition, international regulatory dis-
closure practices differ, meaning that the type of events announced
vary in different jurisdictions.
It is in the issuer’s interest that the event is correctly interpreted and
therefore understood: in the case of an elective event, this will have a
direct bearing on its take-up.
And it is in the data vendor’s interest to interpret the event correct-
ly as the vendor will be judged by customers, at least in part, on the
basis of the accuracy of content. Clearly, it is also in the market prac-
titioner’s – e.g. the investment bank’s – interest to reduce risk and try
to avoid potentially costly errors as far as possible.
Fully automated processes for STP, mainly via ISO 15022, can great-
44 INVESTOR SERVICES JOURNAL
ly reduce the risk of these problems and enable the custodian to set
up a ‘golden copy’ for distribution downstream. A standardised tem-
plate or PDF for the use of issuers, perhaps featuring drop-down
boxes to aid simplicity, is also much desired.
Newbury: This is one of the major reasons for so much human inter-
vention still being necessary. Even where custodians say they use the
ISO15022 MT564 message to transmit corporate actions, some
clients tell us they sometimes receive announcements where all the
information has simply been typed into the text field of the message.
The difficulty is that although theoretically the risk may lie with a cus-
todian, in reality the investment manager is the one likely to suffer
reputation damage and to incur the highest costs in the event of an
error. Investment managers therefore can’t simply trust the custodian
and are forced to invest large sums of cash and human capital in ver-
ifying custodian messages.
Twiggs: The recommendations of the SWIFT Market Practice
Groups (SMPG) in the lifecycle of information exchange are yet to be
realised. Most firms can accept a notification message but few, if any,
are able to fully comply with the complete message exchange. In order
to move forward it is absolutely necessary for all participants to
engage the SMPG recommendation and thereby reduce the potential
for errors and other barriers to STP.
Cross border trading is growing and with that not only volumes but
a growing global population of shareowners. The definition, inter-
pretation and processing of cross border events can be complex with
participant restrictions, international tax liabilities and reporting. A
common definition of the event and the execution of the event
options is needed and this must be promoted by the industry. Having
a common definition of the event is the foundation upon which nor-
malisation of best practices will be achieved.
Is there concern in the industry about multiple platforms for corpo-
rate actions?
Lancaster: I think the industry would prefer to be able to get all their
corporate actions data from a single source if possible. That’s essen-
tially the type of service DTCC is trying to build on a global basis, and
it is a significant challenge. Data for corporate actions comes from a
multitude of sources, including issuers, exchanges, agents, and central
securities depositories, to name just a few. Gathering all the infor-
mation necessary is a key task, and one that requires an experienced
group. Up to now, most major brokers and custodians relied on a
group of vendors who provided independent feeds, and the organi-
zation had to reconcile how to get different feeds in different formats,
compare the data, and come up with its own answer of what needed
to be done. DTCC’s global corporate actions validation service com-
bines multiple data feeds into a single one, and has its own staff of
validators to develop the one right, composite answer for each cor-
porate action. What we are increasingly finding is that most firms are
more than happy to hand over the responsibility and cost to us.
Raeves: Yes, but then again multiple platforms, standards and proto-
cols are a fact of business life that will not go away. There will never
be a single standard for all investment activity – and smart buyers are
investing in business and technology strategies that acknowledge the
continuing diversity of information sources and consumers, rather
than fighting windmills in a pursuit of a single platform or industry
standard. This industry is built on capitalist principles – and we have
all experienced many examples of how monopolies and supplier car-
tels will always be challenged.




ISJ21 34-52 FINAL 2/5/07 7:13 pm Page 45




Sey: Quite simply, yes, and this follows on from the custodian/invest-
ment manager issue. The use of multiple platforms for corporate
actions definitely creates the risk of, for example, data vendors com-
ing up with differing interpretations of events that are sent to their
customers, especially when the event is of a complex nature with sev-
eral different elements.
A standard such as ISO 15022 can reduce that risk and gives a cus-
tomer the opportunity to compare the same event from several
sources, but in exactly the same format. The end result of these com-
parisons is that users can feel more confident in creating a ‘golden
copy’ on which to base their decision-making process.
The fixed structure of the ISO 15022 message can also reduce the
amount of data to be processed. The Securities Market Practice
Group (SMPG) has recently published a document that looks at the
use of the Corporate Action Reference, a unique numbering conven-
tion, by bodies that send messages via ISO 15022. In effect this means
that the same number will appear on the same corporate action no
matter who supplies the message.
Newbury: The concern that data vendors have is to provide clean,
timely, comprehensive data to clients. Vendors realise that standards
such as ISO15022 can help regardless of the platform used and all the
major vendors have bought into this standard to help their clients.
Telekurs Financial shows its dedication to the standard by providing
data in ISO15022 format, keeping the format updated to follow
MDPUG standards and by providing a co-Chair of the MDPUG,
Laura Fuller. The other concern that data vendors share are those
which the Giovannini report has highlighted. Overcoming the barri-
ers and establishing standards for content of corporate actions
announcements globally (or at least at the European level) will
remove a lot of the confusion in organisation and allow for different
systems to speak to each other much more easily.
Twiggs: The issue with the corporate actions domain is not so much
multiple platforms but multiple data formats and the complexities of
normalising often disparate data definitions. Market data vendors
have, over time, grown their event definitions and the supporting
event data for these different events. The challenge is to rationalise the
data into a normalised data set that can be processed.
The corporate actions space is serviced by many information
pipelines which operate with different update frequencies. Corporate
actions information may be available at different times across these
networks. It can be an issue if there is a delay in information flowing
concurrently from all sources. Access to this data can also be an issue
if the information is available across differing technologies.
What will be the key drivers behind data services for 2007?
Lancaster: I’m not sure I can answer for all of reference data. For cor-
porate actions data, however, we certainly see more firms moving to
an STP environment, flowing data throughout their organizations
from a single repository of data, and increasingly looking to out-
source corporate actions information to an outside supplier like
DTCC, rather than trying to do it internally. It’s just not a core com-
petency for most organizations, and they don’t want either the cost or
the risk associated with it.
Raeves: Regulation and competition will enforce increasing depend-
ence on accurate, consistent and accessible information -- the days of
static information are over. To compete effectively management will
increasingly demand near real-time views of the data that drives their
organization. Institutions are realizing that to stay in the game they
CORPORATE ACTIONS
can no longer be content to rely reports that tell them what happened
yesterday as opposed to what is happening now. This means develop-
ing an enterprise data management strategy to tackle master data
management across the organisation. Companies that continue to
rely on rigid information infrastructures will be overtaken by those
with more dynamic ones. Focus will be given to solutions that
streamline data cleansing and make data integration more seamless,
such as customer and counterparty, products, transactions and posi-
tions. Service Oriented Architecture will be increasingly adopted to
speed up the process.
Companies that continue to rely on
rigid information infrastructures
will be overtaken by those with
more dynamic ones.
Sey: I expect that much of 2007 will be devoted to complying with
regulation; complying with MIFID is arguably the biggest challenge
for many industry participants in 2007. Applying standards and
addressing operational risk will help in this regulatory compliance.
There are still many known unknowns about how compliance can be
achieved and demonstrated, and it is not clear what the effects of reg-
ulation will be on the markets.
Preparation for 2008 will be a key driver for data service providers
in 2007. The challenges in 2007 may in many cases be too great to
solve before the end of the year and some organisations will be plan-
ning to solve ‘2007 issues’ in 2008. In addition, it is likely that as the
markets evolve new opportunities will arise, but it may not be until
2008 that they become clear. Also, careful assessment of the evolution
of the markets may be required before an organisation acts.
Newbury: Regulation will continue to be a major driver throughout
2007. MiFID will be implemented on 1 November 2007. In late 2006
firms became aware of the scope of this directive and started to act to
define implementation projects. A number of consortia and other
organisations have stepped up to challenge regulated markets (e.g.
Project Boat, Turquoise and Equiduct) and firms will have to spend
time adjusting to and then training their staff on the new financial
markets landscape. In Europe the Capital Requirements Directive,
implementation of Basel II is now underway and firms will spend
time throughout 2007 making sure that they comply by January
2008. Risk will be a hot topic throughout 2007. On the portfolio level,
firms will have to cope with ever increasing investment into exotic
products. They will need to train staff and source data on these to
continue to be able to support their clients and their businesses.
Twiggs: Agreement on the normalisation of event definitions and
critical data content will continue to dominate the corporate actions
space in 2007. Cross border agreement on events and their definitions
will continue to be refined.
Moreover, the uptake of ISO15022 message designs will continue to
encompass more and more of the participants in the processing of a
corporate action. Ultimately this will lead to a common, internation-
al practice that will fully engage the shareholders and fund decision
makers as part of the process.
The days of stand alone corporate actions have passed. In future
there will be a tighter linkage between corporate actions systems and
other areas of the back office. The leading providers in this space will
tailor their solutions to enable integration with areas such as settle-
ment, front office trading, foreign exchange, cash management or
accounting systems.

INVESTOR SERVICES JOURNAL 45
ISJ21 34-52 FINAL 2/5/07 7:13 pm Page 46
CORPORATE ACTIONS
Rekha Menon looks at
the issues surrounding
the processing of
corporate actions and
what is being done to
improve standards.
Standard
Action
t is estimated that globally around 1
I million corporate actions take place
everyday and with growing levels of
corporate activity, from mergers and
acquisitions to rights issues and dividend
payments, the number is continuously
increasing. Financial institutions are
therefore daily deluged by information
about corporate action events impacting
their customers and their own proprietary
One million corporate actions
take place everyday
positions. While in some instances, the
corporate actions data that originates
from the issuer passing on to one or more
custodians and ultimately to the investor,
is exchanged and processed electronically,
the corporate actions arena is mostly char-
46 INVESTOR SERVICES JOURNAL
acterised by manual labour intensive
processes. Fax, telex and unformatted
emails are commonly used to transmit
notices issued by publicly traded compa-
nies, often leading to incorrect or incom-
plete data being exchanged, which creates
problems such as delayed payments and
even much more significant financial loss-
es.
In recent years, the risks presented by the
manual processing of corporate actions
have been highlighted in several industry
leading studies. The January 2003 Group
of Thirty (G30) study on global clearing
and settlement stated that corporate
actions across the market are the major
source of financial losses attributable to
operational failure. Further, a study pub-
lished by the US DTCC (Depository Trust
and Clearing Corporation) in 2004 esti-
mated that the failure in handling a single,
complex corporate action has the poten-
tial to result in a loss running into tens of
millions of euros. Stating that corporate
action risks are not limited to the back
office, the study estimated the risk to
firms’ front offices from sub-optimal trad-
ing decisions to be in the region of 1.6
billion– 8 billion per year globally.
Not surprisingly, in light of these reports,
there has been an increased focus on
streamlining corporate actions processing.
Estimates by analyst firm, TowerGroup
suggest that globally, securities institutions
spent USD 75 million in 2006 on corpo-
rate actions automation solutions and this
market will grow to roughly USD 120 mil-
lion by 2010. Despite this investment, STP
of corporate actions processing is still far
from being achieved. TowerGroup states
that the problems of disparate, unreliable
data and manually intensive processes still
exist in the securities industry and are like-
ly to continue for many years to come.
But it is not all doom and gloom in the
corporate actions space. The securities
industry is actively working towards
reducing the complexities endemic in pro-
cessing corporate actions, by focusing on
two key areas, standards and best prac-
tices.
For long, given the complexities
involved, automation of corporate actions
processing was regarded a faraway dream.
But this is no longer the case. The SWIFT
backed ISO 15022, which is now regarded
as the de-facto standard for corporate
actions, has made automation possible
and is in many ways responsible for kick-
starting the trend of automating corporate
actions. However, while standardisation is
widely considered the most significant
achievement in the corporate actions
space, adoption of the ISO 15022 standard
outside Europe is still very limited. In
North America, not only investment man-
agers but many smaller custodians too
have not yet adopted the standard.
Additionally, many industry experts state
that the standard needs to be further
improved to include all the requisite data
elements. “ISO 15022 is a good standard,
but it does not really accommodate all the
required data. The fields need to be
expanded to incorporate more market
information,” says David Hands, product
manager director at DTCC. Nonetheless,
he adds, changes in this direction are
under discussion and, should be in place
by 2009 when the DTCC, which currently
follows a proprietary format for corporate
actions, adopts ISO 15022.
The other front for improving corporate
actions processing is in developing best
practices across the corporate actions
value chain. There is a lack of uniformity
in the interpretation and sharing of cor-
porate action information not only across
custodians, but also between custodians
and asset managers. Moreover, the prob-
lem is compounded by the differences that
exist between national markets. The devel-
opment of best practices helps iron-out
these differences. “Best practices talk
about processing efficiency. They focus on
the right steps to take around corporate
actions. They provide guidelines on what
to do in each scenario and with each cor-
porate action type,” explains Chris
Bannocks, product business owner of
Reuters Pricing and Reference Data for
EMEA /UKI at Reuters. Over the last few
years, he says, the industry has increasing-
ly realised the need for best practices in
corporate actions. “The focus on best
practices is being driven by the drive
towards straight through processing of
corporate actions, which is not possible
without best practices being adopted
across the industry.”
Best practices in corporate actions pro-
cessing are key to reducing risk, adds
Richard Piskorz, head of management and
strategy, fund services operations at BNP
Paribas Securities Services. “Handling cor-
porate actions is very risky and best prac-




ISJ21 34-52 FINAL 2/5/07 7:13 pm Page 47




tices can help address this issue. Best prac-
tices can also help improve operational
and commercial efficiency,” he says.
Best practices gained prominence fol-
lowing the 2001 Giovannini Group’s land-
mark report on cross-border clearing and
settlement arrangement in the EU that
also highlighted corporate actions harmo-
nization as one of 15 critical barriers to
efficient pan-European post-trade servic-
es. Several industry initiatives such as
SMPG (Securities Market Practice
Group), AMF (Asset Manager's Forum),
ISITC (the International Securities
Association for Institutional Trade
Communication), and ECSDA (European
Central Securities Depository
Association) already had formed corpo-
rate actions committees or working
groups to document and publish best
practices for corporate actions processing.
The efforts rarely overlap, as they are split
either functionally or regionally between
Europe and North America. All those
institutions are cross-represented or are
trying to work together. ECSDA, as the
name denotes, is focused on Europe and is
working towards corporate actions har-
monization along the Giovannini Group’s
guidelines. ECSDA is also in regular con-
Best practices offer no competitive advantage
for one firm over the other.
tact with the SMPG, which is among the
most high-profile and most global best
practices effort. SMPG is facilitated by
SWIFT and represents more than 38 mar-
kets around the world through its
National Market Practice Groups
(NMPGs), with the core objective of har-
monizing national differences under a
CORPORATE ACTIONS
central set of best practices.
On the other side of the Atlantic, ISITC
is active in the US and in Europe and is
also represented at SMPG. SMPG’s and
ECSDA’s efforts complement each other
and also have cross representation, states
Bernard Lenelle, co-chair of SMPG’s cor-
porate actions group. “SMPG is working
at providing recommendations and har-
monizing how financial institutions com-
municate while ECSDA is working at at a
less granular level, where they try to har-
monise the ways in which the European
markets work. For instance, ECSDA says
that all CSDs should use ISO 15022, but
they do not state how. We say how to use
ISJ21 34-52 FINAL 2/5/07 7:13 pm Page 48
CORPORATE ACTIONS
ISO 15022. In the case of entitlements,
ECSDA strives towards entitlements cal-
culation harmonization across Europe,
while SMPG provides guidelines on how
to communicate the entitlement using the
15022 standard,” says Lenelle.
Among the most significant efforts by
the SMPG in recent years has been the cre-
ation of the Event Interpretation Grid
(EIG). “The EIG clarifies the market prac-
tice for each event type and the basic
information needed to set up each event.
It provides an invaluable framework for
understanding corporate actions across
markets”, says Lenelle.
Widely appreciated by market partici-
pants, the EIG has also been mentioned in
a corporate actions best practices docu-
If you tell an issuer to adopt 15022, that will
be considered a big challenge. But if you
make the process painless using the XBRL
format, then the process will be painless.
ment recently created by the US based
Asset Managers Forum where the EIG is
referred to as the guide to the best practice
standards for event notification by event
type, across many markets.
The AMF document is the most recent
initiative in defining best practices for the
corporate actions space. With the aim of
standardizing interactions within the
marketplace, it seeks to identify various
weak points within the current corporate
actions process and has recommended
best practices on policy issues, as well as
process issues relating to documentation
and communication of corporate actions.
Notably, the AMF being a US centric
group, currently US requirements have
primarily been considered while develop-
ing the recommendations, however the
aim is to make the document globally rel-
evant, says Tina Davis of Mellon Financial
and chair of the AMF Corporate Actions
Best Practices Working Group. The AMF,
she says, plans to initiate a dialogue on
best practices with European depositories
later on this year.
Commenting on the various corporate
actions best practices initiatives dotting
the marketplace, Davis notes, “There are
several different initiatives but they are all
focused on specific pieces of the process.
The AMF on the other hand, is looking at
it from a holistic perspective.”
While this claim might be argued by
48 INVESTOR SERVICES JOURNAL
other groups, there is no doubt that for all
of these best practices efforts to bear fruit,
it is important for the different groups to
concur on a single best-practices docu-
ment. Further, one of the biggest chal-
lenges of best practices is gaining adop-
tion. “Best practices require best adoption.
Best practices offer no competitive advan-
tage for one firm over the other. There
needs to be industry-wide agreement on
best practices and subsequent adoption by
market participants,” notes Bannocks of
Reuters. Along with the obvious difficul-
ties of gaining global adoption across var-
ious markets that might have their own
specific requirements, getting smaller
firms involved too is a challenge, notes
Davis. “Many small firms still use manual
process such as fax to process corporate
actions and technology and automation
maybe cost-prohibitive for several of
them,” she says.
Describing the corporate actions process,
Davis says that while many of the current
problems can be resolved by the adoption
of best practices by the market partici-
pants down the line, the root of the prob-
lem lies at the source. Corporate actions
are not announced in a consistent manner
by the issuer itself. This creates the subse-
quent error-prone chain of events with
data received from multiple sources need-
ing to be cross-checked for accuracy,
which is where inconsistencies and inter-
pretation issues arise. Unless corporate
actions data is disseminated at-source in a
standardized format, the current problems
will remain, states Davis. But, as she has-
tens to add, that is easier said than done.
“Getting a buy-in from agents who are at
the start of the process is not simple. To
get their involvement is one of the biggest
challenge. Many may just not have the
technical infrastructure to fully support
at-source standardization,” she remarks.
John Mayr, Head of Marketing of invest-
ment solutions vendor SimCorp agrees,
"Forcing issuers to behave in a consistent
fashion might be aiming too high. The
reality is that meeting the needs of the
securities industry figures rather low on
the priority list of issuers."
David Hands of DTCC however believes
that at-source standardization is not as big
a challenge as is projected. “At source stan-
dardization is one of the biggest stumbling
blocks to STP. DTCC often translates
paper documents to an electronic format
which is not ideal. What is required is for
issuers to file information in a standard-
ized electronic format, which is certainly
possible using XBRL. If you tell an issuer
to adopt 15022, that will be considered a
big challenge. But if you make the process
painless using the XBRL format, then the
process will be painless.” Hands points out
that there are currently at-source stan-
dardization efforts both in the US and
Europe where regulators and exchanges
are getting involved and he believes that
these efforts will bear fruit in the next few
years.
Indeed, identifying and implementing
best practices is a slow process that can
appear tedious at the best of times, but as
Hands states, the overall task of automat-
ing corporate actions should not be
underestimated. “The complexity of
events and the number of parties involved
all make it a highly complicated affair. The
timeframes too make the task more tricky.
From announcement to settlement can
take many months in between which there
have to be changes and updates that need
to be communicated forwards and back-
wards. And that’s just one market. When
trades are settled across markets then the
complexity increases manifold. There are
many moving parts of a single event!”
Naren Patel, director of Securities
Business Development at corporate
actions automation solutions vendor,
CheckFree believes nearly 10 - 20 percent
of corporate actions will never be auto-
mated. “Unless a particular asset class
becomes mature, it is very difficult to
automate it fully with a universal market
best practice acceptance. With innovative
trading strategies being constructed every
day by the front office, it is not possible to
include these new event types into a
standard automated process.” Nonetheless
he points out, even by automating
80 - 90% percent of corporate action event
types firms can achieve a high 40 - 50
percent ROI. Undoubtedly, he says
corporate actions standardization
and best practices efforts are imperative to
not only improving STP rates on a
sustained basis but also reducing and
mitigating the overall operational and
reputational risk in the asset servicing area
of the securities industry.

ISJ21 34-52 FINAL 2/5/07 7:13 pm Page 49

GLOBAL CORPORATE
ACTIONS, PRICING,
CROSS-REFERENCE AND
DESCRIPTIVE DATA.

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With over 3 million instruments, we source data directly from over

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of formats including fully encoded data feeds optimised for automated
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– Delivery in ISO15022 format (also available via SWIFTNet)
ISJ21 34-52 FINAL 2/5/07 7:13 pm
SECURITIES LENDING
Andrew Warburton analyses
the recent dialogue surrounding
the potential conflict between
securities lending and good
Signifying scandal
50 INVESTOR SERVICES JOURNAL
Page 50
corporate governance.
A m I alone in thinking that ‘corpo-
rate governance’ is a manipulative
term – one that can be decon-
structed to reveal multiple implications?
On the one hand it recalls a Platonic
ideal, a vision of power wielded by phil-
anthropic elders; on the other, it’s limited
to the corporate world and the inevitable
capitalist relations. Whilst activists have
used it to condemn corporate governors
and to suggest that capitalism must learn
social values (as if capitalism had some-
how betrayed society and should thus be
“Beneficial Owners need to remain conscious
of the fact that they lose their right to vote
when their shares are out on loan.”
softened or controlled), I can’t help won-
dering why they haven’t asked themselves
if ‘capital’ can be made to yield at all.
“Capital,” says Jean Baudrillard, “is a chal-
lenge to society… not a scandal to be
denounced according to moral or eco-
nomic rationality…” The idea that cor-
porations can be ‘governed’ at all, that
wrongdoing can be found and rooted
out, is a sophistry of sorts that applies
social values to the iron laws of capital.
The effect is like a veil cast over the sys-
tem, with isolated ‘scandals’ giving birth
to the illusion that it is not ‘capital’ that is
the enemy of the social after all, but the
phenomenon called ‘poor corporate gov-
ernance’.
Is it any wonder then that securities lend-
ing should come up against the ‘corporate
governance’ hordes – those critics who,
thinking they’re inspired by humanist
principles, find themselves purging the
system’s systemic anti-humanism again
and again and again?
The major problem with securi-
ties lending, from a corporate governance
viewpoint, is that the dividend record
date conflicts with the date of the annual
general meeting. Lenders are incentivized
to lend their stock, which means they’re
unable to vote at the meeting. The dilem-
ma the industry faces lies in the ‘catch 22’
nature of the situation – the choice
between revenue and hole-proof gover-
nance – and the potential this has to
expose the fact that the industry values
revenue above all else. The industry has
two options: it can reveal its true nature
(something it will never do in case the
whole façade comes spiralling down) or
make up some story to gloss over the
facts. Unsurprisingly, the latter is the
course that’s been taken. The reality – the
devaluation of corporate governance
attendant on the pursuit of revenue – is
currently being hidden beneath a sea of
vague excuses. The first excuse is that
lenders hardly ever recall their stocks to
vote, something that’s important in a
practical sense, but which fails to recog-
nise the potential inability to vote. The
second excuse is that lenders are apprised
that they lose their entitlement by lending
out their stock. Whilst this may benefit
from resembling a predilection to sup-
port individual choice (or the market
resting on its laissez faire laurels), it is
nevertheless an intrinsically flawed blue-
print for a system. “Beneficial Owners




ISJ21 34-52 FINAL 2/5/07 7:13 pm Page 51

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SECURITIES LENDING
need to remain conscious of the fact that
they lose their right to vote when their
shares are out on loan. It is important for
them to work with their lending provider
so that a securities lending programme is
implemented in a manner that still allows
the Beneficial Owner to comply with
their corporate governance policies,” said
Chris Holzwarth, Head of Sales at State
Street, as if giving up one’s right to vote is
a positive life-style choice.
An illusion of power
Moving away from the context of the
term ‘corporate governance’, into its ety-
mological roots, shades of meaning
demonstrate the reality of the ‘corporate
governance’ illusion. Govern (from Latin
As for the shade of ‘poor corporate
governance’, providers of securities lending
do not go out of their way to refute it.
gubernare) does not mean ‘to rule’ but ‘to
steer a ship through water’. Whilst the
former suggests absolute linear control,
the idea implicit in the latter is that
action is dependent on the substance that
frames it. Steering, in other words, brings
into existence a nexus of pressure from
one’s hands, the boat and the water. “The
boat responded gaily, to the hand expert
with sail and oar… Your heart would have
responded gaily, when invited, beating obe-
dient to controlling hands.” The corporate
governor does not rule from above but
steers the corporate body through a capi-
talist sea. Correlatively, it is not the cor-
porate governor’s hand that causes the
wreck of his ship, but the rolling motion
of the sea. If corporate governance
activists were less desperate to dictate
every move of the hand, perhaps they’d
be less blind to the state of the water.
If the sea is, in fact, what causes
wrecking, how can we understand ‘poor
corporate governance’? What exactly is it,
especially in regard to securities lending?
Does it exist at all – or is it a mere fabri-
cation, a necessary scapegoat for the cor-
porate system?
One issue that has garnered a lot of
press attention lately is the corruption of
corporate governance through borrowing
stocks to vote on them. Whilst the poten-
tial for this kind of activity exists, its
actual existence is questionable. Are the
stories illusions, constructed on the basis
52 INVESTOR SERVICES JOURNAL
that they could potentially happen –
imaginary consequences of a mere possi-
bility? And what is it anyway that causes
the ‘potential happening’ to become more
than just a gap in what-can-be-perceived
and solidify into a story? “The press
seems to talk about it a lot,” says Mr.
Holzwarth, “and there may be an instance
here and there where it has happened, but
I don’t even want to say we don’t see it
frequently, as we hardly, if ever, see that
type of activity.” Whether the stories are
based in ‘reality’ or not, whatever mecha-
nism brought them into life, their sym-
bolic power cannot be diminished, for
they represent the truth of the law by
declaring that the law has been broken.
By emphasising the importance of the
governor’s hand, they convince us that
the sea is not moving.
So, to go back to the question at hand:
does ‘corporate governance’ exist, and if
so, is its function threatened by the secu-
rities lending market? The answer is ‘yes’
(and ‘no’). It exists as an illusion in the
absence of real governance to convince us
that corporate bodies lie within the
social. As for the shade of ‘poor corporate
governance’, providers of securities lend-
ing do not go out of their way to refute it.
They might form half-hearted excuses as
to why securities lending doesn’t interfere
with good corporate governance, but to
rule out the possibility of poor corporate
governance completely, even within their
own market, would leave no room to
excuse its (imaginary?) excesses i.e. the
borrowing of securities for the purposes
of voting. At the same time they are care-
ful to place the responsibility for ensuring
good corporate governance firmly in the
hands of the beneficial owner, saying, “All
lenders should ensure they have in place
the means to monitor and manage their
lending programs, paying particular
regard to their own corporate governance
responsibilities and where necessary,
ensuring loaned securities are recalled
prior to record date.” In this way the mar-
ket is hermetically sealed, its legitimacy
proved by a combined recognition of a
threat to corporate governance and a
public disavowal of its source.

Manoeuvres in the dark
The securities lending market is
remarkably short on signposts.
Not only is there no accurate
image of the market, trans-
parency of information and the
regulation of reporting are a
long way from sight. What
murkiness, I wonder, gives rise
to this ‘nothingness’ on my
screen – this opacity of price
and this market invisibility?
Whilst some blame must be
placed on the over-the-counter
nature of the market, a desire
for secrecy seems evident in
those who operate in it. A
source close to ISJ, a walker in
this eerie galaxy, pointed out
that the market has historically
been more about who you know
than what you know. Darkness
suits the participants best for
the following stated reasons:
“Typically, the lenders ask the
borrowers to generate large vol-
umes of borrowing activity in
the widely available, liquid blue-
chip equities (referred to as
General Collateral or GC) that
lenders have in abundance. In
return, the borrowers are given
access to the less liquid harder-
to-borrow securities… This
arrangement has favoured larg-
er market participants as the
medium to small size borrow-
ing firms do not have the vol-
ume of GC business to share
out and similar sized lenders do
not have the specials to gener-
ate the GC business. It can be
in the interests of some firms to
maintain the status quo…
Where there is opacity, there
is often opportunity for some
and not others.”
ISJ21 53-67 FINAL 2/5/07 9:00 pm Page 53

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ISJ21 53-67 FINAL 2/5/07 9:00 pm Page 54

RBC DEXIA

John Lockbaum of RBC Dexia

Investor Services explains how T he lift-out is history. Long gone are the days when
investment administrators would pay to ‘buy’ the
middle and back offices of their clients, lifting out a
variety of features and functions that could extend to sys-
the second wave of tems, staff, premises and even water coolers. With the ben-
efit of a decade or more of outsourcing experience behind
outsourcing deals has a them, investment servicing specialists simply do not need to
different set of drivers. engage in any more lift-outs.
That, at least, is the conventional wisdom. Lift-outs are no
longer seen to be the optimal way forward in building an
investment operations outsourcing business, primarily
because most of the largest providers have built a critical
mass of expertise across a broad range of disciplines. That
much is certainly true: in the case of RBC Dexia, for exam-
ple, we have strong investment operations expertise across
the board, both in our home markets and globally. Others
are in a similar position.

SAME SOLUTION, But there are two good reasons why we should not discard
the concept of lift-outs altogether. First, all the providers
have learnt some extremely valuable lessons from our lift-
out experiences. If we consider lift-outs as quasi-acquisi-

DIFFERENT tions, then we have undoubtedly enhanced our ability to

evaluate and execute deals and follow through effectively
with integration at the same time as maintaining service

CHALLENGES levels. Lift-outs are not only a matter of systems integration:

as a result of taking on staff from another firm, we have also
built up a much stronger talent management culture.
We all know how tough it can be to hold on to our best
people, and that challenge is heightened when we are taking
on our clients’ employees. These people may have limited
career opportunities on the buyside, but their skills are in
high demand and short supply for investment administra-
tors, and we have to work very hard to ensure that the new
staff settle in quickly and understand and appreciate our
culture.
Staff retention rates from a lift-out are a key performance
indicator for us and other firms. As an example, our out-
sourcing relationship with CI Financial, which began in
2001 and which is the largest of its kind in Canada, has seen
very pleasing transition and retention rates. With more
than 90pct of the former CI staff still in post after two years,
today we have a 60pct retention rate of staff working on the
CI relationship. Of the remainder, many have transferred to
new responsibilities within RBC Dexia or other parts of the
RBC group. This talent management experience has a far-
reaching effect across our businesses, not only for those
incoming employees but also for existing staff who share
the benefits of our implementation of best practice proce-
dures and training.

Raising the Game

But there is another strong reason to suggest that the lift-
out is far from dead and buried. Alongside the traditional
‘long-only’ managers whom we have served for many years,
administrators are now being asked to come up with com-
prehensive outsourcing solutions for the newer breed of
alternative investment managers. From hedge funds
through to private equity and weather derivatives, these
managers are dramatically diversifying the asset pool, with
the consequence that the shape of administrative and oper-
ational support is also changing rapidly.

54 INVESTOR SERVICES JOURNAL
ISJ21 53-67 FINAL 2/5/07 9:00 pm Page 55




Prompted by the growing interest of institutional
investors in alternative investments, these asset managers –
many of which are small boutiques with limited resources –
realise the need to raise their game when it comes to invest-
ment operations. Institutional investors expect and demand
the highest standards of operational excellence, and their
buying power means that these specialist managers have to
respond.
With both institutions and regulators focusing heavily on
operational efficiency and transparency, hedge fund man-
agers have responded by revisiting the whole issue of mid-
dle and back office processing to evaluate the best way for-
ward, both in terms of satisfying the requirements of their
clients and ensuring effective operational risk management.
Complexity Equals Cost
It is not only pressure from regulators and clients that is
making alternative investment managers concentrate their
minds around operational issues. Intense competition
within the alternatives sector has resulted in managers
broadening the spread of their investment in exotic instru-
ments and markets. This inexorable search for alpha has its
own operational by-product: the need for a highly sophisti-
cated administrative infrastructure, which is both expensive
and time-consuming to maintain in-house. Not surprising-
ly, these managers have come to the conclusion that they
must look to third-party providers for comprehensive oper-
ational and administrative support packages.
As the level of investment complexity rises, so does the
cost of the infrastructure needed to support it, both in
terms of human resources and technology. There are no
easy ways to generate economies of scale when trading in
structured products and OTC instruments, for example,
and finding and verifying independent valuations are
equally critical and expensive challenges.
Proof of this comes from the sobering analysis of OTC
derivatives processing costs by Z/Yen, a specialist market
analyst . Z/Yen recently reported that, despite a massive
increase in trading volumes in 2006, there had been little or
no progress in reducing the processing unit cost. One of the
factors behind this, according to Z/Yen, was the increasing
use of manually-intensive exotic and structured trades.
It looks as if we may be coming full circle in the out-
sourcing cycle. Whereas the first wave of deals were all
about cost reduction and management, this second wave is
all about operational excellence, transparency and risk mit-
igation – different drivers but the same solution. Whatever
the motivation, managers are still looking for a turnkey
service that enables them to focus on performance, sales
and clients.
The lead in this new approach may have been taken by
those specialist boutiques, but there is now much evidence
that the larger managers are reaching the same conclusions.
As these ‘long-only’ firms transform themselves into hybrid
managers that can offer a variety of investment styles and
products, they are asking administrator to support the
expansion and increasing diversity of their asset base.
Hello to Hybrids
This trend towards style convergence is an ongoing chal-
lenge to the market. We can no longer fit managers into neat
RBC DEXIA
little boxes – retail, wholesale, passive, active, traditional,
alternative, equity, fixed income, inter alia. The phenomenal
growth of the alternatives sector, and the pressing need to
generate alpha, have combined to create managers that are
having to learn to accommodate a range of styles and prod-
ucts under one roof.
Administrators now face the challenge of dealing with
this consolidation of traditional and alternative invest-
ment styles. We have to construct a service model that cuts
across every investment style and product for any market,
because that is what global investors expect. These hybrid
firms do not want to have different service levels accord-
ing to what investment style a particular fund adopts.
Whether it is a hedge fund, real estate fund, exchange-
traded fund or a traditional long-only cash fund, man-
agers want consistency from their providers. Additionally,
they want that consistency across all the markets in which
they are active. Providers have got to be best-of-breed
wherever they do business.
Intense competition within
the alternatives sector has
resulted in managers
broadening the spread of their
investment in exotic
instruments and markets.
All this adds up to a new business model for investment
operations outsourcing. The arguments for outsourcing no
longer revolve primarily around cost management: today,
asset managers are more concerned about complexity, reg-
ulatory compliance, time to market, global distribution,
client retention and, of course, investment performance.
These are the topics that most often come up in our con-
versations with asset management firms, and they are
expecting us to come up with solutions, across both prod-
uct and geographic lines.
What is clear is that we can no longer afford to adopt a
‘one-size-fits-all’ strategy. The asset management industry
is undergoing major structural change, and all the previous
demarcations have become redundant. There is now a blur-
ring of the lines, where styles and strategies overlap and
alpha and beta are equally important. Suppliers need to take
into account the specific operating model and strategic
direction of each client – product diversity, geographic
ambitions, distribution infrastructure, management style,
for example – before settling on the optimal administrative
support architecture.
The first decade of global investment operations out-
sourcing has taught us, and our clients, a huge amount
about both the limitations and opportunities. It has been a
steep learning curve and there have been some tears along
the way. Now a new breed of buyside firm is making us
think all over again about how we can best support the
changing business model. It is a challenge, but then life
would be very dull if there was nothing to keep us on our
toes. We are destined to live in interesting times!

INVESTOR SERVICES JOURNAL 55
ISJ21 53-67 FINAL 2/5/07 9:00 pm
FRED FRANCIS - RBC DEXIA
RBC Dexia recently announced the news that
Fred Francis, Global Head of Market Driven
Products, is retiring this summer.
Going but not forgotten...
56 INVESTOR SERVICES JOURNAL
Page 56
ISJ reports.
e get to report on scores of
W ‘people moves’ here at ISJ, from
those taking their first steps in
the industry to those established
in high-level jobs. But when RBC Dexia
announced the early retirement of Fred
Francis, their Global Head of Market-driv-
en Products, we knew we were witnessing
a ‘People Move’ beyond the norm. As well
as being an asset to RBC Dexia for the last
27 years, Mr. Francis is known for the
sheer diversity of the roles he has held –
from strategic planning to investment
management and corporate trust. He
leaves behind him at RBC Dexia a success-
ful array of services, from hedge fund
products and tri-party repurchase to
investment analytics, trade management
services and treasury products. Perhaps
the most impressive thing about Mr.
Francis, though, is the spirit of curiosity
that twinkles in his eyes, something that
has evidently motivated his career from
the outset. By his own admission, it was
his desire to ‘see something through’ that
led him on this remarkable journey in the
first place, from his early days in account-
ing and auditing to his years with RBC
Dexia and the successes of his entrepre-
neurial endeavours in real-estate. This is
not to say that ambition is Mr. Francis’s
only quality. When asked to talk about his
successes, he attributes them more to his
thirst for learning than any superhuman
“Learning,” he says “is everything,
and winning is the reward for learning.”
quality within himself. “Learning,” he says
“is everything, and winning is the reward
for learning.” Equally impressive is the
respect he has for his RBC Dexia team. “I
cannot succeed without a wonderful
team… I may have spurred people to
move in one direction or another, but real-
ly it’s the people who make the world a
better place.” If I remember one thing
about my meeting with Mr. Francis, it will
be this – that despite being responsible for
making huge sums of money, he has the
integrity to say that it’s the presence of
people, not capital, that makes the world a
better place.
What made you choose a financial
profession?
A. After high school I worked for a couple
of years before deciding what career I’d
like to have. By that time I had become
quite practical and pragmatic. I thought it
would be the most practical approach
towards an education, a career orienta-
tion, one in which you learn the basics of
what the financial world is about. From
my perspective everything is common
sense. I’ve always felt I’ve got somewhat of
an entrepreneurial flair, the gut feeling for
things from a financial perspective, and
formalising that in the business world was
to me something that was attractive.
Could you tell me about your time in the
auditing firm KPMG?
A. It was a wonderful experience. I’ve
never had any regrets. Chartered account-
ancy is not the kind of career I would like
to have long-term – it’s too detached from
the practical world – but on the other
hand it was a wonderful experience in
terms of teaching you basic disciplines
that you don’t get anywhere else. Within
the first month of starting you’re sent on
an audit to an institutional client where
you have no knowledge of the business,
you have no idea what they do and how
they do it, you barely have some inkling as
to what the audit is about, and the only
thing you have to refer to is prior years’
files, and you try to learn from them as
much as you can before going. It teaches
you a very tight discipline on deadlines,
something that in other industries doesn’t
seem to be of major importance – dead-
lines, organisation, getting a sense for an
approach, determining a road map even
though you hardly know much about the
business… After a five-year stint, however,
I thought I’d had enough, had had enough
of the training, the discipline, the under-
ISJ21 53-67 FINAL 2/5/07 9:00 pm Page 57
standing, and so I decided to move on to
something a little more challenging.
What has been the most challenging
aspect of your time with RBC Dexia over
the last 27 years?
A. I was lucky in the sense I was given a lot
of latitude and so long as I was generating
revenues and profit I was given more cord.
In terms of challenge I would suggest that
the one challenging moment I had was
when I was trying to convince the bank to
set up a prime brokerage business within
the custody arm. It was a novel idea –
hedge funds weren’t necessarily a welcome
type of client initially, and it was a bit like
tough slugging. It satisfied my need to sat-
isfy my curiosities on the one hand, and
on the other hand it was an excellent move
because it gave us an insight into the
hedge fund world, which forced us to
think in terms of how we needed to pre-
pare for the challenges of today. It was a
somewhat difficult evolution but it was
very rewarding in that the learning, the
growth, was amazing.
What has been the most innovative or
groundbreaking change in the develop-
ment of the financial market in the last 30
years?
A. The most obvious is the power of lever-
age, which has changed what this industry
is all about, and it’s not just applicable to
the industry, but applicable to just about
everything you can do. Coming up with a
disciplined approach to risk management
will allow leverage in a much more power-
ful way than has ever been seen before.
And to me that means one thing, to me
that means financial growth, to me that
means wealth creation… and leverage will
allow the creation of wealth more than has
ever been seen in the past. Is it a discovery?
Is it new? No. Has it been used in the past?
Most definitely… But today it has become
universally accepted and probably more
and more so than ever before. Even the
regulators are getting to a point where
they acknowledge the power of leverage
and the wealth creation capabilities of it,
and are looking for ways of managing to
create the safety nets around it, as opposed
to disabling it, which was the mindset in
the past – that to me, this shift in mindset,
is the biggest change in the cultural/finan-
cial world.
What has been the most rewarding part of
your career in terms of specific projects?
A. Everything I do is rewarding because I
FRED FRANCIS - RBC DEXIA
don’t like touching anything that I’m not
going to take somewhere, but having said
that, what is rewarding for me is, the
David and Goliath concept, where we are a
David in the financial world, when it
comes to our industry, and turning us into
a Goliath, winning on all fronts and all
geographies and having the acknowledge-
ment and recognition when, in effect, all
we deserve is to be a small regional bank
that does not have the kind of brand that
Citibank would have, but creating that
brand through innovation and differentia-
tion… That, for me, is where the satisfac-
tion comes from. I would suggest that
within the past five to seven years, the fre-
quency with which we’ve become number
one has increased dramatically, primarily
I cannot succeed without a wonderful team.
because of the innovation, creativity and
the diversity of the product range that I
put out over the last number of years, and
it’s a culmination of fifteen years of work –
that is what is rewarding.
What will you miss the most after retiring?
A. The first and foremost and most impor-
tant in my mind, and part of the mindset
that I’ve put in place, is my team – and the
reason is very simple. I cannot succeed
without a wonderful team. I may have
spurred people to move in one direction
or another, but really it’s the people who
make the world a better place. I would
suggest that half my team has been with
me for over 10 years, and it’s not a work-
ing relationship only, it’s a friendship, it’s a
relationship of success, it’s a depth of tal-
ent, and it’s amazing – the camaraderie
and philosophical debates we have…
Many times people have come up to my
office and said, “Would you mind very
much if we close the door?” And I say,
“Excuse me, what’s the problem?” “You’ve
been shouting,” they say. “What do you
mean I’ve been shouting?” I say, “We’ve
been having a heated debate!” That is
something that’s irreplaceable – and it’s
the element I’m going to miss the most.
The second element is that I truly think
that as an organisation RBC and RBC
Dexia are very supportive in terms of
opportunity creation, encouraging success
and allowing out of the box thinking. I
wish my team all the success. They’ll do
very well I’m sure, and the beauty is, when
you have a strong team, whatever is there
is not a one off, it’s continued… that is
what’s beautiful.

INVESTOR SERVICES JOURNAL 57
ISJ21 53-67 FINAL 2/5/07 9:00 pm Page 58
FUND FORUM PREVIEW
FUND FORUM INTERNATIONAL 2007
2nd – 5th July
On 2 July 2007, Europe’s largest and most prestigious
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Over the course of four days, from the 2nd through to
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58 INVESTOR SERVICES JOURNAL
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Tel: +1 284 494 1509
Email: info@ifc.gov.vg
W: www.ifc.giv.vg
ISJ21 53-67 FINAL 2/5/07 9:00 pm Page 59
The DIFC is the world's newest international financial
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info@difc.ae
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Financial Tradeware provides integrated solutions for
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Tel : +44 (0) 20 7493 2773 Mob: +44 (0) 7887 747 357
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INVESTOR SERVICES JOURNAL 59
ISJ21 53-67 FINAL 2/5/07 9:10 pm Page 60
DATE FOR THE DIARY
Trompe l'Oeil
and like trickery are not skills usually
celebrated in finance. But now ISJ
invites our readers to view Elena and
Michel Gran’s stunning works in an
exhibition created by Braxxon
Consulting and Financial Tradeware at
Mayfair’s prestigious Albermarle Gallery.
60 INVESTOR SERVICES JOURNAL
Featuring the most recent works by
Elena and Michel Gran -
Contemporary Masters of Trompe l'Oeil
Sponsored by Braxxon Consulting, Financial
Tradeware and Investor Services Journal
The Artwork
Elena and Michel Gran present two unique features in contemporary
trompe-l'oeil painting.
Firstly, they work together on the same canvas. This idiosyncrasy has
fascinated the public who are eager to understand how this may be pos-
sible between two artists. Symbiosis is so perfect that once a painting is
completed, they can not say for sure who painted what part.
Secondly, and of singular importance, is their distinctive interpretation
of trompe l'oeil. Technically brilliant, their skill and adeptness is self-evi-
dent. However, unlike other skilled practitioners of the genre, who repli-
cate onto canvas a faithful translation of their model, the Grans, in con-
trast, take the concept onto a completely different level - of intellectual
prowess and philosophical discourse borne out of their profound under-
standing of historical reference. These attributes, combined with a vision
and imagination rich in metaphor, engage the observer in an unrelenting
beguiling game of fantasy and illusion.
The Artists
Elena was born in St. Petersburg in 1942 into a family of painters and
architects. She trained at the Academy of Theatre, Music and
Cinematography St Petersburg within the Faculty of Arts.
Michel was born in Moscow 1941, the son of a theatrical artist. He
trained at the same Academy as Elena where they met and in 1964 sub-
sequently married.
On graduating they embarked on a joint professional career as theatre
set designers and book illustrators. They became collectors of furniture
and objets d'art, in particular of unusual shapes, which because of their
intrinsic historical character often appear in their paintings.
Progressively, the representation of the inanimate and depiction of the
object, significantly the playing card, became the dominant theme in their
work which ultimately led to their first canvases in 1979/80.
In 1981, Elena and Michel moved to Paris. During the past 20 years they
have had 16 solo exhibitions throughout France, Germany, Italy and
England and also have participated in group exhibitions, among which
the famous Salon d'Automne and the Salon des Independants of which
they are members. Throughout this period they have completed 200
works including those in this exhibition, a reassuring and noteworthy
point for collectors.
The Grans are represented in public collections in Germany and Italy
and in 1996, the Louvre Museum purchased a work entitled Red and
Black for the French Museum of the Playing Card.
Party
v ie w & Cocktail
re m
Private P 0 pm to 8.00 p, 2007
6.0 a y
ay 30th M
Wednesdemarle Gallery,
Alb et,
arle Stre
49 Albem, W1S 4JR
London
m
jnews.co
alan@is
RSVP
ISJ21 53-67 FINAL 2/5/07 9:00 pm Page 61

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ISJ21 53-67 FINAL 2/5/07 9:00 pm Page 62
DISASTER RECOVERY
In the latest despatch from
our disaster recovery expert
Keith Ford reports from
Continuity Towers.
Excursion to
Las Vegas
W
ell, spring has well and truly sprung here at con-
tinuity towers and the sap is rising (That’s not a
business acronym) but a reference to how perky
we are all feeling!
Our high spirits may be to do with our recent excursion.
I am not sure how much I can tell you about this, I am sure
that you have heard all that stuff before about how “I could
tell you what I have been doing, but then I would have to
kill you” Well our team here at continuity towers have been
on a secret mission to a foreign country!
I don’t think I have to tell you that this is another of the
“ideas from upstairs”. Honestly, you would think sometimes
that we are in the fashion or media business not interna-
tional finance. It does seem that whenever one of our com-
petitors mentions one of their new initiatives over a brandy
in the club, or as we expect in this case the Sushi Restaurant
there is a staggering stampede back to our offices and a flur-
ry of slurred emails instructing us to sally forth on their lat-
est ridiculous pilgrimage.
The most irritating thing of all is that so many times the
“Ideas” that they come back with fresh from the lips of our
competitors Directors are the very same ideas we have been
suggesting to them for years!
On the most recent occasion our Directors had managed
to discover that some large cities in developed countries
have many many buildings in close proximity to each other.
This may present a possible threat, not just from terrorists
but also from fires and electrical outages and if we have an
office in just such a location we may well be affected.
Genius! Now although we have our own DR sites that have
62 INVESTOR SERVICES JOURNAL
really just grown organically from existing sites, we have not
before looked at outsourced Disaster Recovery or suitabili-
ty of locations to perhaps provide our own facilities.
And that in short is how the whole team found themselves
in Area 51, Dealing with Aliens.
I know I have told you before about our elaborate travel
plans when it comes to flying? Well the hurdles were out
again as the flight with our usual carrier “Bags Astray” had
three other directors on board, which when added to our
team represented an unacceptable risk, so we had to try a
smaller airline. Even though it was not our money and the
flight represented great value we still jumped a on a Maxjet
flight from London, we in the IT world really think this “all
business class” at the price of cattle class a wonderful idea,
go and try them, tell them I sent you at www.maxject.com
After a fantastic flight we were met at the airport by a lim-
ousine provided by “company X” that was about as big as a
bendy bus with blacked out windows and a well stocked bar.
With the DVD’s and stereo blasting away, with the team
being as professional as you can be when standing up
through the sunroof and shouting at the odd passer-by, we
made our way to the Hotel company X had found for us.
Our hosts were very keen to marry us up (Vegas Joke) with
other possible customers that were looking at the facilities.
At first we were surprised to find that most of these
prospective customers were Japanese. It was explained to us
that despite our English opinion of Las Vegas being the
Uber Blackpool, it was in fact considered by Global
Corporations as a particularly safe location in North
America and of course very accessible from Japan! Consider
ISJ21 53-67 FINAL 2/5/07 9:00 pm Page 63

DISASTER RECOVERY

first the climate, the airport is never snowed in, they have the
weather of California but without that inherent earthquake We want to make it quite plain that
risk. It was also pointed out that a large number of their clients
from Japan had started looking at the location to simply store our recommendation
off site massive amounts of data in an area where real estate
and staff is inexpensive and the setting up of Disaster recovery
was made purely on the
sites was simply the next obvious step. business and geographic
Now I was wondering, were our management team looking
for a fairly in-depth study of the facilities available and the statistics that were available
location? Or perhaps if I wore my cynical hat, did they
believe that if they sent our team of young blades out to Las
to us and has nothing to do
Vegas with all the distractions of show girls, casinos and with the fact that Paul is now
what seemed to be a virtually cost free fun city would we let
these wonderful attractions colour our judgement. I think having a passionate long distance
they were obviously very keen on the location to begin with
and to be honest we were a little happier than if we were in
romance with a cocktail waitress
Milton Keynes, despite the rather “X files” feeling to their
desert facilities.
from the MGM casino.
Whenever we are asked to present our findings we often like
to use large matrix tables that give our audience the detail they
require in a manageable way. Oh and of course they take up
loads of space which makes it look as if we have been really
busy and it makes decision making very simple for our deci-
sion challenged executives. We like to call it a quantitative
analysis. We chose what we considered the most important
issues for our organisation in finding a Disaster Recovery site,
perhaps electricity sub station outages, likelihood of being a
terrorist target, distances from sites to be recovered from. Add
in additional detail on weather and climate issues such as
snow, rain, and humidity with natural disasters such as earth-
quakes, floods and tornadoes.
If you then spend some time researching the answers you
can then quickly rank the location in terms of it’s suitability.
Our team had copied the idea in a much more creative fash-
ion and Paul was very quick to produce a remarkably similar
table based on the price of a large vodka and tonic, a three
course meal, one two mile taxi trip and the entry price to a
lap dancing club.
To our surprise Las Vegas came out top from an initial shop-
ping list of ten other US cities. So was our “research” impartial
and was the US directors decisions to look first at Las Vegas as
a possible site impartial and objective?
Wikipidea looks at Cognitive and personal biases in decision
making and describes it thus. see page 60
It is generally agreed that biases can creep into our decision
making processes, calling into question the correctness of a
decision. It is not generally agreed, however, which normative
models are to be used to evaluate what constitutes an erro-
neous decision. Nor is the scientific evidence for all of the
biases agreed upon. So, while it is agreed that decision making
can be biased, how to tell when it is, and specific cases of bias-
es, are often challenged.
We want to make it quite plain that our recommendation was
made purely on the business and geographic statistics that
were available to us and has nothing to do with the fact that
Paul is now having a passionate long distance romance with a
cocktail waitress from the MGM casino. Finally we have just
heard the decision and we will be using a facility in Las Vegas,
which has nothing, repeat nothing to do with the fact that in
January the North American CIO sold his ski lodge in
Colorado and purchased a New Ranch in Nevada.

INVESTOR SERVICES JOURNAL 63

ISJ21 53-67 FINAL 2/5/07 9:00 pm Page 64
RISING STARS
A Schorer
Thing
ISJ speaks to Isabel
Schorer of Eurex,
continuing our
series of ‘Meet the future’
profiles.
During my studies I took a trainee position
at Credit Suisse; first in the cash service
then quickly moving into the SME
Corporate Clients department. Eventually I
was employed as a project management
assistant in Corporate Banking. After my
graduation in 2004, I started working as a
full- time project manager at Credit Suisse.
Preferring the marketing and communica-
tion aspects of my work, I took the oppor-
tunity to move into Sales and Marketing in
August 2006 when I joined Eurex, the
world’s largest derivatives exchange and
leading clearing house in Europe, in my
current role.
THE ISJ MINUTE
CD or MP3? MP3
Books or Films? Books
Beer or Wine? Wine
Theatre or Club? Club
Elvis or Johnny Cash? Johnny Cash
Nights In or Nights Out? Nights Out
Watching or Playing? Watching
64 INVESTOR SERVICES JOURNAL
Why did you choose this career initially?
Initially it was personal interest in eco-
nomics and the finance industry that led
me towards my current career. This choice
was helped by the encouragement from my
family, friends and a mixture of coinci-
dences and good fortune!
Describe your experience at previous
employers / locations
I enjoyed my experiences at Credit
Suisse where I was very lucky to have the
opportunity to work in several different
business areas, working alongside profes-
sionals who were prepared to spend time
to help me further develop my own busi-
ness skills and knowledge.
What do you enjoy most about your current
position at Eurex?
Firstly, I enjoy the variety of projects and
responsibilities, as well as the creative
freedom and individual responsibility that
I have in my job.
Secondly, I am very motivated to be part of
a growing market with plenty of opportuni-
ty. Last but not least, I really appreciate
working in a team of like-minded and sup-
portive professionals.
Who are your mentors / role models?
In my professional life I was lucky to
have the support and encouragement of
my superiors whom I clearly see as influ-
ential role models. However, the most
important people to me are my family,
because they are always there when I need
someone to talk to and my parents gave
me the chance to become who I am today.
Where do you see yourself in five years
time?
Our organization is very dynamic and
has a lot to offer. But only time will tell
where I will be in five years time.
We at ISJ work hard, we did hear you
work long hours too. What is your average
working day like?
I don’t have an average working day -
which is something I like very much! In
managing my different projects (also
unexpected issues) I am sometimes
doing conceptual work in Zurich, other
times I am busy in meetings or work-
shops or working on new marketing
issues. If I am not doing any of these
then maybe I’m abroad attending an
event or a conference.
If you were given the opportunity to
take a sabbatical or year out what
would you do?
That is very easy! I would go for a
round-the-world trip to visit places that
interest me (with the emphasis on art &
design) and further develop my language
skills.
If you were named Eurex employee of the
year, how and where would you cele-
brate?
I would invite my whole team and the
people who supported me last year and
thank them, because you can only be
that successful as a team and not as a
single person.
What are your long-term goals for the
future?
My goal is success in my professional
development and a good work-life
balance.
ISABEL SCHORER
Marketing & Key Account Manager –
Eurex SecLend and Eurex Repo, Eurex
Zürich AG
Education:
Master of Business Administration at
University of Zurich
Master of Advanced Studies in
Communication Management at HSW
Lucerne
Employment:
1999 – 2006 Credit Suisse, Switzerland
2006 – Present Eurex Zürich AG,
Switzerland
ISJ21 53-67 FINAL 2/5/07 9:00 pm Page 65

MANDATES

MANDATES AWARDED TABLE

2007
Month Winner Client Location Assignment Mandate Size
April AA Mellon Buckinghamshire UK Custody Services GBP 1bn
April StateStreet Paternoster UK Custody/Sec Lending n/a
April BNP Paribas Chi-X France Clearing Services n/a
April JPMorgan PIC UK Custody Services n/a
March Northern Trust Hounslow UK Custody Services GBP 300 million
February BNY Tokyo-Mit UK Custody Services USD 3.4 bn
February State Street Rolls Royce UK Custody & Fund Services GBP 450 million

BANK OF NEW YORK DOMINATES

THE MANDATES WORLD...

The BANK OF NEW YORK has been appointed by BANCO DE MOÇAMBIQUE, the central bank of the Republic of
Mozambique, to act as global custodian and securities lending agent for its foreign reserves. Tim Keaney, executive vice
president and head of Europe at The Bank of New York, said, “We have made significant investments in value added
services such as securities lending, global risk services and transition management, and this appointment reflects the
strength and breadth of our capabilities. The Bank of New York has a significant business on the African continent and
this prestigious central bank win demonstrates our commitment to the region.”

ABN AMRO MELLON GLOBAL SECURITIES SERVICES B.V. has been appointed by BUCKINGHAMSHIRE COUNTY
COUNCIL PENSION FUND to provide global custody, investment accounting (SORP) and performance measurement
solutions for assets valued at £1 billion. Frank Downes, Chairman of the Pension Fund at Buckinghamshire County
Council, said: “We were extremely impressed with ABN AMRO Mellon’s enthusiastic team and by the extensive suite of
reports offered in respect of accounting and performance measurement. ABN AMRO Mellon has been chosen after a rig-
orous selection procedure and we look forward to working with them.”

MELLON FINANCIAL CORPORATION announced that its Asset Servicing group will administer the middle and back
office for the managed accounts business of BEAR STEARNS ASSET MANAGEMENT (BSAM). Among the services that
Mellon will provide are account opening and maintenance, transaction support, custodian reconciliation, and investor
reporting services. Mellon will also be providing BSAM with an imaging and workflow tool. "What impressed us most was
Mellon's long-term industry commitment as a managed accounts outsourcing provider, and the experience of its indus-
try-focused service team," said Stuart Hendry, managing director of investment operations for BSAM.

STATE STREET CORPORATION has announced an expansion of its relationship with PATERNOSTER, the insurance com-
pany which takes responsibility for the risks associated with companies’ final salary/defined benefit pension schemes.
In addition to custody and securities lending, State Street will now provide Paternoster with collateral management serv-
ices. “Collateral management is particularly important given our complex liability-driven investment style,” said Mark
Wood, Paternoster’s chief executive. “We trust State Street to help us achieve our aim of delivering the best possible
returns whilst minimising risk and cost effectively.”
The BANK OF NEW YORK, has been appointed by SOCIÉTÉ EUROPÉENNE DE BANQUE LUXEMBOURG as global cus-
todian for its UK and Irish assets. Clemente Benelli, chief executive officer of Société Européenne de Banque
Luxembourg, said, “We appointed The Bank of New York because they have demonstrated a clear understanding of the
sectors we operate in and have the experience to meet the complex needs of our business.” Robert Darmanin, executive
vice president at The Bank of New York, said, “Winning this significant piece of business highlights our capabilities and
proven track record and exemplifies the momentum we continue to experience in our custody business. We look forward
to helping Société Européenne de Banque Luxembourg team grow its business.”

The BANK OF NEW YORK has been appointed by MIZUHO CORPORATE BANK LTD, as clearing agent for its trading in
US Treasury and Global securities clearing. Colin Wallace, Assistant Director at Mizuho Corporate Bank, London Branch
said “Following market analysis which focused on the London Branch requirements, we selected Bank of New York for
its securities clearance capability. The Bank of New York demonstrated they could deliver solutions across multiple mar-
kets, which fit nicely within the London Branch business model. ”

INVESTOR SERVICES JOURNAL 65

ISJ21 53-67 FINAL 2/5/07 9:00 pm Page 66
PEOPLE MOVES
Moving
&
Shaking
New York - The Board of Directors of
Broadridge Financial Solutions, Inc.
has appointed John Hogan to the posi-
tion of President of Broadridge. This
promotion, which is in addition to his
role as Chief Operating Officer, recog-
nizes John's critical role, his strong
leadership and his high level of
responsibility across all facets of
Broadridge's business. Before assum-
ing the role of Chief Operating Officer
of Broadridge, John was Division Co-
President of the Brokerage Services
Group of Automatic Data Processing,
Inc., the business that was spun off by
ADP on March 30, 2007 to create
Broadridge.
London - Fabien Pictet & Partners
(“FPP”), a specialist fund management
company focusing on both traditional
and alternative investments in
Emerging Markets, has announced the
appointment of Dr. Daniel Rutz to
augment its Ukrainian investment
management team. Mr. Rutz joins
from Goetzpartners Corporate
Finance (formerly CEA) where he
worked for seven years as Director,
Media & Communications and more
recently, as Executive Director, Media
& Communications and Central,
Eastern & South-Eastern Europe. Mr.
Rutz has extensive experience of man-
aging private equity transactions, has
worked on deals throughout Europe
including Ukraine, and will replace
Yves Kuhn who has left the company.
Tokyo - MSCI Barra, a provider of
benchmark indices and risk manage-
ment analytics products, announced
that it has hired Noboru Terada as a
Senior Advisor. Mr Terada will be
based in Tokyo and report to Philippe
Ballet, Head of MSCI Barra in Japan
and Australia. Mr Terada is a former
66 INVESTOR SERVICES JOURNAL
Executive Investment Officer and a for-
mer Member of the Board of Trustees at
the Government Pension Investment
Fund in Japan. “Mr Terada is a recognized
thought-leader within the industry. The
pension environment in Japan has
changed significantly over the past ten
years and many of these changes are due
to the efforts of Mr Terada, who has con-
sistently campaigned for improved pen-
sion governance,” said Henry Fernandez,
CEO and President of MSCI Barra.
London -
SunGard System
Access has
announced the
appointment of
Roy Williamson
to the position of
vice president of
Business
Development for
EMEA. Based in
London, Roy will
report directly to
Roy Williamson Leslie Loh, presi-
dent of SunGard
System Access. In his new role, Roy will
have overall responsibility for overseeing
the EMEA's business development team's
activities and driving new sales for the
region. Roy brings with him over 18 years
of experience in the financial software
solutions and services marketplace. Prior
to his new appointment, he was sales
director of EMEA, with IPS-Sendero.
Prior to that, he held various senior sales
management positions at Netik, Financial
Models Corporation, Thomson Financial
and Trema.
London - Carsten Zielke, an insurance
strategist in the German financial mar-
kets, has joined the Financial Analytics
and Structured Transactions (F.A.S.T.)
group at Bear Stearns International
Limited. Dr. Zielke joins from WestLB
where he was head of insurance equity
research. Bear Stearns has also hired Paul
Wessling from HSH Nordbank to work
with Dr. Zielke to provide strategy and
asset liability management expertise. Both
will be based at Bear Stearns' European
headquarters in London.
Singapore - Deutsche Bank has
announced it has appointed Gregory Park
as Managing Director and Head of
Securitisation, Asia ex-Japan, based in
Hong Kong. Mr. Park was previously
Managing Director, Head of Asset
Securitisation at Calyon, based in Hong
Kong and was responsible for all region-
al securitization and structured capital
markets transactions. He has over 11
years' experience in the Asian securitisa-
tion market, across a broad range of
markets and asset classes. Sajid Javid,
Managing Director and Head of Global
Credit Trading Asia at Deutsche Bank,
said: "Mr. Park's extensive experience
will benefit those clients looking to
securitise assets for balance sheet relief
and flexible terms of finance via
Deutsche's leading capital markets plat-
form in Asia."
New York - The
Nasdaq Stock
Market has
announced that
it has appointed
the Honorable
Michael G.
Oxley as non-
executive Vice
Chairman of
NASDAQ. In
his new posi-
Michael Oxley tion, Mr. Oxley
will work with public company chief
executives and board members on
NASDAQ's behalf and oversee outreach
to NASDAQ listed companies on public
policy issues. Additionally, he will serve
as an advisor to NASDAQ President and
Chief Executive Officer Bob Greifeld
and the NASDAQ Board of Directors.
Oxley will report to Bob Greifeld. Mr.
Oxley joins NASDAQ after a 34-year
career in public life, including 25 years
of distinguished service in the U.S.
Congress and as former Chairman of
The House Financial Services
Committee.
London - BNP Paribas Securities
Services UK has announced the
appointment of Stephen Turner as
Chief Operating Officer, UK with
immediate effect. Gail Burke, who has
held the post since September 2006, will
be returning to Australia for personal
reasons. In his new role, Stephen will be
responsible for all aspects of operational
service delivery in the UK, including IT.
Commenting on the appointment, Tony
Solway, Head of BNP Paribas Securities
Services in the UK, said: "Stephen's
appointment demonstrates the strength
ISJ21 53-67 FINAL 2/5/07 9:00 pm Page 67
and depth of our management team. He
has all the necessary skills and experience
to deliver excellence in client service in
the years to come."
New York - Omgeo, provider of post-
trade, pre-settlement trade management
services, has announced three manage-
ment changes. Timothy Keady was pro-
moted to managing director, global sales
and relationship management and has
also joined Omgeo’s executive team. Lee
Cutrone, managing director of industry
relations, will now also oversee Omgeo’s
global marketing function. Martin
Brennan takes on the new role of manag-
ing director, business development for
the Asia-Pacific and Europe, Middle East
and Africa (EMEA) regions. All three
gentlemen report to Marianne Brown,
president and chief executive officer.
London - KAS
BANK has
appointed
Caroline Cudars
as Manager of
New Business
Development
Institutional
Investors UK.
The appoint-
ment will be
effective from
Caroline Cudars Monday 12th
March. Caroline Cudars will primarily
focus on business products for the UK
institutional asset management and
investment fund side of the market.
“With this appointment, KAS BANK fur-
ther emphasizes its strong commitment
to and focus on the UK institutional
market”, says Laurens Vis, Managing
Director of KAS BANK UK Branch.
Chicago - Spectrum Global Fund
Administration announced that Carol
Burke has been promoted to Chief
Executive Officer. Before her promotion to
CEO, Ms. Burke held the position of Chief
Administrative Officer and General
Counsel of Spectrum. Ms. Burke was pre-
viously Executive Vice President/Chief of
Staff and General Counsel of CBOT
Holdings through the completion of its
2005 IPO. Her extensive knowledge and
experience in the financial services indus-
try has been an integral part in shaping the
strategic, financial and operational compo-
nents of Spectrum's global business.
London - State
Street
Corporation has
announced the
appointment of
Michael Walsh to
head of State
Street’s invest-
ment servicing
business in the
United Kingdom,
Middle East and
Michael Walsh Africa (UKMEA)
He will report to
Peter O’Neill, executive vice president and
head of State Street’s investment servicing
and investment research and trading
businesses for UKMEA. Walsh has been
responsible for managing State Street’s
investment servicing business in Scotland
since October 2005. He joined State Street
in 2004 as head of WM Performance
Services, the company’s European per-
formance measurement division. Prior to
joining State Street, Walsh was with
HSBC Investment Funds in the UK, most
recently serving as managing director and
head of investment services.
London - The
Executive
Committee of the
Equity Trust
Group is pleased
to announce the
appointment of
Joost Löbler as
Managing Director
for EQUITY Fund
Services, it’s funds
services division.
Based in London, Joost Lobler
Joost concentrates
on managing as well as expanding Equity
Trust’s global fund services’ activities for
hedge funds and funds of funds. The
Equity Trust Group has several decades of
experience in complex fund administra-
tion. EQUITY Fund Services has over $
15 Bn under administration and offers
services from 11 global strategic loca-
tions.
Mr Löbler spent 17 years at Fortis
N.V./S.A, latest in the position of Chief
Commercial Officer for Fortis Prime
Fund Solutions. After leaving Fortis early
2006 he acted as an advisor to the board
of the Citco Group Ltd. for some time,
after which he joined Equity Trust.
New York - Deutsche Bank Securities Inc.
PEOPLE MOVES
have announced that Jeff Dorman will
join as a Managing Director and Head of
Global Prime Finance in North America
in the Global Markets' equities business.
In his new role, Dorman will lead
Deutsche Bank's Global Prime Finance
business in North America. He will be
based in New York and will report to
Jonathan Hitchon and Barry Bausano,
Co-Heads of Global Prime Finance and
Robert Karofksy, Head of Global Markets
Equity in North America. Dorman most
recently worked at Bear Stearns as Global
Co-Head of Prime Brokerage. Prior to
joining Bear Stearns, Dorman spent 18
years at Lehman Brothers, most recently
as Head of Domestic and International
Prime Brokerage and Equity Finance.
New York – Deutsche Bank have
announced that Mark Haas has been
promoted to Head of Business
Development for Global Prime Finance.
In this capacity, Haas will develop the
bank's product strategy for Global Prime
Finance, leveraging his over 25 years of
industry experience.
Hartford - Mellon Financial Corporation
announced that Robert Penney has been
appointed president of its Private Wealth
Management group's Connecticut region.
Joining Robert as managing director is
Paul Tracey, responsible for private client
portfolios. "Strategically located between
our offices in New York, Boston and
Providence, the new West Hartford office
represents a significant opportunity for
Mellon," said Larry Hughes, executive
director for Melon's Private Wealth
Management group. "With Bob and Paul's
experience, we look forward to expanding
our presence and client base significantly
in the coming years."
New York - Wombat Financial Software
Inc. has announced that Jon Lambert has
been appointed the newly created role of
Chief Financial Officer, after having served
as an adviser to the company for two years.
Lambert’s addition will help position the
firm to continue its rapid pace of expan-
sion world wide, having continued its
trend of more than doubling revenues
again in 2006. Lambert brings some 20
years of experience in the software industry
to Wombat. Most recently, he has been
providing Chief Financial Officer (CFO),
Chief Operating Officer (COO) and
Business Development consulting services
to various early stage companies.
INVESTOR SERVICES JOURNAL 67
ISJ21 53-68 FINAL 3/5/07 6:01 pm Page 68

Official Media Partner

INVESTOR
S ERVICES
JOURNAL
ISJ21 69-80 Directory FINAL
T: +44 (0) 844 499 6388
C: David Monks, Saghar Bigwood
or Stephen Everard
A: 10, Earl Street
London, EC2A 2AL.
E: dmonks@goalgroup.com or
sbigwood@goalgroup.com or sev-
erard@goalgroup.com or
info@goalgroup.com
C: Professor Michael Mainelli,
Executive Chairman
E: michael_mainelli@zyen.com
C: (Disaster Recovery and Project
Management): Keith Ford,
Senior Consultant
E: keith_ford@zyen.com
T: +44 207-562-9562
F: +44 207-628-6786
W: www.zyen.com
C: Cornelia Keth
T: +49 69 718 3738
F: +49 69 718 6050
E: cornelia.keth@bhf-bank.com
C: Moritz Ostwald
T: +49 69 718 6838
E: moritz.ostwald@bhf-bank.com
A: Strahlenbergerstraße 45,
63067 Offenbach a.Main
Germany
W: www.bhf-bank.com
International: Olivier Storme
T: +352 4767 2847
E: olivier.storme@caceis.com
France: Patrick Lemuet
T: +33 (0)1 57 78 03 34
E: patrick.lemuet@caceis.com
W: www.caceis.com
www.dbs.com
+65 6878-1830
+65 6878-4766
Ms Low Swee Fun
investorsvs@dbs.com
DBS Bank Ltd,
Global Transaction Services,
Securities Services,
6 Shenton Way, #36-02,
DBS Building Tower 1
068809 Singapore
3/5/07 1:19 pm Page 69
ISJ Directory of Services
Asset Servicing
GOAL is the widely-acknowledged industry leader in providing creative products,
services and solutions to automate and optimise the global reclamation of withhold-
ing tax and class action compensation. Our research has shown that in excess of
US$6 billion of withholding tax remains unclaimed each year by the rightful owners
and beneficiaries and the amounts for class actions is even larger.
To establish your potential ability to reclaim over-withheld taxes and/or class action
compensation GOAL provides a free proof of concept analysis. We simply require details
of the income entitlement(s) and/or trade details together with the type and domicile of
the underlying beneficiaries. We do not need the name(s) of the beneficiaries.
Our Products include GTRS, Class Actions, GQI, e-Reclaim, GOAL TaxBack, DMS
and Bespoke Software Development.
Consultants
Z/Yen helps organisations make better choices. Our name combines Zen and Yen -
“a philosophical desire to succeed” - in a ratio, recognising that all decisions are
trade-offs. Z/Yen’s mission is to be the foremost risk/reward management firm.
In the financial markets Z/Yen conducts numerous research projects on a variety of
wholesale and retail issues, as well as providing technical strategy, support and
prediction systems. Z/Yen’s renowned annual studies include:
i. Global cost per trade benchmarks on equities, money markets and foreign
exchange;
ii. Operational performance of broker ratings;
iii. Operational performance of client (buy-side) ratings.
Custody & Clearing
BHF-BANK is one of Germany's most prestigious private banks. Its roots date back to the
year 1854. As an advisory, service and sales & trading bank, we offer our discerning clientele
a comprehensive array of customised solutions. BHF-BANK combines the strengths of a pri-
vate bank with a long track record of capital market competence.
Trust, an individual approach and impartiality - these qualities are at the very heart of the
long-term guidance and advice we provide for our clients. Our bank's activities are grouped
within the divisions Asset Management & Financial Services, Financial Markets & Corporates
and Private Banking.
The bank's longstanding experience in the German securities services market goes hand in
hand with a corporate culture that values prompt acknowledgements and short decision-mak-
ing channels.
BHF-Bank offers tailor-made custody services to meet its clients' particular requirements.
It's reporting services include a comprehensive SWIFT reporting matrix as well as its
Internet-based reporting tool cds@web. Assets under Custody: EUR269 bn No of funds: 328
CACEIS is an Investor Services company with six offices across Europe. Owned in
equal parts by Crédit Agricole and Natixis, CACEIS provides Custody, Fund
Administration and Corporate Trust services to demanding Corporate and
Institutional clients. We have considerable expertise in Cross-Border Fund
Distribution Support as well as Alternative Investment and Private Equity servic-
ing.
Our staff have the language skills and industry knowledge to develop business
relationships into strong partnerships and our powerful IT systems are constantly
updated to ensure high levels of process automation.
CACEIS is responsible for over EUR1.75 trillion held under custody, and over
EUR850 billion under administration.
DBS offers a full range of custodial services including securities safekeeping, settlement
of trades, corporate actions and market information updates. These services are
available in Singapore, Hong Kong, Indonesia, India, China (A-shares) and other select-
ed markets. DBS also offers short-term, highly liquid overnight facilities for its clients'
accounts to earn daily interest on any excess funds.
With over 20 years of experience in the custody business, DBS' strengths lie in its ability
to provide quality services, in depth knowledge and expertise of the Asian markets, as
well as customized business solutions to support clients’ businesses. Its clientele
comprises the global custodians, international central securities depositories, broker-
dealers, financial institutions, insurance companies, investment managers, private banks
and corporate.
69 INVESTOR SERVICES JOURNAL
ISJ21 69-80 Directory FINAL 3/5/07 1:19 pm Page 70

DnB NOR is the largest and leading provider of Custody, Clearing and
T: +47 22 94 92 95
Remote Member Service in Norway In addition, DnB NOR provides a wide
F: +47 22 48 28 46
range of value added services to both Foreign and Domestic clients.
Contact: Bente I. Hoem
Through an Alliance solution with banks in Sweden, Finland and Denmark,
E: bente.hoem@dnbnor.no
DnB NOR can offer seamless regional products, which can be customized to
our client's needs.
W: www.dnbnor.com

Handelsbanken was the first Nordic bank to provide complete custody services in the T: +46 8 701 2988
entire Nordic region. We conduct in-house processing in each Nordic country, with F: +46 8 701 2990
well-experienced staff with in-depth market knowledge and access to market Contact: Johan Wennerberg
information. Each client is allocated an account manager fully responsible for the E: custodyservices@handels-
day-to-day activities, as well as a regional relationship manager. Handelsbanken banken.se
provides specialised and tailor-made custody services including complete corporate Address: Blasieholmstorg 12,
action services, securities borrowing and lending for all Nordic countries, as well as SE-106 70 Stockholm, Sweden
settlement and clearing services to clients that are remote members of the Nordic www.handelsbanken.com/nordic_
stock exchanges. _custody_services

New York: Christopher Lynch

JPMorgan Worldwide Securities Services, a division of JPMorgan Chase Bank, N.A., T: 212-552-2938
is a global industry leader with $13.9 trillion in assets under custody. JPMorgan E: chris.e.lynch@jpmorgan.com
provides innovative custody, fund accounting and administration and securities
services to the world's largest institutional investors, alternative asset managers and London: Francis Jackson
debt and equity issuers. T: 44 (20) 7325 3742
E: francis.j.jackson@jpmorgan.com
JPMorgan Worldwide Securities Services leverages its scale and capabilities in more
than 90 markets to help clients optimize efficiency, mitigate risk and enhance Sydney: Laurence Bailey
revenue through a broad range of investor services as well as securities clearance, T: (61-2) 9250-4833
collateral management and alternative investment services. E: laurence.bailey@jpmorgan.com
W: www.jpmorgan.com/wss

Nordea is the leading financial services group in the Nordic and Baltic Sea region
and operates through three business areas: Retail Banking, Corporate and
Institutional Banking and Asset Management & Life. T: +47 2248 6238
- The leading financial services group Contact: Anne-Lise Kristiansen
- A world-leading Internet banking and e-commerce operation
Head of Sub-custody and
- The largest customer base of any financial services group in the region
- A leading asset manager in the Nordic financial market Clearing
- The most comprehensive distribution network in the region E: anne-lise.kristiansen@nordea.com
Nordea is the leading custody services provider in the region. Nordea provides high
quality, tailor-made custody services for local and foreign investors dealing with
Nordic, Baltic or global securities.

RBC Dexia Investor Services offers a complete range of investor services to

T: +44 (0) 20 7653 4096
institutions worldwide. Established in January 2006, we are equally owned by Royal F: +44 (0) 20 7248 3946
Bank of Canada (RBC) and Dexia. We rank among the world's top 10 global Contact: Tony Johnson
custodians, with approximately USD 2.0 trillion in client assets under custody, Head, Sales & Relationship
including in-house assets of RBC and Dexia. Our innovative products and services Management
help clients maximise operational efficiency, minimise risk and enhance portfolio E: antony.johnson@rbcdexia-is.com
Address: 71 Queen Victoria Street,
returns. And our 3,800 professionals in 15 markets offer proven expertise to
London, EC4V 4DE, UK
enhance clients’ business performance.

Santander is Spain’s leading financial institution and the largest bank in the euro zone
by market capitalization. Our commitment and contribution to the securities industry is
well established after more than a century of providing services in this field. T: Europe: (34) 91 2893932 / 28
T: USA: (1212) 350 39 02
W: santanderglobal.com
Santander’s cutting edge technology enables it to offer a comprehensive array of inno-
E: globalsecurities@
vative services in a broad range of markets. Santander currently has full local capabili- gruposantander.com
ties in Iberian and Latin American markets along with a franchised presence in many
others. Santander`s experience and product range ensures that every aspect of the
securities business is fully contemplated.

70 INVESTOR SERVICES JOURNAL

ISJ21 69-80 Directory FINAL 3/5/07
T: +46 8 763 5770
F: +46 8 763 6930
Contact: Goran Fors
E: goran.fors@seb.se
W: www.seb.se
A:Standard Bank
Financial Asset Services
3rd Floor
25 Sauer Street
Johannesburg 2107
T: +2711 636 6615
E: adam.bateman@standard-
bank.co.za
W: www.standardbank.co.za
C: Neil Daswani,
Global Head, Securities Services
T: +65 6517 0022
E: Neil.Daswani@sg.standard-
chartered.com
W: www.standardchartered.com
T: +46 8 5859 1800
F: +46 8 7237 147
C: Neal Meacham, Head of
Custody
E: neal.meacham@swedbank.com
A: Stockholm SE 105 34
Sweden
T: +43 50505-58510
F: +43 50505-58579
C: Andreas Petzl , Head of Sales
and Relationship Management
E: Andreas.petzl@ba-ca.com
W: www.hvb-custody.com/
London: Richard Bustard
T: +44 (0)20 7444-0403
E: rbustard@dtcc.com
New York: Susan Spivey
T: + 1 212 855-4144
E: sspivey@dtcc.com
General information
T: +1 212 855-1000
1:19 pm Page 71
SEB is the leading provider of securities services in the Nordic and Baltic area. We
are committed to custody and clearing processes for the wholesale market. We hold
securities worth over EUR 460 bn and provide services in more that 70 markets, 9
of them under the SEB name (Sweden, Norway, Finland, Denmark, Luxembourg,
Germany, Estonia, Latvia and Lithuania).
We offer a full range of securities services including corporate action and
information services, securities lending and services to remote members of the
Nordic and Baltic stock exchanges. We continuously develop new products in
connection with clients and partners to ensure we deliver the high-quality
products our clients demand. We always strive to make the processes more
efficient. With a history of 150 years in the securities industry; we know the market
and our clients well.
Financial Asset Services is the custody and investments-servicing division of
Standard Bank, providing a unique suite of services to sophisticated investors in
South Africa and eight sub-Saharan markets.
Standard Bank has assets under custody to the value of ZAR1.56 trillion and an
overall market share of approximately 40%.
Standard Bank's unique selling point lies in its consultative approach to
relationships combined with the bank's commitment to custody and investment
administration services.
Standard Chartered leading the way in Asia, Africa and the Middle East.
Standard Chartered has a history of over 150 years in banking and is in many of the
world's fastest-growing markets with an extensive global network of over 1,200
branches (including subsidiaries, associates and joint ventures) in over 50 countries
in the Asia Pacific Region, South Asia, the Middle East, Africa, the United Kingdom
and the Americas.
As one of Asia's leading custodians, Standard Chartered has an impressive track
record across the 16 Asian markets in which it provides securities services. It serves
global, regional and local custodians and broker-dealers, as well as local and regional
fund managers. The Bank plays a key role in promoting the development of these
markets and keeping the international investor community informed of industry
developments across the region.
Swedbank provides client-focused custody services to domestic and international
securities lending (including auto-borrow facilities), derivative clearing services,
proxy voting, full corporate actions and income service. Flexibility is an important
aspect of Swedbanks products and services. Our dedicated Client Relations
Managers and Account Managers are focused on personalized processing and
reporting solutions.
Other Features: ISO9001:2000 quality certification. Swedbank Markets Online
(SMO) internet information and reporting toolfor Custody and Securities Lending.
Nordic Custody alliance with DnB NOR (Norway), OKO Bank (Finland) and
Amagerbanken (Denmark) to offer regional custody product.
Institutional Assets under Custody: USD 70 billion
No. of Institutional Clients: 110
Unicredit Markets & Investment Banking (MIB) serves as UniCredit Group's global
product and competence center for global financial markets and investment banking
services, including Custody throughout Central and Eastern Europe, including Austria.
Brand diversitiy under which the group operates (Bank Austria Creditanstalt, HVB,
Bank BPH, Bank Pekao, Zagrebacka Banka and International Moscow Bank), has its
roots in local market presence and knowledge, contributing into a single unified
product across the region. In 2006 the group was recognised by no less than 3
independent surveys as being the best region custodian Markets & Investment Banking
The group's ability to deliver service excellence across 13 markets is the cornerstone
of our success. From participation in local market associations to our inter group
training sessions, to a client consultative approach, the group continues to work
towards making a single impression - excellence.
Data Services .
Through its subsidiaries, DTCC provides clearance, settlement and information serv-
ices for equities, corporate and municipal bonds, government and mortgage-backed
securities and over-the-counter derivatives. DTCC's depository also provides custody
and asset servicing for more than 2.5 million securities issues from the United
States and more than 100 other countries and territories. In addition, DTCC is a
leading processor of mutual funds and insurance transactions, linking funds and car-
riers with their distribution networks. DTCC has operating facilities in multiple loca-
tions in the United States and overseas. For more information on DTCC, visit
www.dtcc.com.
DTCC’s GCA Validation Service gathers and distributes validated global corporate
INVESTOR SERVICES JOURNAL 71
ISJ21 69-80 Directory FINAL 3/5/07 1:19 pm Page 72

Interactive Data Corporation (NYSE: IDC) is a leading global provider of Interactive Data (Europe) Ltd
financial market data, analytics and related services to financial institutions, active A: European Headquarters
traders and individual investors. The company’s businesses comprise: FT Interactive
Fitzroy House, 13-17 Epworth
Data, ComStock, CMS BondEdge and eSignal.
Street, London EC2A 4DL
FT Interactive Data provides global securities pricing, evaluations, dividend, corporate T: +44 (0)20 7825 7800
action and reference data designed to support financial institutions’ and investment F: +44 (0)20 7608 3514
funds' pricing activities, securities operations, research and portfolio management. FT
E: eu-info@interactivedata.com
Interactive Data collects, edits, maintains and delivers data on more than 3.5 million
W: www.interactivedata.com
securities, including daily evaluations for approximately 2.5 million fixed income and
international equity issues. FT Interactive Data specialises in ‘hard-to-value’ instru- C: Brendan Beith – European
ments and ‘hard-to-get’ information from emerging markets. Sales Director

SunGard's solutions for data management provide technology for the management
W: www.sungard.com/dataman-
and delivery of market, historical and reference data to financial services
agementsolutions
institutions, energy and public sector organizations. SunGard also offers outsourced
T: 1-888-441-9935
data management services, as well as real-time, interactive and flat-file data feeds
F: 212-977-7144
for application integration. Aggregating market data and financial content from more
C: Marketing Department
than 100 third-party sources, SunGard's solutions for data management add value
E: moreinfo@sungard.com
through a range of services including cleansing, enrichment and analytics. To find
A: SunGard
out how SunGard's solutions for data management can help improve productivity,
888 Seventh Avenue
portfolio optimization and investment opportunity with predictive analytics and
New York, NY 10106
packaged data please visit www.sungard.com/datamanagementsolutions.

Telekurs Financial, a company in the Telekurs Group, specializes in the procurement,

Telekurs (UK) Ltd
processing and distribution of international financial information for investment adviso-
ry services, portfolio management, financial analysis and securities administration. A 15 Appold Street
global network of local financial market specialists procures real-time stock exchange London
information at source from the leading financial centres. Containing over 3 million EC2A 2NE
financial instruments, the database of structured, encoded securities information main- C: Kimberly Neumann
tained by Telekurs Financial and its ten representative offices abroad is unparalleled T: +44 (0) 20 7550 5000
throughout the world in terms of both depth and data coverage. F: +44 (0) 20 7550 5001
Telekurs Financial is a founding member of the Association of National Numbering E: info@telekurs.co.uk
Agencies (ANNA) allocating Swiss security (Valor) numbers and leads the way in intro-
W: www.telekurs.co.uk
ducing standards aimed at simplifying trading and securities administration.

Fund Administration
Butterfield Fund Services (BFS) provides valuation, accounting, corporate secretarial, Andrew Collins Managing Director
compliance, directorial and shareholder services to hedge funds, fund-of-funds, and T: 441-299-3954
mutual funds. BFS also services international pension & insurance trusts. Clients E: andrewcollins@bntb.bm
such as financial institutions, insurance companies, and institutional investors use Tania Kowalski Marketing
Butterfield Fund Services to set up and launch investment funds. BFS operates in Manager T: 441-278-6300
Bermuda, Bahamas, the Cayman Islands and Guernsey. E: taniakowalski@bntb.bm
Whether a fund is just starting out or is well established, Butterfield Fund Services A: Rosebank Centre 11
can provide complete solutions to help clients better service their investors. With Bermudiana Road, Pembroke,
over $50 billion in assets under administration, many alternative funds have turned Bermuda HM 08 / P.O. Box HM
to Butterfield Fund Services for timely and accurate administration services. 195 Hamilton, Bermuda HM AX

CACEIS is an Investor Services company with six offices across Europe. Owned in International: Olivier Storme
equal parts by Crédit Agricole and Natixis, CACEIS provides Custody, Fund T: +352 4767 2847
Administration and Corporate Trust services to demanding Corporate and E: olivier.storme@caceis.com
Institutional clients. We have considerable expertise in Cross-Border Fund
Distribution Support as well as Alternative Investment and Private Equity servic-
ing. France: Patrick Lemuet
Our staff have the language skills and industry knowledge to develop business T: +33 (0)1 57 78 03 34
relationships into strong partnerships and our powerful IT systems are constantly
updated to ensure high levels of process automation. E: patrick.lemuet@caceis.com
CACEIS is responsible for over EUR1.75 trillion held under custody, and over W: www.caceis.com
EUR850 billion under administration.

JPMorgan Fund Administration provides a full suite of products for all aspects of New York: Christopher Lynch
fund administration, enabling asset managers to focus on their core business of T: +1 212-552-2938
E: chris.e.lynch@jpmorgan.com
investment management.
London: Francis Jackson
Fully integrated with JPMorgan's custody and fund accounting system, it also T: 44 (20) 7325 3742
accepts automated data feeds from clients' in-house or third party accounting plat- E: francis.j.jackson@jpmorgan.com
forms. By automating these activities, we leverage technology to build flexible busi- Sydney: Laurence Bailey
ness systems that increase efficiencies and deliver customer focused solutions. A T: (61-2) 9250-4833
world-class team of experienced industry professionals provides the expertise you E: laurence.bailey@jpmorgan.com
need in fund administration services. W: www.jpmorgan.com/wss

72 INVESTOR SERVICES JOURNAL

ISJ21 69-80 Directory FINAL
C: Fred W. Jacobs, III
A: PFPC, 301 Bellevue Pkwy
Wilmington, DE 19809 USA
T: 302-791-2000
F: 302-791-1570
E: Information@pfpc.com
C: Fergus McKeon
A: PFPC Riverside Two
Sir John Rogerson’s Quay
Dublin 2, Ireland
T: +353-1-790-3500
E: Information@pfpc.com
C: Stuart Mauger
T: +44 (0) 1481 744479
F: +44 (0) 1481 744529
E: stuart.mauger@rbc.com
A: PO Box 48 Canada Court
St Peter Port Guernsey GY1 3BQ
C: Deanna Bidwell (Cayman)
T: +1 345 949 9107
F: +1 345 946 1288
E: deanna.bidwell@rbc.com
W: www.rbcprivatebanking.com
W: www.ubs.com/fundservices
C: Mr Gerhard Fusenig
T: +41 44 235 4992
E: gerhard.fusenig@ubs.com
A: UBS Global Asset
Management, Fund Services,
Stauffacherstrasse 41, PO Box,
CH-8098, Zurich, Switzerland
Robert N. Chin, General Manager
T: (+) 5999 738 1351 ext 11
E: robert.chin@atcfunds.an
Kedi J. Chang, Managing Director
T: (+) 5999 738 1351 ext 10
E: kedi.chang@atcfunds.an
ATC Fund Services
Bon Bini Business Center, units
2B2K & 2B2L
Schottegatweg Oost 10
Curaçao, Netherlands Antilles
F: (+) 5999 738 1311
W: www.atcgroup.info
Custom House Administration &
Corporate Services Limited
A: 25 Eden Quay, Dublin 1,
Ireland
T: +(353) 1 878 0807
F: +(353) 1 878 0827
C: dermot.butler@customhouse-
group.com
C: david.blair@customhouse-
group.com
ww.customhousegroup.com
W: www.dpmmellon.com
T: +1 732 667 1155
F: +1 732 662 2650
C: Skander Aissa
E: Aissa.s@dpmmellon.com
A: 400 Atrium Drive Somerset
New Jersey NJ 08873 USA
3/5/07 1:19 pm Page 73
PFPC is a premier provider of processing, technology and business solutions to the
global investment industry. Our core offering includes accounting, administration,
investor services, middle-office services and regulatory administration services. Whether
your products are U.S. or non-U.S. domiciled funds, trust vehicles, limited partnerships
or commingled investment products, PFPC’s multi-jurisdictional, multi-fund capability
allows us to process your complex fund structures - from hedge funds, fund of funds
and private equity funds to master/feeder and multi-managed funds.
PFPC offers personalized alternative investment solutions tailored to your unique
needs. With more than 30 years in the fund servicing industry, our seasoned and
responsive professionals bring you the know-how, focus and dedication to deliver the
services you need, when and where you need them, any way you want them.
Our clients have access to a broad range of value added services and tailored solu-
tions including global custody and fund administration services for funds domiciled
in the Caribbean and Channel Islands.
Our services include Trustee, banking and credit facilities, treasury and foreign
exchange, trade execution, financial accounting, corporate services, derivative sup-
port services and online access, leveraging a custody network that covers 80 plus
markets worldwide. Our service combines leading edge technology with professional
expertise and a truly integrated service delivering creative, customised solutions.
Fund Services offers comprehensive fund administration services including fund
set-up, registration and support around the world (currently 28 countries), fund
accounting, NAV calculation, compliance management, risk control and reporting.
We provide a flexible offering from the full range of services, including Private
Labelling, to selected functions. Services are based on leading fund administration
architecture, multi-source pricing and powerful compliance tools.
Capabilities also extend to services for hedge funds through our teams in Cayman,
Ireland and Canada.
In times when management attention is increasingly focused on value creation, it
may be rewarding to re-evaluate whether asset administration remains a strategic
core business to you.
Luxembourg: Jean-Paul Gennari, tel. +352-44-1010 1
Switzerland: Markus Steiner, tel. +41-61-288 4910
UK: Mark Porter, tel. +44-20-7901 5000
Hedge Fund Administration
ATC Fund Services is a specialized hedge fund administrator who has consistently
received excellent reviews from its clients. ATC provides full administration to hedge
funds, including daily processing of all funds’ activities, nav calculation on a daily,
weekly or monthly basis and registrar & transfer agency services. In addition, ATC
takes a pro active approach in assisting start up hedge fund managers with the
incorporation of their fund in jurisdictions such as the Cayman Islands, the British
Virgin Islands and the Netherlands Antilles.
Custom House is a specialist hedge fund administrator and was the first and only
one to be awarded a Moody’s Management Quality Rating.
Custom House provides advice and assistance in the organization of hedge funds,
together with the provision of a full administration service, which covers all aspects
of the day-to-day operation, including shareholder services.
Custom House now offers a global “24/7” service through offices in Dublin, Chicago
and Singapore.
Custom House is authorised by the Irish Financial Regulator under Section 10 of the
Investment Intermediaries Act, 1995.
DPM Mellon provides onshore and offshore alternative asset fund administration,
back and middle office outsourcing, portfolio valuation, daily NAVs, risk
administration and portfolio transparency solutions for fund managers, asset
allocators, institutional investors and proprietary traders.
DPM Mellon’s services are designed to solve complex administrative needs and
improve operational efficiency. From the most basic reports to complex portfolio
valuations, risk analysis and daily transparency, DPM has the systems, infrastructure
and experience to handle your toughest administrative challenges.
DPM Mellon has a world-wide staff of approximately 200 employees. DPM Mellon
is headquartered in Somerset, New Jersey with offices in London, the Bahamas, and
the Cayman Islands.
INVESTOR SERVICES JOURNAL 73
ISJ21 69-80 Directory FINAL 3/5/07 1:19 pm Page 74

For further information,

Quintillion is a full service hedge fund administration specialist which supports all
please contact:
portfolio investment strategies and fund structures from its head office in Dublin's
Joan Kehoe
International Financial Services Center (IFSC). The company has made a considerable
Chief Executive Officer
investment in technology and operations expertise, to give clients the opportunity to
E: joan.kehoe@quintillion.ie
manage a range of funds with the support of a single administration partner. Key
T: + 353 1 523 8001
technologies are Advent Geneva, Koger NTAS and Paladyne.
Ken Somerville
Typical strategies supported include Convertible Arbitrage, Multi Strategy, Distressed
Head of Business Development
Securities, Global Macro, Fund of Hedge Funds, Market Neutral and Managed Futures
E: ken.somerville@quintillion.ie
funds. A comprehensive range of fund structures, currency classes and performance fee
T: + 353 1 523 8003
mechanisms are also accommodated.
W: www.quintillion.ie

Hedge Fund Services, based in the Cayman Islands, Ireland and Canada holds a
leading position in the area of hedge fund administration, offering a complete range
of services including accounting, NAV computation, share holder services, banking W: www.ubs.com/fundservices
and credit facilities. With the dedication and experience of a professional team of C: Mr Gerhard Fusenig
200 and our state-of-the-art web reporting, accounting and shareholder systems, we T: +41 44 235 4992
are well positioned to provide clients with a first class service. E: gerhard.fusenig@ubs.com
With specialist expertise in both single manager and fund of hedge fund adminis-
tration, we provide facilities for both onshore and offshore funds. A: UBS Global Asset
Capabilities also extend to services for investment funds through our teams in Management, Fund Services,
Luxembourg, Switzerland and the UK. Stauffacherstrasse 41, PO Box,
Cayman Islands: Darren Stainrod, tel. +1-345-914 1076 CH-8098, Zurich, Switzerland
Ireland: Don McClean, tel. +353-1-436 3636
Canada: Pearse Griffith, tel. +1-416-971 4702

International Finance Centres

The British Virgin Islands has created a progressive and transparent environment for
the establishment and regulation of mutual/hedge funds and their functionaries. By
the end of Q3 2006 the BVI had recognised or registered more than 4,000 funds, British Virgin Islands
and licensed some 700 managers and administrators, making the BVI a leading International Finance Centre
domicile of choice for investment business. Haycraft Building
Benefits of conducting investment business in the BVI include: 1 Pasea Estate
-Fast-track registration and licensing system - funds can be registered in a few days. Road Town
-Presence of qualified, experienced legal, accounting & administration practitioners. Tortola
-A well-developed corporate professional infrastructure. British Virgin Islands
-Modern, robust and cost-effective regulatory and corporate regimes. T: +1 284 494 1509
-BVI private and professional funds fall outside the scope of the EU Savings F: +1 284 494 1260
taxation Directive. W: www.bviifc.gov.vg
-Segregated Portfolio Companies - also known as Protected Cell Companies - can now
be formed as mutual funds under the BVI Business Companies Act 2004.

DIFC
The DIFC is the world's newest international financial centre. It aims to develop the Dubai International
same stature as New York, London and Hong Kong. It primarily serves the vast Financial Centre
region between Western Europe and East Asia. Level 14, The Gate
P.O. Box 74777, Dubai, UAE
Since it opened in September 2004, the DIFC has attracted high calibre firms from
E: info@difc.ae
around the globe as well as its region. Firms operating in the DIFC are eligible for
benefits such as a zero tax rate on profits, 100 per cent foreign ownership, no T: +971 4 362 2450
restrictions on foreign exchange or repatriation of capital, operational support and M: +971 50 4958902
business continuity facilities. F: +971 4 362 2333
W: www.difc.ae

Prime Brokerage
Fimat’s Alternative Investment Solutions team (AIS) is a dedicated global Prime
Brokerage team serving the alternative investment community including hedge C: Philippe Teilhard
funds and CTAs. A: Fimat International Banque SA
The AIS team offers a global range of brokerage activities on a wide range of asset (UK Branch) - part of the Societe
classes including equities, bonds, currencies, commodities, and their related listed & Generale Group
OTC derivative products. The team also provides a dedicated account management SG House, 41 Tower Hill
team, cross-margining tools between securities & derivative instruments, hedge fund London EC3N 4SG, UK
start-up services, hedge fund industry quantitative information and capital T: + 44 207 676 85 36
introductions services. F + 44 207 628 44 47
The AIS team is part of Fimat, which employs over 1,600 people in 26 markets, E: philippe.teilhard@fimat.co.uk
and is a member of 46 derivatives exchanges, and 17 stock exchanges worldwide.

Payments & Settlement

The Settlements Directory for CLS removes the uncertainty surrounding which A: Exchange Tower
instructions to use, easing time pressure on query handling and investigation in One Harbour Exchange
back office operations. London
E14 9GE
T: Asia: +81 (0) 2 3517 2791
The Settlements Directory for CLS is a web-enabled application powered by
Europe: +44 (0) 20 7971 5700
SSISearch containing contact details, basic settlement information and MT300 North America: +1 212 943
preferences. It offers Settlement Members ongoing certainty of accurate settle- 2290
ments information and a fast, simple method of publishing and accessing CLS E: corpcom@cls-group.com
static data. W: www.cls-group.com

74 INVESTOR SERVICES JOURNAL

ISJ21 69-80 Directory FINAL
A: Eiger Point
Swift Park
Old Leicester Road
Rugby
CV21 1DZ
United Kingdom
T: + 44 (0) 1788 554800
(Sales): +44 (0) 1788 554810
A: Europe/Asia/Africa
42 New Broad Street
London EC2M 1SB
United Kingdom
T: +44-207-588-1100
F: +44-207-588-1155
A: Americas
30 Montgomery Street Suite 501 ing in countries outside the U.S. that have established Real Time Gross Settlement
Jersey City, NJ 07302
T: +1-201-946-1100
F: +1-201-946-1313
W: www.dataexplorers.com
T: +44 (20) 7392 4000
F: +44 (20) 7392 4004
A: 155 Commercial Street,
London E1 6BJ United Kingdom
London: Julian Pittam
T: +44 (20) 7392 5018
E: jp@dataexplorers.com
Boston: Tim Smith
T: + 1 (617) 973 5099
E: tim.smith@dataexplorers.com
T: +1 212 901 2224
C: Michelle Lindenberger
E: Michelle.lindenberger@equi-
lend.com/info@equilend.com
A: 17 State Street, 9th Floor
New York NY 10004
T: +44 20 7743 9510
A: 54 Lombard Street
London EC3V 9EX
W: www.equilend.com
T: US- +1 617 204 4500
T: UK- +44 (0)20 7469 6000
C: Dan Ahern
E: info@eseclending.com
W: www.eseclending.com
A: 175 Federal Street, 11th FL,
Boston, MA 02110, US
A: 1st Floor, 10 King William
Street, London EC4N 7TW, UK
T: +41 (0)44 218 14 14
F: +41 (0)44 218 14 18
E: info@ifbs.com
A: IFBS AG, Buckhauserstrasse
11, CH-8048 Zurich, Switzerland
W: www.ifbs.com
3/5/07 1:30 pm Page 75
Eiger Systems solutions are designed to be best in class and are the leading products
within their market sectors. Developed to meet the needs of organisations with complex or
mission critical payment processes, our solutions interface easily with existing business
applications and are available for all main operating systems.
EigerPAY Gateway is a global payments platform which handles complex payment require-
ments and multiple payment channels. Already the UK’s leading BACSTEL-IP solution,
EigerPAY Gateway is ideally suited to organisations with one or more of the following:
• a mission critical reliance on payments
• complex functional or technical requirements
• a requirement for numerous communication channels such as
BACSTEL-IP, CHAPS, SWIFT, or PE-ACH connectivity
EigerPAY Gateway’s flexible architecture enables organisations to integrate with the
many new and developing payment systems, with minimal change to legacy systems.
Fundtech's payments solutions automate all aspects of the funds transfer and cus-
tomer notification process, enabling straight-through-processing (STP) of payments.
Fundtech also offers payments solutions for continuous linked settlement (CLS), nos-
tro account management and enterprise-wide payments management.
Global PAYplus - The enterprise-wide payments management solution for global
financial institutions.
PAYplus RTGS - A fully integrated, multi-currency payment system for banks resid-
(RTGS) standards.
PAYplus USA - The leading payments solution for financial institutions in the US.
Securities Lending .
Data Explorers Limited, a specialist and independent company, offers impartial
quantitative measurement of securities lending performance services to the global
securities financing industry. We help our clients monitor and understand the
relative performance of their lending activity and risk, and turn raw lending, borrow-
ing and collateral data into useful, actionable information. We also provide proxies
for short selling information.
Working with the industry we ensure information flows are appropriate and peer
groups relevant. We are not involved in transactions.
All of our services: Performance Explorer, Transaction Explorer, Risk Explorer,
Index Explorer and Report Explorer are web based and available to clients
over the internet.
EquiLend Holdings LLC was formed by a group of leading financial institutions to
develop a global platform for the automation of securities finance transactions.
The EquiLend platform is designed to increase efficiency by standardizing, cen-
tralizing and automating front and back office processes, while delivering global
access to liquidity, reduced risk and scalability. The EquiLend platform is
designed to process equity and fixed income securities finance transactions on a
global basis. Investors include: Barclays Global Investors; Bear, Stearns & Co.
Inc.; Credit Suisse; The Goldman Sachs Group, Inc.; J.P. Morgan Chase & Co.;
Lehman Brothers; Merrill Lynch; Morgan Stanley; Northern Trust Corporation;
State Street Corporation; and UBS.
eSecLending is a global securities lending manager and a leading provider and
administrator of customized securities lending programs. Its programs attract
some of the world's largest and most sophisticated asset gatherers, including
pension funds, mutual funds, investment managers and insurance companies.
Over the past six years, the company has auctioned more than USD 1 trillion in
assets and has achieved significant growth in its client base, lendable assets and
assets on loan. The firm awards principal securities lending business through a
competitive auction process that has provided clients with higher returns
compared to traditional program structures and improved transparency and
objective criteria upon which to make decisions. More information about
eSecLending can be found at www.eseclending.com.
IFBS offers the financial industry a wide range of consulting services as well as
individual and standard software solutions. The firm supports clients along the entire
security value chain - from business modelling to change management processes.
IFBS’s IT solutions range from FINACE®, a Securities Finance and Collateral
Management Platform, to the development of tailor-made IT applications.
INVESTOR SERVICES JOURNAL 75
ISJ21 69-80 Directory FINAL 3/5/07 1:30 pm Page 76

Securities Lending .
JPMorgan's Securities Lending program is unparalleled due in no small part to the New York: William Smith
Firm's breadth of capability, financial strength, professional expertise and seamless T: 212-623-5664
operations. E: william.z.smith@jpmorgan.com

Our program enables investors to access a broad spectrum of lending markets, with a London: David Mitchell
diverse borrower base, offering a broad indemnification against borrower default, T: 44 207 7420055
while achieving very competitive bids for their securities - all of this in an environ- E: david.mitchell@jpmorgan.com
ment designed not to compromise the activities of their fund managers. .As one of
the founding members of EquiLend, a global automated platform for borrowers and Sydney: David Brown
lenders, JPMorgan is at the forefront of technology and is ideally placed given its T: (61-2)92504606
integrated lending, custody and accounting platforms. E: david.ldn.brown@jpmorgan.com
W: www.jpmorgan.com/wss

Nomura Group is a global investment bank dedicated to providing a broad range of

financial services for individual, institutional, corporate and government clients. T: +44 (0) 20 7521 5672
The Group’s business activities include investment consultation and brokerage F: +44 (0) 20 7521 2683
services for retail investors in Japan, and, on a global basis, brokerage services, C: Jonathan Cossey, Head of
securities underwriting, investment banking advisory services, merchant banking, Equity Finance
and asset management. A: Nomura House,
Nomura offers a full range of Equity Finance services to institutional participants 1 St Martin's-le Grand, London,
in over thirty markets, through regional trading desks in London, New York, EC1A 4NP United Kingdom
Tokyo and Hong Kong. Identifying client needs and providing bespoke solutions W: www.nomura.com
is our top priority.

Pirum provides a full suite of automated reconciliation and straight through process-
ing (STP) services supporting Operations within the global securities finance T: +44 20 7220 0961
industry. The company's on-line SBLREX service encompasses daily contract F: +44 20 7220 0977
compare, monthly billing comparison, mark-to-market & exposure processing, C: Rupert Perry
pending trade comparison, income claims processing and custody reconciliation.
E: rupert.perry@pirum.com
Subscribers to Pirum’s services significantly increase their operational efficiency
A: Pirum Systems Limited
and reduce their risk by using Pirum’s solutions, as staff are able to focus on fixing
the exceptions instead of using their time to check and process routine business. 37-39 Lime Street
These automated processes are more scalable and risk controlled too, allowing London, EC3M 7AY
significantly higher volumes to be managed without corresponding increases in W: www.pirum.com
operations headcount.

Santander is the only Spanish financial institution with a team exclusively dedicated
to securities finance & with the purchase of Abbey in 2004 has expanded its
capacity on a Global basis with trading teams in London (UK) & Connecticut (USA). W: www.gruposantander.com
T: (3491) 289 39 42/54
Santander's leading local capabilities in Spain, Portugal, UK, USA & Latin America,
E: securitieslending@
along with its solid balance sheet & combined with the state-of-the-art technology,
provides its clients with the broadest range of solutions in securities lending & gruposantander.com
financing, including availability across all assets classes, as well as access to
uncommon emerging markets.

Technology .
Advent Software EMEA, established in 1998, provides trusted solutions for the front
through to back office operations, based on a true real-time fund/portfolio
accounting platform, to the investment management community throughout Europe, T: +44 (0)20 7631 9240
Middle East and Africa. Advent has an established network of offices across the F: +44 (0)20 7631 9256
region serving a growing client base of asset managers, hedge fund managers, prime
E: emea@advent.com
brokers, fund administrators, wealth managers, private banks and family offices who
continue to improve their businesses using Advent’s suite of integrated investment
A: One Bedford Avenue,
management solutions. Advent Software EMEA is part of Advent Software Inc. London WC1B 3AU, UK
(Nasdaq: ADVS), a global organisation that has been providing solutions to the W: www.advent.com
world's leading financial professionals since 1983. Firms in more than 50 countries
using Advent technology manage investments totaling more than US $8 trillion.

Progress Apama provides the next-generation Algorithmic Trading A: EMEA - Progress Apama
Platform for both the buy and sell-side financial institutions - giving 68 Lombard Street
traders full control over composing, deploying and managing algorithmic London EC3v 9LJ
T: +44 (0) 870 3517212
trading strategies, such as VWAP, spread trading and index arbitrage.
E: fraser.herrick@progress.com
Apama has customers using the Algorithmic Trading Platform in equities, A: USA - Progress Apama
futures & options, foreign exchange and bonds and often trading multiple 10th Floor, 230 Park Avenue
assets classes within the same strategy. New York NY
T: +1 203 606 5006
E: jim.feingold@progress.com
Apama's platform plugs straight into any market data feeds, order
management systems and databases. W: www.progress.com/apama

76 INVESTOR SERVICES JOURNAL

ISJ21 69-80 Directory FINAL
Annette Lindinger
press@aquin.com
T: +49 69 21 93 66 600
F: +49 69 21 93 66 650
Mainzer Landstr.
199 60326
Frankfurt am Main
Germany
W: www.aquin.com
C: Belinda Hamer (US)
E: bhamer@asset-control.com
T: +1 212 445 1076
F: +1 212 445 1079
C: Pascal Guignabaudet (EU)
E: pascalg@asset-control.com
Address: 54 Lombard Street,
London, EC3P 3AH, UK
T: +44 (0)20 7743 0320
F: +44 (0)20 7743 0321
W: www.asset-control.com
Broadridge Financial Solutions
The ISIS Building
193 Marsh Wall
London E14 9SG UK
T: +44 (0) 20 7551 3000
E: info@broadridge.com
W: www.broadridge.com
W: www.burns-stat.com
T: +44 (0)20 8525 0696
C: Patrick Burns
E: patrick@burns-stat.com
4-b Jodrell Road
London
E3 2LA UK
T: UK +44 (0)20 8390 5000
Boston +1 617 482 8800
Hong Kong +85 225 812 880
F: +44 (0)20 8390 7000
E: info@dstintl.com
A: DST House, St Mark’s Hill,
Surbiton, Surrey, KT6 4QD
W: www.dstinternational.com
W: www.eagleinvsys.com
T: +44 (0) 20 7163 5700
F: +44 (0) 20 7163 5701
A: Mellon Financial Centre
160 Queen Victoria Street
London, EC4V 4LA
3/5/07 1:30 pm Page 77
Aquin Components ranks among the leading IT solution providers to the international
asset management and fund industry. Its core competency comprises investment
compliance and risk monitoring; trade and order management; data management;
customized reporting; custodian reconciliation and management of software
integration projects.
Aquin’s clients include the best-known asset management companies and custodians
in Europe and the USA. They benefit from substantial cost savings derived from
automation of investment management processes supported by the choice of
stand-alone products or integrated solutions. The company has its headquarters in
Frankfurt am Main and subsidiaries in Zurich, Paris, Luxembourg, London, Dublin
and New York.
Asset Control is the world's leading provider of Centralized Data Management (CDM)
to financial industry firms. With a complete range of in-house and outsourced
options, Asset Control delivers a hybrid approach to data management. The
selection of developer tools, turnkey software solutions and outsourced services
enable users to optimize their investment data for efficiency, cost control, reduced
operational risk and increased value from their data.
Asset Control solutions manage prices, reference data, risk factors, credit risk data,
corporate actions and research data. The solutions support market risk, Basel II,
portfolio management, trading and enterprise-wide operational coherency.
Broadridge Financial Solutions, formerly ADP Brokerage Services Group, with nearly
$2.0 billion in revenues and more than 40 years of experience, is a leading global
provider of technology-based outsourcing solutions to the financial services industry. Our
integrated systems and services include international securities processing, investor
communication and outsourcing solutions. We offer advanced, integrated systems and
services that are dependable, scalable and cost-efficient. Our systems help reduce the
need for clients to make significant capital investments in operations infrastructure,
thereby allowing them to increase their focus on core business activities.
Proxy Edge – comprehensive solution for institutional global proxy voting management.
Gloss – leading international STP system which automates the trade processing lifecycle from
trade capture through confirmation, clearing agency reporting and settlement.
Tarot - a UK retail and private client stockbroking, custody and fund management solution.
Securities Data Management – outsourced data services for securities operations.
Burns Statistics provides software and consulting services. We are focusing on ran-
dom portfolios, a technique that provides significantly improved performance meas-
urement. A particularly powerful feature is that the initial holdings of the portfolio
can be used in the performance analysis in order to gain even more precision.
Performance measurement is after the fact, but random portfolios also allow fund
managers to test trading strategies before implementing them. There are many addi-
tional uses of random portfolios as well, one is to objectively evaluate the effect of
constraints on a portfolio.
DST International is the world’s premier vendor of technology solutions to the global
investment management community with over 700 clients in 55 countries, and
1500 employees in 19 of the world’s leading financial centres. Our wide range of
asset management solutions meet the needs of fund managers, dealers, settlement
staff, custodians and record keepers operating as international asset managers; from
front office simulation, opinion management and modelling functions, through data
management, dealing and settlement to custody and corporate actions. The suite of
products can be used either as stand-alone applications or brought together in flexi-
ble combinations according to specific needs.
Eagle Investment Systems LLC, a Mellon Financial CompanySM, is a global provider
of financial services technology, serving the world's leading financial institutions.
Eagle's Web-based systems support the internal straight-through processing
requirements of firms of any size including money managers, mutual funds, hedge
funds, plan sponsors, banks, corporate trusts, and insurance companies. Eagle is
committed to providing leading-edge technology, professional services, and global
support for portfolio management, investment accounting, performance
measurement, attribution, reference data management, AIMR/GIPS compliance,
reporting, and outsourcing.
INVESTOR SERVICES JOURNAL 77
ISJ21 69-80 Directory FINAL 3/5/07 1:30 pm Page 78

Financial Tradeware provides integrated solutions for medium to small sized

Investment Management firms, Fund Managers and Hedge Funds, covering the full
trade life cycle. It is part of the Dharma Group of companies and benefits from the W: www.f-tradeware.com
joint contributions and experiences within the group of leading market traders, busi- T: +44 (0)20 7493 2773
ness analysts, financial services professionals and skilled Microsoft Certified pro- F: +44 (0)20 7495 4858
grammers. The company has developed a suite of applications that integrate and C: Alberto Fontana
Straight Through Process (STP) real-time trading, back office administration, E: info@f-tradeware.com
accounting and compliance. Ultra.net®, S-Messenger® and H-Fund® are the com- A: 31 Dover Street
pany's flagship products all based on Microsoft.NET infrastructure. In addition the London W1S 4ND UK
company offers a Member Administered Closed User Group (MA-CUG) service for
SWIFT connectivity. For more information see: www.f-tradeware.com

Elemes NM is your partner in global agent bank custodian network management pro-
viding a global view of your relationship network in a powerful and easy to use pack-
Fingertip Developments Ltd
age. It includes diary, invoice verification, document management, multi-entity Curtain Court
views, reporting, account information incorporating fee and rate structures, contacts, 7 Curtain Road
notes and supports eFee – electronic fee invoicing technology. London EC2A 3LT
UK
Unrivalled extensibility allows you to develop your own functionality with your in-
house development team. T: +44 (0)20 7100 9280
enquiries@fingertip-
Flexibility does not stop with the software, our commercial terms offer adaptable
developments.com
pricing to suit present and future requirements for all sizes of organisation.

IGEFI is the foremost provider of software solutions for international fund

A:IGEFI Group Sàrl - 7, Rue des
promoters, third-party service providers and fund managers. Its prestigious
Primeurs, L-2361 Strassen
client-base is testimony to our commitment, service and quality with over 160
T: +352 26 44 211
expert staff supporting clients from six offices worldwide including Bangalore,
F: +352 26 44 21 44
Boston, Frankfurt, Geneva, Luxembourg and Paris. MultiFonds is operational in
E: marketing@igefi.com
more than 20 countries worldwide and support investment funds assets in excess
W: www.igefi.com
of US$ 1 trillion.
C: Mr. Jesper Steiness - Director,
MultiFonds Fund Accounting and MultiFonds Transfer Agency are developed on
Business Development
a “one system-one database” philosophy and provide significant advantages
E: jesper.steiness@igefi.com
including reduced overhead and IT support costs and single look and feel reporting
for global clients.

For more than a decade, administrators, managers, and advisors have relied
on KOGER for dependable software tools backed by extensive industry T: 001-201-291-7747
experience and expertise. Now, for those who want to reduce costs and F: 001-201-291-7808
streamline business processes, Koger offers Fully Integrated Fund C: Mr Ras Sipko
Administrator, a vertically integrated suite serving the back-office E: ras@kogerusa.com
software needs of the fund industry. KOGER USA
Fully Integrated Fund Administrator consists of three core programs: 12 Route 17 North
~ NTAS, the New Transfer-agency System Suite 111
~ E*TAS, Electronic Transfer Agency System Paramus
~ GRID, Global Reach Interface Daemon New Jersey, NJ 07652, USA
Other programs, such as PTAS, KIT, and KORS available separately, complement W: www.kogerusa.com
the core competency of Fully Integrated Fund Administrator.

Building on over twenty years of experience in capital markets and cross-asset soft-
ware solutions, Murex introduces Mx Asset Manager - a unique cross currency, cross
asset fund management solution capable of handling the full range of products, from
plain vanilla to the most complex derivative products.
C: Hélène Desbiez
Coupled with a high degree of flexibility and customization, Mx Asset Manager fea-
Business Development Manager
tures a multifaceted design catering to the needs of both service providers (prime
T: +33 1 44 05 32 00
brokers, administrators, asset servicing providers) and direct clients (portfolio man-
E: helene.desbiez@murex.com
agers for mutual, pension or hedge funds, insurance companies).
W: www.murex.com
With so many new challenges presented to buy-side managers when integrating
increasingly-complex derivatives into their portfolios and funds, Mx Asset Manager
represents a strong and reliable ally for dynamic position keeping and multi-dimen-
sional risk management in a thriving market.

peterevans is a leading independent provider of front to back office solutions for the
financial services sector. Clearly focused on the securities and investment market,
and built upon more than 21 years of experience, peterevans presents a peterevans
sophisticated boutique approach in a homogenized market place. New Broad Street House
xanite, peterevans suite of products, offers a configurable, fully integrated, 35 New Broad Street
browser based, comprehensive solution that can be deployed as a single application
London EC2M 1NH
or integrated as components into your existing platform. The xanite modules can de
delivered via an ASP or self-hosted. Covering wealth management, custody, T: +44 (0) 29 20 402200
corporate actions, clearing and settlement, private client and on-line stock broking E: info@peterevans.com
with full operational and administrative support for the front, middle and back office. W: www.peterevans.com
xanite gives full but controlled access to clients, portfolio, fund and relationship
managers, brokers, middle and back office staff – on line anywhere in the world.

78 INVESTOR SERVICES JOURNAL

ISJ21 69-80 Directory FINAL
T: +44 20 7220 0961
F: +44 20 7220 0977
C: Rupert Perry
E: rupert.perry@pirum.com
A: Pirum Systems Limited
37-39 Lime Street
London, EC3M 7AY
W: www.pirum.com
T: +1 609-987-2400
F: +1 609-514-4794
C: Lorne Whitmore, Vice
President, Global Sales &
Product Management
E: lwhitmore@pfs.com
A: 600 College Road East,
Princeton, NJ 08540, USA
W: www.pfs.com
T: +44 (0) 20 8289 8174
F: +44 (0) 870762 6157
C: Mr. Khalid Mukhtar
E: khalid@sectech.com
A: Sectech Limited
204-206 High Street
Bromley, Kent
BR1 1PW, UK
W: www.sectech.com
T: +44 (0) 20 7651 8800
F: +44 (0) 20 7651 8811
C: Elizabeth Gee,
Sales Director
E: elizabeth.gee@simcorp.co.uk
SimCorp, 10 Walbrook
London EC4N 8DQ UK
W: www.simcorpdimension.com
T: +44 (0)20 7826 4470
F: +44 (0)20 7826 4480
C: Nick Stevens
E: sales@singularity.co.uk
A: Cable House, 4th Floor
54-62 New Broad Street
London EC2M 1ST UK
Further Contacts:
US T: +1 212 946 2685
Singapore T: +65 9616 7732
T UK: +44 (0) 8452 303 065
T US: 1-888-650-1831
F: +44 (0) 8452 303 064
E: info@fintuition.com
A: FinTuition Ltd
1 Berkeley Street
London W1J 8DJ
United Kinddom
W: http://www.fintuition.com
3/5/07 1:30 pm Page 79
Pirum provides a full suite of automated reconciliation and straight through process-
ing (STP) services supporting Operations within the global securities finance
industry. The company's on-line SBLREX service encompasses daily contract
compare, monthly billing comparison, mark-to-market & exposure processing,
pending trade comparison, income claims processing and custody reconciliation.
Subscribers to Pirum’s services significantly increase their operational efficiency
and reduce their risk by using Pirum’s solutions, as staff are able to focus on fixing
the exceptions instead of using their time to check and process routine business.
These automated processes are more scalable and risk controlled too, allowing
significantly higher volumes to be managed without corresponding increases in
operations headcount.
Princeton Financial® Systems, a wholly owned subsidiary of State Street
Corporation, is a leading provider of investment management and accounting
systems and ASP services for global institutional investors.
Its flagship PAM® investment management systems provide comprehensive STP-
ready functionality that can be licensed for in-house use or accessed via the
Internet. PAM® systems are currently used worldwide by over 275 leading invest-
ment managers, insurance companies, mutual funds and unit trusts, pension funds,
hedge funds, endowments, banks and corporation, which manage combined total
assets over US $3 trillion.
Princeton Financial has offices located throughout the United States, United
Kingdom, Belgium, Australia, Singapore, Amsterdam and Canada. Form more
information, visit Princeton Financial’s website.
Sectech Limited, established in 1998, provides comprehensive solutions
for Custody, Settlement and Securities Back office automation to meet the
needs of custodians, fund managers, asset managers, and pension funds
managers.
The Custody 2000 suite of applications is a powerful and feature rich system
that automates all areas of a securities back office operation. The system
is based on a multi-currency, multi product, and online real-time platform.
Modules include settlements, corporate actions, cash management, order
execution, compliance monitoring, performance measurement, investment
accounting, certificate management, MIS, SWIFT messaging, email reporting,
client billing, client query tracking and Market Interfaces.
SimCorp Dimension is a powerful, comprehensive and truly seamless investment
management system. It can handle NAV and other calculations, with complete
related accounting, for a huge variety of fund structures and product types, including
regional specialities. Support for broader functions, such as performance attribution
and risk management, are particular strengths of the system.
SimCorp Dimension has been designed from scratch as an enterprise-wide system,
handling all aspects of the investment management process, consistently. Data is
recorded into a core database so that reporting is made easy, there is no
reconciliation of data and no duplication of procedures.
Over 100 Capital Markets firms worldwide rely on Singularity to achieve step-change
improvements in efficiency and cost-effectiveness. Across front, middle and back office
operations, Singularity's clients are improving performance by automating process and
leveraging their human capital most effectively. Our process automation solutions com-
bine deep knowledge and long-standing capital markets experience with award-winning
technology. Clients include JPMorgan, Bank of Tokyo Mitsubishi UFJ, Raymond James,
Prudential, Invesco, BNPParibas, Morgan Stanley, American Express and M&G.
-By cutting latency in securities processing, our clients are recognising new efficien-
cies, reducing costs and increasing throughput
- By streamlining their customer on-boarding processes, our clients are gaining faster
access to fees, increasing customer satisfaction & gaining greater cross-sell opportunities.
- By automating their KYC & other compliance processes, our clients & reducing risk.
- By improving collaboration in their client reporting cycle, our clients are providing
more timely and insightful investment performance information.
Training and Education .
FinTuition is an international training company based in London specialising in the
securities finance business: securities lending, equity finance, hedge funds, prime
brokerage, repo and collateral management.
FinTuition offers a regular schedule of open-enrolment courses from introductory to
advanced levels as well as tailor-made in-house training and consulting. We have
course locations in Asia, Europe and North America.
FinTuition training relies heavily on exercises, role plays and case studies to pro-
mote a better understanding of securities financing and trading concepts through
contextually reinforced learning.
For more information about our courses, course dates and course directors, please
visit our website www.fintuition.com
INVESTOR SERVICES JOURNAL 79
ISJ21 69-80 Directory FINAL 3/5/07 1:30 pm Page 80
HINDSIGHT/FORESIGHT
Paul Mumford, Senior Fund
Manager, Cavendish Asset
Management continues our
series of Hindsight/Foresight...
THGISDNIH
How have investment management strategies evolved over
the past five years, with the benefit of hindsight?
Changes in strategy are largely due to the growing size of
investment management organisations, with firms looking to
better control both the individual managers and militate
against systemic market risk, post-Enron. Quantitative invest-
ing, for example, is believed to be growing at double the rate
of the overall money management industry. However, I worry
that despite the twin-objectives of achieving better quality
and control, you can end up with much more constricted
management decisions, potentially stifling performance. At
Cavendish, our strategic shifts have been market-related. In
the bear market, more defensive holdings with good earnings
visibility were essential. Asset situations in property and
housebuilding were held along with overly depressed oppor-
tunities within sectors such as oil and retail – all of which
were subsequently re-rated. We now find ourselves focusing
on healthcare and technology.
How have lessons learnt impacted on the development of
new and innovative strategies?
Arguably, a lot of the “innovation” has been borne out of a
desire to recreate some of that freedom and diversification,
when genuinely contrarian investment and active management
has become much more scarce. The overall objective of achiev-
ing greater diversity is imperative, especially as the indexes are
themselves heavily concentrated at both a sector and individual
stock level – meaning that exposure across funds can also be a
problem. Yet I maintain that it is well-informed and subjective
judgements, pitted against the market, which ensure proper
diversity and give the potential to outperform.
With the benefit of hindsight on market conditions and
volatility, what would you do differently?
I guess we would probably have taken profit sooner on
some stocks that had had a great run, in light of the flight to
safety that has been steadily played out in the last few months.
Having said that, this has left a lot of companies looking very
attractively valued, so holdings should benefit from a re-rat-
ing when sentiment picks up. Considering that the PE ratios
for the major UK indices remain well below their historic
averages, and that corporate earnings remain sound, it is sim-
ply a case of sitting tight.
80 INVESTOR SERVICES JOURNAL
FORESIGHT
Are hedge funds still alternative?
Put simply, no. This is widely apparent from their more
pedestrian performance in recent years, whist their promise to
make money even out of a market fall has been seriously
contended by the most recent bout of volatility. The biggest
difficulty the hedge fund industry faces is size - it is an over-
crowded marketplace with too much money chasing too few
genuinely original investment decisions. There is a lot of talk
about convergence, between long and hedge style strategies, and
hedge funds became much more directional during the rally,
essentially mimicking long-only investments. Yet, investors will
pay the premium for the market glibe of absolute returns.
Whether the sector returns to its beta roots and adopts more
aggressive and innovative investment methods, or becomes a
bolt-on for the sake of diversity, it ultimately now lacks agility.
Over the next few years where will the largest returns come
from?
Attractive valuations are a 'must' - it is more important to buy a
good company at the right price, than to buy a terrific company
which may in fact be approaching overvaluation. The midcap
market is now looking fairly expensive and well-trawled, leaving
fewer buying opportunities there. Recovery plays are particularly
interesting, considering the level of corporate and private money
available. Struggling companies face much greater pressure to
realise a turnaround, or risk being taken out entirely.
Subsequently, and on a more general note, some larger caps are
starting to look more attractive on price. We also remain commit-
ted to AIM for long-term growth potential, but current sentiment
needs to lose a little of its defensiveness.
What's the biggest risk you face?
An unforeseen international market crash. Global downturn
has clearly been on the minds of most investors in the last few
months, hence the market jitters. And, to an extent, we are in
unchartered territory in the wake of globalisation. Whilst more
joined-up world economies should provide a high level of secu-
rity, the interrelationship of those economies is still very green.
However, in all likelihood, it would take a major rise in interest
rates and inflation to trigger a serious fall-out, whilst more
modest inflationary rises would actually benefit corporate earn-
ings. On fundamentals alone, the major UK indices are still
looking attractive.
“Life can only be understood backwards,
but it must be lived forwards.”
SOREN KIERKEGAARD
AD EuroclearINVEST.SERV.JOURNAL 3/11/04 12:43 Page 1

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