Equiniti ezine | July 2011

EZINE > july 2011 inside this issue: Financial crime: staying one step ahead How the Equiniti Financial Crime team tackles fraudulent activity to protect shareholders Seeing the bigger picture Luke Thomas, Deputy Secretary, Centrica plc, offers his opinion on Investor Analytics Diversity and transparency: our take on the Green Paper Sian Stokes analyses the EU Commission Green Paper on the EU Corporate Governance Framework A very rewarding service Total Rewards solution for GKN plc CPD: what’s changing?

James Kindell advises on new CPD requirements

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Who is looking out for your shareholders

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fraud

Equiniti’s Financial Crime team seeks to protect its corporate clients’ reputations and their investors’ assets by liaising with police, deploying anti-crime measures and monitoring fraud trends in order to anticipate fraud activity.

Financial crime: staying one step ahead Financial crime is big business. Every day in the UK, £40m is lost in fraud, a large proportion of which funds organised crime and terrorist activities. A crippling issue for the economy and for individual victims, fraud, money laundering and market abuse are sophisticated crimes that require coordinated action both from the Government, the police and the financial services sector itself.

At Equiniti, a dedicated team is in place to constantly monitor market activity and identify suspicious behaviour. The activities of the Financial Crime team encompass fraud, money laundering, sensitive person tracking and transaction monitoring. It’s a considerable task, but one that delivers tangible results.

“Last year, we handled 330 fraud cases with a potential loss of more than £21m,” says Fran Philips, Financial Crime Manager. “With our intervention, the actual exposure was reduced

to approximately £1m. The majority of cases were cheque fraud, which was recoverable.

Our corporate clients receive further back-up and protection by taking our bespoke Forged Transfer Insurance; this can be arranged for them through their Relationship Manager.”

Trend watching

Tracking is a major part of the job for Fran and her team. Poring over Daily Activity Reports, they look at key parameters of known fraud trends to identify suspicious behaviour. They work in close collaboration with the police to spot and monitor fraud patterns, and also attend regular Fraud Liaison Meetings with other industry participants to deliver a joinedup strategy.

“It’s all about staying one step ahead,” says Fran. “By sharing information and trends with the police and other industry participants, we have a greater opportunity to see the continued on page 2

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fraud bigger picture within the industry. We aim to be proactive in preventing fraud, as well as limiting the damage when crime does take place.”

On identifying fraudulent activity, the Financial Crime team immediately freezes the victim’s portfolio, not just the compromised shares, and notifies the Relationship Manager.

The team also responds to Production Orders, providing witness statements in court testifying to the individual’s shareholding. In the past, the Financial Crime team has even assisted with witness protection and at times like these, it can be a highly emotive business.

However, the stakes are never higher than when the team is responding to Financial Sanctions Regulations as the Government can place sanctions on specific trading activity at any time.

When global tensions escalated earlier this year, Equiniti had to act quickly. “The Government implemented sanctions in February, and our task was to find any connection with specified individuals and entities and respond accordingly,” says Fran.

Money laundering is another financial crime Equiniti must be vigilant towards as the ‘laundering’ of the proceeds of crime is a major problem worldwide.

“Money laundering is the process by which criminals attempt to conceal the true origin and ownership of the proceeds of their criminal conduct, so that they appear to have originated from legitimate sources. It involves ‘washing’ money through a layering process by which illegal or ‘dirty’ money is converted to legal or ‘clean’ money through a series of transactions, such as share transfers or share dealings.’’ says Fran.

of their portfolio or the matter at hand.

Across every transaction, we liaise with the shareholder directly but also keep the corporate client informed. After all, what affects their stakeholders also impacts on them so it’s important they are reassured that we have a dedicated and experienced team in place to take care of their shareholders and employee investors. Our team is at the forefront of protecting their business.”

Protecting your business

Money laundering, funding terrorist activities and fraud are often the product of organised crime rings, stealing billions of pounds in assets. Yet Equiniti also works at the other end of the scale, protecting individual shareholders from becoming the victims of fraud.

“The Financial Crime team is there to protect our corporate clients’ shareholders and employee investors,” says Fran. “If they are the victim of a burglary or have their handbag stolen, we offer to protect their shareholding for a defined period as a precautionary measure to help ensure no fraudulent activity takes place.

“This is a service we provide as standard for all shareholders, irrespective of the size

If you would like more information: If you would like to find out more about the services provided by the Financial Crime team, please contact your relationship manager five continued questions on > page 3 4

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five questions

Equiniti’s new Investor Analytics service provides a detailed picture of shareholder voting patterns. Nicola More puts five questions about it to Luke Thomas, Deputy Secretary of Centrica plc, for his first impression of the in-depth reports

Seeing the bigger picture Why did you decide 1 to use the Equiniti Investor Analytics service?

We wanted to get more granularity and detail on shareholder voting patterns. You usually just get the lump sum total of votes, but this service allows us to dig a bit deeper. It gives us a clearer idea of which people are voting in which way. This information is invaluable for improving insight on shareholder behaviour.

Did it reveal any particular 2 patterns in your business?

We held our AGM in May, and since there were no controversial issues on the agenda and we were fully compliant at year-end with the UK Corporate Governance Code, we were hoping to gain high levels of shareholder support.

On average, more than 95% of shares voted were in favour of the resolutions, so all of our measures were extremely well supported. This positive result meant that we didn’t have much for the Investor Analytics team to follow up on, but it was good to have the opportunity to test the service in a stress-free environment.

We were able to explore the full potential of the reports and gain an understanding of how they could benefit us in future.

How would you rate the 3 quality of the reports?

The first thing that struck me is that they are very highly detailed. All the major funds and accounts are captured, and shareholder voting patterns fully broken down so that your investor relations or proxy solicitation team can follow up with certain individuals. Each company needs to look carefully through the reports and extract the information that’s most relevant to them, particularly in the runup to their AGM. I look forward to seeing how the Investor Analytics service will evolve in future. I’d certainly advise other clients to look out for it.

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five questions

What are the key benefits 4 of the Investor Analytics service for your business?

When it comes to shareholder voting, the devil’s in the detail. It’s very useful to have this level of granularity, as it allows us to engage with any individual shareholders who felt they couldn’t support a particular resolution. It enables us to develop a deeper understanding of what our shareholders think, and that’s crucial particularly if there is to be a vote on a contentious issue. This service helps to put us in control.

How important is it that 5 companies like Centrica engage closely with shareholders?

Shareholder dialogue is essential for listed companies, and developments in corporate governance mean it is expected too. Some of our shareholders approach us directly to discuss key issues, but it’s important that we proactively engage with them, rather than simply being reactive. The Investor Analytics service shows us the complete picture, so we can be a step ahead.

I look forward to seeing how the Investor Analytics service will evolve in future. I’d certainly advise other clients to look out for it.

Luke Thomas, Deputy Secretary of Centrica plc

For more information Please contact your relationship manager. Alternatively, listen to Simon McGregor, Managing Director of Investor Analytics, talk about the service here regulation > page 5 6 continued on

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regulation

Sian Stokes, Assistant Company Secretary at Equiniti, analyses the EU Commission Green Paper on the EU Corporate Governance Framework

Diversity and transparency: our take on the Green Paper With consultation closing on 22 July 2011, myself and my colleagues at Equiniti have been busy finalising our response on the EU Commission Green Paper on the EU Corporate Governance Framework.

The Green paper is a discussion paper seeking views across three main areas: boards of directors, shareholders and the quality of corporate governance statements.

The spotlight on boardroom diversity continues with questions in the Green Paper on recruitment policies and their associated disclosure. It also asks how a better gender balance can be achieved. We have a view that whilst clarity on recruitment policy is a good thing, ultimately it is a matter for a company’s board and nomination committee acting within the provisions of the Corporate Governance Code. This approach can be tested by a

company’s shareholders under the ‘comply or explain’ framework.

Whilst we also agree that companies need to address gender balance on their boards and within their senior management teams, we do not believe that mandatory quotas are the answer. In fact, we believe that they could be detrimental to the success of board composition, taking no account of an individual company’s circumstances.

Instead we would favour provisions within the Code subject to the usual ‘comply or explain’ principle, allowing companies to report on the reasons why they do not ‘comply’ with any suggested measures.

Transparency has been given a great deal of focus within the consultation both in terms of shareholder engagement and greater visibility for companies. Whilst continued on page 7

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regulation shareholder co-operation is a vast subject and could well form the basis of an entirely separate consultation, we would support the development of national stewardship codes for long-term institutional investors.

In the UK we are experiencing higher levels of institutional shareholder engagement, particularly since the introduction of the Stewardship Code. We have also placed emphasis on the need for greater visibility concerning the identity of shareholders across all member states to encourage better corporate governance.

Statistics show that where there is greater transparency, there is usually a higher level of voting and cross-border voting is something that we would wish to see more of.

Our response references the significant contribution made by the Transparency Working Group of the TARGET2 Securities project and we have outlined our full support of their findings in section 6 of the Final Report to the T2S Advisory Group on 7 March 2011.

The ‘comply or explain’ principle has been firmly established within the UK for listed companies over the last two decades and we have made it clear that whilst

we appreciate this may not be applied as comprehensively across other member states, we would not wish to see the success of the UK regime undermined by measures in the form of an EU regulation or directive.

The Commission expects to publish a feedback statement in the autumn and a decision as to whether legislative proposals will follow will depend on the responses received.

The consultation closes on 22 July: If you would like to make any last minute comments for inclusion in Equiniti’s response you can do so by emailing sian.stokes@equiniti.com

In the UK we are experiencing higher levels of institutional shareholder engagement, particularly since the introduction of the Stewardship Code employee continued benefits on > page 7 8

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employee benefits

Equiniti recently produced a Total Rewards Statement for GKN plc. Liz Longden discovers what happened

A very rewarding service When it comes to employee benefits, Equiniti provides much more than share plans. Ask GKN plc, a multinational engineering company and longstanding Equiniti client, who, earlier this year, commissioned a Total Rewards Statement (TRS) for its top 575 employees.

As the first stage in this bespoke service, Equiniti presented GKN with a variety of delivery options, all designed by its in-house creative services team. These ranged from hard copy booklets posted out to employees, to a website where users could log on and download their own individual document.

GKN opted for a personalised PDF document for each employee, to be delivered via a password-protected email – an approach that enabled the company to keep printing costs down. However, the option of a printed version was also made available upon request.

Equiniti then studied how best to manage the data provided by GKN, in order

Equiniti presented GKN with a variety of delivery options, all designed by its in-house creative services team to produce tailored documents for each employee. Because the recipient group varied considerably in terms of the benefits to which they were entitled, it was important to ensure that only information concerning rewards for which an individual was eligible was included in their document. To meet this requirement, Equiniti developed a solution involving the creation of a single database, with the inclusion of specific data identifiers. This system greatly helped the production of personalised statements, even proving capable of distinguishing between continued on page 9

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employee benefits ten different footnotes which were to be included according to individuals’ personal circumstances, while also reducing the risk of incorrect data merging.

“Our strength at Equiniti is our expertise in managing complex data,” explains Stuart Bennett, Project Manager. “This ensures that, regardless of how complicated a project seems, we will always find the best way to deliver the simplest solution.”

The appointment of a dedicated project manager also ensured that all files, documents and proofs passed between the respective teams on time, without a hitch.

Client feedback from the GKN rewards team rated Equiniti’s service on six separate categories, with five rated as ‘excellent’ and the sixth as ‘good’.

“I feel this project was successfully executed,” says Liz Rogers, Group Executive Reward Manager, GKN. “We hit all our targets, including the overall deadline despite numerous changes to the content of the statement. We have also received positive feedback from the recipients.”

“The Equiniti Group holds an extensive collection of expertise, and within the employee benefits area alone, we can

provide a wide range of services,” adds David Coleman, Head of Employee Benefit Support Services, Equiniti. “We bring many years of experience, and clients may be surprised to learn some of the ways in which we can help them.”

If you would like more information: Find out more about Equiniti’s employee benefits services, by contacting David Coleman on 01903 833340 or email david.coleman@equiniti.com continued trainingon > page page10 9

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training

James Kindell from David Venus & Co advises on new CPD requirements from the ICSA

CPD: what’s changing?

As from 1 August, the Institute of Chartered Secretaries and Administrators (ICSA) is putting in place new requirements for its members for Continuing Professional Development (CPD).

The CPD year follows the ICSA subscription year (1 August to 31 July). Members will be required to undertake a minimum of 20 hours of CPD each year (of which at least five hours must be ‘Formal CPD’), keep records of their CPD undertaken together with supporting evidence for a minimum period of three years, and make annual declarations to the ICSA that they have complied with the CPD requirements.

CPD can take a variety of forms from individual research or reading articles (i.e.

‘Informal CPD’) through to writing articles and attending or participating in organised seminars (i.e. ‘Formal CPD’).

Further information on CPD, including what constitutes ‘Formal CPD’, recordkeeping and supporting evidence, making the

annual declaration and being exempt from the requirements may be found on the ICSA website www.icsa.org.uk.

With this increasing emphasis on CPD, both David Venus & Company and Equiniti have been helping clients meet their CPD needs.

David Venus & Company provide: ■■ Training to directors on their rights, duties and responsibilities ■■ Board briefing papers on governance, regulatory and legislative developments ■■ Industry updates and seminars ■■ Training to the company secretariat, such as running ‘mock’ Board meetings ■■ Knowledge management systems, such as precedents, checklists and briefing papers ■■ Bespoke training packages Equiniti provide : ■■ Industry updates and seminars ■■ Briefings on governance, regulatory and legislative developments

Members will be required to undertake a minimum of 20 hours of CPD each year

If you would like more information: For further information, please contact James Kindell at james.kindell@davidvenus.com or on 01372 465330 or Peter Swabey at peter.swabey@equiniti.com or on 01903 833488 continued on page 10