Bob Schneider is a Partner in 
Wilson So is the Director of Hitachi Consulting Corporation XBRL: An Interview with Max Mansur of SWIFT (Part 2)
Max Mansur is a Global Market Manager in Securities Markets at SWIFT. He works in the asset servicing domain addressing the needs of custodians, securities market infrastructures, broker/dealers, investment managers, issuers, and their agents. Mr. Mansur has 31 years of information technology experience including system design, program management, quality, and financial solutions. He can be reached by email.
This is the second part of a two-part interview. Part 1 contained questions 1 through 6.
7. Could you describe a bit of the history behind using XBRL for corporate action communications? When was XBRL first considered as a possible solution? How have developments in the XBRL field – such as the SEC mandate and US GAAP taxonomy creation – affected the assessment of XBRL for the corporate action process?
There have been several threads behind looking at XBRL for corporate actions. The problem is long-standing and multinational. It is all driven by “there’s got to be a better way” and “can’t we just get data from the source?” I personally heard the idea of a technology to tag key data within documents in the UK about three years ago. Soon after, I wove it into some presentations I made at Sibos (SWIFT’s annual international conference of financial institutions) and to ECSDA (European Central Securities Depository Association). At the Sibos presentation, DTCC’s CEO, Don Donahue, was in the audience and the first to comment on the approach. I believe the wheels were already turning there. And SIFMA’s Corporate Actions Division had already made unsuccessful overtures to the SEC asking for issuers to provide a cover form of key data for filings under the mergers and acquisition regulation.
So the need for data from the issuers was well established. David Hands of DTCC had been discussing this in professional groups for the last ten years. The advent of XBRL for SEC filings obviously stimulated interest because the same entities produce corporate actions and, sometimes, even using the same documents. So it was the program, the sponsorship of serious work by XBRL US, the strong leadership of its CEO, Mark Bolgiano, and finally the mandate that created an environment ripe for corporate actions.
The rest of what we call the “perfect storm” to get the project underway was, unfortunately, the financial crisis. This fueled both the drive for transparency and significant loss of revenue to apply manual effort to address shortfalls in corporate actions processing. The need, plus the right technology, plus the development of ISO 20022 corporate actions messages in XML format, became a foundation when corporate financial reporting in XBRL was mandated.
Underwriting the commitment of SWIFT and DTCC, beyond the formation of the Issuer to Investor: Corporate Actions initiative, both Chris Church, CEO Americas of SWIFT, and Don Donahue, CEO of DTCC, have joined XBRL US as founding members. Also, Jamie Shay, Head of Standards for SWIFT has joined the board of XBRL International.
8. How would the adoption of XBRL for the corporate action process occur on a global basis? Would it be adopted country by country, jurisdiction by jurisdiction? Could the XBRL taxonomy currently being created in conjunction with XBRL US be adopted by other countries in whole? Or would different corporate action taxonomies be needed for different regulatory regimes, which would then need to be harmonized, similar to US GAAP and IFRS?
This is a challenge, but the approach we’ve taken in the US is resonating in many markets. Each market would have some differences, but if we are skillful with maintenance of the core taxonomy as aligned with ISO 20022, then the biggest differences would be entry points based on templates appropriate to the market. This kind of work goes on already via the Securities Market Practice Group (SMPG) for corporate actions. However, each market and jurisdiction would need to work together to establish the templates and then build out the entry points needed for their country. Given the international vitality of ISO messaging, ongoing work to harmonize market practice, and the discipline being demonstrated within the industry, this is a very achievable goal. The power of the regulators and market infrastructures, since they are charged with protection of investors and market strength, will have an unavoidable role creating the incentive necessary for success.
9. How would the implementation of an XBRL solution to corporate action events proceed? For example, might it first be adopted for relatively simple and data-specific events (like dividend announcements) and then be implemented for more complex, text-heavy events (like M&A activity)? Would it be comparable to the SEC mandate, i.e., implemented in stages with the largest companies going first? Or would it be adopted by all parties for all events in one fell swoop? Do you anticipate the need for an equivalent of the SEC’s Voluntary Filing Program (VFP)?
Good set of questions. For the moment, we don’t know. One factor: how compelling is the business case? Do the desires of the financial institutions processing corporate actions meet well with a roll-out strategy? The SIFMA Corporate Actions Division effort was focused on the most complex as being the highest risk – the situations wherein a mistake can incur major damage through claims. However, these are also the less frequent type of corporate action events compared with dividends and payments which, though simple, cover the lion’s share of all corporate action volume. I would definitely imagine at least a pilot or voluntary program to demonstrate value and work out any bugs since this is the first ISO 20022-based XBRL implementation. The best answer is that the Issuer to Investor team of DTCC, SWIFT, and XBRL US are working with our Stakeholder Group to determine the best way forward.
10. What kinds of government action are required to adopt XBRL for corporate actions? What changes are required in legislation or regulation that must meet SEC approval? Do you believe the regulatory environment is conducive to adopting XBRL?
The discussion is open at this time and pending completion of the business case. The regulatory environment appears conducive. At a minimum, it seems straightforward to require XBRL filing for all current required corporate action disclosure. Adding XBRL to corporate actions announcements that are not required for SEC filing may take more effort, but the result may indeed justify this kind of requirement. Why announce some corporate action event types with XBRL to identify key data, but not the rest of the event types? (By the way, please check out The Asset Managers Forum (AMF) website; AMF is a part of SIFMA and has recommended the Issuers to Investors program for corporate actions to the SEC.)
11. In contrast to the strong and consistent support for XBRL voiced by the prior SEC Commissioner, the current Commissioner Mary Schapiro has been notably less vocal in her support for interactive data. Do you see that as a significant roadblock for implementation?
I would refer readers to the three-part interview this blog did with Paul Wilkinson in October and November, particularly question 5 in Part 1. Paul very clearly elucidates Mary Shapiro’s challenges as well as those faced by Christopher Cox at the end of his term. And, as widely reported at the XBRL US conference in November 2009, the second mandatory filing revealed significant improvements over the initial 2Q filing in cost, speed, and quality. The term “pleasantly surprised” came from many quarters, including, unofficially, the SEC representatives. With the program launched and moving forward – the proof is in the pudding, they say – success will breed the enthusiasm that the XBRL community would like to see.
12. Maintenance has arisen as a significant issue for XBRL financial reporting (FR) taxonomies. Do you believe maintenance will pose a similar challenge for corporate action taxonomies?
Maintenance is absolutely a significant challenge. How do we avoid a diverging new taxonomy for every market adopting XBRL for Corporate Actions? Luckily, this is an area where ISO and SWIFT have been working together successfully for a long time: global standardization. I am certain that there will be significant opportunities to share in this area. The notion of extensibility is already beginning to be accepted and institutionalized for ISO 20022 messaging, strongly driven by the DTCC, but like XBRL will need a mechanism to manage the extensions and collaboratively fold back into the core standard. It is a must that we implement a global maintenance scheme to ensure corporate actions taxonomies remain aligned with ISO 20022 while the core taxonomy is adopted and adapted for new markets. I won’t speculate on the solution details because this is another area wherein there is significant ongoing discussion, but maintenance must be solved in a professional, efficient manner or risk moving toward entropy.
13. Are you concerned that companies may simply have had enough XBRL with the mandate for financial reporting and do not want to hear any more about it at this time? Or do you sense an eagerness to leverage the XBRL investment that has been made by extending the data standard to new areas like corporate action events?
I don’t know — we haven’t gone far enough yet. Let’s hope it will be old hat and easy to do by the time we show up with a demand, or rather, an opportunity to expand on clarity and efficiency in communicating the financial corporate activities that affect their owners, the shareholders.