Class Actions and Proxy Processing

1
Class Actions and Proxy Processing

• Bank Depository User Group
• Scottsdale, Arizona
• October 25, 2005

2
Panel

• Xcitek John Kehoe, Senior Sales Executive
• ProxyTrust John Jansing, President
• ADP ICS John Keegan, Vice President, Account
  Management

3
Xcitek Class Action Processing

• Issues
• The Industry
• Financial Institutions Headaches
• Class Actions Defined
• Event Lifecycle
• What are the Vendors doing to help with Class
  Action Processing?
• Data Providers
• Outsource Solutions
• Software Solutions
• What is needed and next steps?

4
Xcitek Class Action Processing

• Class Action Processing Issues
• The industry
• Settlements in the last several years increased
  into the billions requiring financial
  institutions to pay close attention to filing.
  (Approximately 200 class actions are announced
  each year, of which 75 settle)
• No central oversight effort. Disparate
  requirements
• No definitive legal requirements for financial
  institutions to file on whos behalf
• Mostly US driven - hard to find international
  class action data sources

5
Xcitek Class Action Processing

• Class Action Processing Issues
• Financial Institutions Headaches
• Class Actions getting more complex (i.e. Worldcom
  with several different filing forms)
• Class Actions typically go back 9 years. Data in
  different databases or most likely in microfiche
• Different financial institutions filing for the
  same account. Some rejected and some dually paid
  upon settlement
• Years before settlement is received thus making
  accounts owed proceeds hard to find if left
  financial institution
• Unlike a corporate action, you miss the filing
  date and you miss out on the settlement. With a
  corporate action you may have cash or own the
  security. Huge Risk!
• Usually a cost center to the financial
  institution
• Time intensive, manual effort

6
Xcitek Class Action Processing

• Class Action Lifecycle Similar to Corporate
  Action Processing
• Build Class Action
• Notify Recipients
• Create Data Requests
• Import/Add Data
• Solicit Responses
• Create/File Claims
• Reconcile Payments/Settlements

7
Xcitek Class Action Processing

• Class Action Lifecycle
• Build Class Action
• Of the top 50 plaintiff law firms, 10 represent
  60 of securities class actions that settle

8
Xcitek Class Action Processing

• Class Action Lifecycle
• Notify Recipients
• Who are they?
• Individual account holders Trust Clients
• Pension Funds
• How and in different ways?
• Global Notification - Provide an Optional Global
  Announcement of the Event
• Announcement Notification - Send Cleansed Data
  to Eligible Recipients
• Incomplete Response Reminder - Solicit Response
  from Eligible Recipients
• Advice Response Received - Advise Receipt of
  Responses
• Claim Notification - Notify Eligible Recipients
  Claim has been Filed on Their Behalf - New Claim
  Notification Template

9
Xcitek Class Action Processing

• Class Action Lifecycle
• Create Data Requests - Request Data to Complete
  the Claim Report
• Begin End Date of Holdings
• Date Range of Transactions
• Transaction Type to Identify Eligible Trades
• Yes/No Indicators for Additional Data Elements
• File or Report Format

10
Xcitek Class Action Processing

• Class Action Lifecycle
• Import / Add Data
• Import Holdings (Beginning / Ending)
  Transactions
• Import Data from Client Spreadsheets
• Rapid Data Entry for Non-Imported Data
• Account Data
• Holdings Data
• Transaction Data

11
Xcitek Class Action Processing

• Class Action Lifecycle
• Solicit Responses Capture Responses
• Opt In
• Opt Out
• Auto Opt In

12
Xcitek Class Action Processing

• Class Action Lifecycle
• Create / File Claims
• Provide Generic Agent Claim Form
• Include Required Fields Values to Submit Claim
• Populate Claim Data
• Only Include Accounts that Opt In
• Create Claim Filing Notifications
• Export Claim Data for Electronic Filing
• View Claim Report on the CA for Holding
  Transaction Data

13
Xcitek Class Action Processing

• Class Action Lifecycle
• Recon Payments / Settlements
• Calculate and Record Class Action Settlement
  Proceed Payment
• Report Class Action Settlement Proceed Payment
• MT 566
• Entitlement Export
• Develop Payment Reconciliation Statuses for Views
  and Management Reporting

14
Xcitek Class Action Processing

• What are the Vendors doing to help with Class
  Action Processing?
• Data Providers
• Xcitek Xcitek Class Actions (XCA)
• ISS
• Outsource Solutions
• ISS
• Magenta One
• Software Solutions
• Xcitek XSP Class Actions

15
Xcitek Class Action Processing

• What is needed and next steps?
• Step 1 Look to fix your problems now
• Review your data offerings
• Look to automate or outsource
• Step 2 Start Industry Initiatives
• Financial Industry Groups Unit (Steering
  Committees)
• Step 3 Hire Research firms
• Formulate papers to guide industry groups
• Step 4 Government Regulation?
• Why do the lawyers hold so much power and make so
  much?
• Look to see how lobbying as a financial industry
  sector can help.
• JUST DO IT!

16
Proxy Processing

• Discussion Topic The Current Beneficial Proxy
  Process
• How it Actually Works
• Third Party Processors Typically Handle
• Requests from Vote Agents
• Exception Processing
• Whats Good for the Bank
• How it Benefits Your Clients

17
Proxy Processing

• Discussion Topic Helping Investment Company and
  Registered Investment Advisor Clients Comply with
  SEC Regulations
• Challenges faced
• Current Process
• What works/Doesnt
• Options Available

18
Proxy Processing

• Discussion Topic Future Processing, Challenges
  to the Current Process and What They Mean for the
  Bank
• Business Roundtable
• Access to the Customer
• Cost Model
• Deregulation

19
Proxy Processing

• Discussion Topic Electronic Delivery
• Current Model
• Options

20
Proxy Processing

• Discussion Topic What Does the Future Hold?
• Will There be Additional Regulatory Oversight?
• What Will it Be?
• What Will it Mean for the Bank?