TORONTO-Citigroup has begun sending information about dividend payments of American Depositary Receipts using interactive tags, bank officials said here Wednesday at the annual SIBOS 2011 conference here for the Society of Worldwide Interbank Financial Telecommunication.
The initiative marks the culmination of a pilot program announced last year with SWIFT, XBRL U.S., the U.S. arm, of XBRL International, and Depository Trust & Clearing Corp. to promote the use of the protocol which already helps analysts and investors quickly grasp the financial basics of a company.
The ultimate goal of using tags that adhere to the taxonomy of the eXtensive Business Reporting Language for corporate actions announcements is for financial firms to seamlessly transform the tags into formats called ISO 20022-messages that can flow through the SWIFT network.
Doing so reduces the potential for liability from misinterpreting information in disparate e-mail or faxed formats. Alan Smith, global head of issuer services at Citi, estimated that the financial industry could save $1 billion annually in operating losses from errors related to manual processing.
Depositary banks such as Citi are responsible for issuing certificates representing equities in foreign companies and for paying dividends on depositary receipts. ADRs are bought by U.S. investors and dividends are paid in U.S. dollars.
As one of the four largest ADR depositary banks, Citi typically receives information about dividend payments on ADRs from its own overseas branches, other foreign banks or the issuer directly in e-mail or fax. Citi has historically forwarded the information to buyers of ADRs such as broker-dealers, DTCC and fund managers through e-mails or faxes, but can now do so electronically.
Next up: Citi will soon start to issue announcements on other corporate action events affecting ADRs. Citi is tagging the dividend announcements on its own and relying on its tax agent Globe Tax Services to add additional tags on tax reporting, payment and recovery of taxes paid to foreign tax authorities. "Relying on the XBRL tagging done by Citi helps reduce the time we need to add tax information from about one hour to 10 minutes," said Len Lipton, managing director of Globe Tax in New York. Still undetermined is whether the SEC will require XBRL tags for corporate actions.