Computershare AMA Part 2 | Video Link & Transcript

🏆 AMA

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Part 2 is Here!

We’ve collated your questions for part 2, from clarifications in part 1 to additional ones we did not get around to asking and more! A big thanks to Paul and the team over at Computershare for working with us, they’ve been an absolute pleasure to work with.

Thanks to the community for asking such smart, well thought out questions as well.

You can find the full video here, on our new (non-monetised) Youtube Channel.

Youtube Link: https://www.youtube.com/watch?v=bo427AW0anw

Part 1 post link: https://www.reddit.com/r/Superstonk/comments/qmnan7/computershare_ama_part_1_video_link_with/

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Transcript

^(Please note, the transcript may not be 100% accurate as it was typed out by hand. Please refer to the video for full accuracy.)

Jsmar18 00:00

So for those who have not seen part one, our guest today is Paul Kahn, president of global capital markets at Computershare. Welcome back, Paul.

Paul Conn 00:08

Yeah. Thanks for having me back, Jack. Really appreciate the opportunity to do the part two.

Jsmar18 00:13

Yeah, we've got tons of follow up questions. So it's much appreciated. So to start off this AMA, I think the main thing that we noticed and want to clarify some details with you on it's taking a step back. And it might be helpful for our audience, if you can clearly define what the difference is between what a broker does versus what Computershare does?

Paul Conn 00:34

Okay. Well, that's a great question. I'm glad we're starting with that. I mean, it's clear from the discussion that's going on in the marketplace that people are comparing and contrasting the different types of transaction and dealing services that Computershare offers, and they are absolutely doing like a tail of the tape comparison to what online brokers offer like stepping right back, it's important to understand what a broker does, and what a transfer agent does. I'm not here to tell you what a broker does. But I can tell you what we do as a registrar and a transfer agent. We are able to offer these services in conjunction with our broker, a third party broker, but what we don't do is we don't offer financial advice. We're not financial advisors. So that's a key distinction, we offer the security. So we offer these services for the securities that we offer our corporate clients registry or transfer agency services for so we provide investors with access to a subset of the market, not all securities in the market, not other types of financial products and crypto and things like that. We don't provide cash accounts. So when people buy securities through us, we expect them to get the money to us, to enable us to do that transaction on their behalf equally when we sell securities on their behalf. We dispatch the funds to them, we don't run cash accounts in the same way that a broker does. That's another very important distinction. And perhaps the final distinction is we don't provide any facilities for leverage or margin or lending. So that's a fundamental difference between what we do in running registers for companies and through that registry process, being able to offer access to dealing services. So that helps your your audience kind of clear up some of the macro. I know we're focusing on the micro, the micro is important. But it's important to kind of set the stage in the macro terms first.

Jsmar18 02:45

Yeah, I certainly agree, especially since majority of what we'll go through is pretty micro, as you said. So moving on to the micro. We've got some clarifications from the last interview, and will tend to just jump around a bit in terms of the questions, so bear with me here. But one of the one of the largest ones that we discussed a lot last AMA was sell orders through CS. But there's still some vagueness around placing multiple orders at high prices, specifically. So I'm going to give this scenario, not what I'm saying it sounds correct, based on what we inferred from the last demo. So is it correct in saying that an order is capped at 1 million, but the maximum limit sell for a share, is at 250,000, which means you'll be able to place one order for four shares at a limit sale price of 250, totaling 1 million.

Paul Conn 03:43

Okay, I'm going to try not to be vague here, but I'm going to answer that in a yes and a no, and break it into its two constituent parts. The first relates to aggregate value, as opposed to limit order prices. As it relates to aggregate value, I mentioned that we had this $1 million threshold, but that people could put multiple orders in through the system, noticing that there is a lot of chatter around what happens when you have very high priced securities, you know, your the math that you just laid out, is correct. But what we're looking to do, and I can't give you a firm date on when this will happen, you know, next week or the following week, or I hope it will be in place before the end of the year, we're looking to significantly increase the aggregate value cap limit, and that would actually increase the number of shares that you could push through the pipe on any one order, while still having the ability to put multiple orders through the system. So that's something I'm hoping we'll be able to bring some relief to very quickly as it relates to this second element, which is around the maximum limit, or the price, that number is above 200,000 and below 250,000. We're still looking at that there are some technical changes that we would need to make and how we interact with our broker, we'd need to obviously have our straight through processing systems change to do with a higher limit order price. We're not yet at a point where we're ready to just start changing our systems. You know, we're well aware of the of the chatter that's going on, there's nothing stopping someone putting an order, a market order through us, you know, at a price that's much, much higher than that. Or indeed, someone could sell through their own third party broker if they wanted to. And these things are all interrelated. So looking to give some relief on the aggregate value cap per order, while still allowing multiple orders. Not yet looking to make any changes to the maximum limit order price. But recognize that market orders above that can go through into the marketplace, and that people can still continue to transact through their broker if they so choose. So hopefully that clarifies where we are.

Jsmar18 06:24

Yeah, that's fantastic. And I think people find it reassuring that you're actually looking into that as well. So it's appreciated.

Paul Conn 06:33

Yeah we are. There's a lot of work going on in the background to understand what these issues what may need to happen.

Jsmar18 06:40

Oh, awesome. So moving on to broker selling, you said in the part one of the AMA that people can directly register, people can be directly registered on your books themselves, through their self ready broker. I personally, I'd love to direct register my ship my shares and various stocks, but hold them in my broker. Could you describe how this process actually works, step by step?

Paul Conn 07:03

Yeah, I will inject I haven't been back through the transcript. And firstly, thank you for doing the transcript because I know that's very helpful to your audience. But I haven't been back in <to> check the transcripts specifically. But what I want to kind of convey, you can hold stock in your name, in DRS form, and deal through Computershare to sell or you can have your shares transferred to your broker. So you can affect the sale through your broker, you can't hold your shares at your broker and at Computershare at the same time, so they can only be in one place at any one time. So I just want to clear that point up. As for the question, I think you're asking, which is, can you hold your securities in DRS form at Computershare and execute an order on a brokerage platform? I think that's kind of where you're where's the of the logic is going and the answer to that is there's no reason why that can't happen. The issue really gets down to who the broker is how their brokerage platform works, and what the relationship is between the broker and the client. If we focus on some of the online platforms, where they require you to have stock in your account or cash in your account before an order can go on, it's highly likely the broker will say, you can't sell through the broker until the shares at DRS back from Computershare to the broker, which can be a particularly for US brokers, that can be a pretty efficient process. But ultimately, it is something which, you know, each person needs to talk to their own broker about to see what they would be prepared to do, whether they put the order on execute, and then bring the shares into the brokerage for settlement or whether they would require the transfer to come into the platform pre-execution of the order is kind of two different ways.

Jsmar18 09:09

Alright, good. Now that I think that's good clarification. I think maybe we got the wrong inference based on...

Paul Conn 09:15

Look, if I contributed to that. My apologies. No...

Jsmar18 09:19

No, no, not at all. I think it's it's very complex lingo…

Paul Conn 09:23

It's complicated. I've been doing this for four decades. I'm still learning things every month.

Jsmar18 09:30

I'm certain. So we also touched on direct share registering reporting as well. I think it's, everyone's asking this question. It's human nature to want certainty when there's a great deal of uncertainty. And you said that CS is unable to share the total number of direct registered shares of a stock and that falls mainly on the issue of a particular stock instead. So people are wondering if Computershare are able to share any metrics at all when it comes to stocks that you are the transfer agent for, such as total number of accounts, average shares per account, etc? Or is that just totally locked away and responsible for the issuer a response?

Paul Conn 10:12

So again, this is a good question, we have that data. It's all available on our systems, what we can do with that data is subject to a contract with a corporate client. So we're not at liberty to regularly distribute, or even distribute that information into the marketplace, we understand exactly why individuals are trying to understand how many investors go through the DRS process, and also the aggregate percentage of issued capital that they control. So we were talking to one or two of our clients about what this means. And I think there's a reasonable case for this information to be made available periodically. It's not something that we can do on our own, but I’d like to think that that may happen in the not too distant future.

Jsmar18 11:09

Yeah, that's fair enough. I think, obviously, people want to understand what portion of retail investors have the company, so very natural. So when it comes to, I think clarifications for book entry versus direct stock purchase program, so we touched on it before, but we want to dive a bit deeper into it as well. And one of the main questions asked as a follow-up is the difference between book entry only shares and those purchase through the direct stock purchase program. Now, is there any difference in how these are directly registered? AKA, when it comes to ownership, direct registered in owner's name, but direct stock purchase is part of a pool. Does this mean that they are not in the owner's name in a way?

Paul Conn 11:52

Yeah, it's a good question. And we're going to go into another layer of detail here. So we've been very clear, when shares are registered in DRS, they're registered directly on the register of the company in the individuals own names. It's very, very straightforward. When people are buying shares through the plan, we record their names on a subclass within the register, so the names are visible to the issuer. So just like the regular common shares, they're visible. In a technical sense, we are holding a portion of those shares in a Computershare nominee, purely so that we can affect efficient settlement within the market through DTC. However, so that's kind of a general point, however, as I think I said last time, there's nothing stopping any investor at any point, removing shares from the plan holding to the DRS holding, it can be done electronically. It's free. There's nothing untoward here in what we're doing. It's really just about how we can organize the security so that we can offer this direct stock purchase plan facility efficiently.

Jsmar18 13:16

Okay, that's good to know. And are there any differences in how a hypothetical special dividends, <such as> an NFT dividend would be issued? With either of these plans?

Paul Conn 13:27

No, that's a good question. I really can't get into the hypotheticals. I can't because until such time as one of our clients says, we're going to have a special dividend, and this is how it's going to be structured. We won't have the opportunity to say, “well, how does it relate to this part of the facility or that part of the facility,” but I would envision that if a company did that they'd want all of their shareholders on the register, be they in Drs, or the share plan to participate. But at the end of the day, that's going to be their decision. We would work with them early on to make sure they could give effect to that efficiently.

Jsmar18 14:09

Yeah, yeah. Okay, that's good. And last, but not least, is verification process tips that people are seeking. So as it takes a few weeks, if not for mail to route to international locations, when it comes to verification processing for those international customers, are there any tips you can offer us when it comes to expediting that process at all?

Paul Conn 14:31

So we know, some people are asking for expedited courrier to get that to them. I mean, we were very, very conscious of this issue. And since we last spoke, I've been working with Joe and Yin and the team at Computershare to see if we can actually solve this particular problem. We are looking at the two and multi-factor authentication that’s not something that we can implement for investor center registration quickly at this stage. But getting right to the point, we are looking fairly soon as it relates to Europe to print and distribute the DRS statements and the pin packs from a UK facility so that we can, you know, truncate the need to cross the Atlantic. Clearly, if there's, you know, dispatch within the UK, that would be very efficient, or much more efficient, and hopefully crossing the Channel won't be too difficult, either easier than being mailed directly from the US into Europe. So I'm hoping that we can cut down some of the time through that particular process, the longer-term solution is to bring around a two or multi-factor authentication process.

Jsmar18 15:52

Awesome. That's absolutely fantastic. Fantastic to hear that your making progress, I'm not sure people will be very happy to start receiving the letter a shorter amount of time.

Paul Conn 16:02

Yeah, we might… we are making some progress in two-factor authentication, once the investor is registered into investor centers. So you'll see we recently I think it was just last week or the week before introduced some two-factor authentication processes for people that already authenticated into Investor Center that's available now in Australia. For those people that are looking at our services in the US, we've recently introduced some very quick access solutions called Quick Access Hub. So people can Google this Computershare Quick Access Hub. You can register for SMS text notifications, and you can register for some very commonly used services. And within some of those services, we're using two-factor authentication. So you know, we're not quite as backwards as some people might have… you believe we are. But I know on the I know, on the dispatch of the pin, it's still causing a lot of noise, a lot of pain, and we're doing what we can to get closer to the investors so we can mail from them starting from Europe, and then maybe we'll be able to replicate that in Canada and Australia and New Zealand. But that's a bit further down the track.

Jsmar18 17:24

It's good to hear regardless, I thank you. I'm sure everyone will be very thankful as well.

Paul Conn 17:29

I hope so we are trying.

Jsmar18 17:32

So we're moving on to the functionality-related questions. Now, we will get to get into these in part one. But now we can get into them in part two. So people are interested in what capabilities Computershare provides for companies that choose you as that transfer agent. So the companies commonly opt-in for the feature that provides the option for live counts or registered shares.

Paul Conn 17:57

So I think I touched on this last time, the corporate clients we have, have real time access to the register. So as we update the register, they are able to see the changes. I think that's a helpful point to note. However, I think I would separate that out from the company's ability to see what's going on inside the DTC where they don't have access to what's happening at a book entry level, either between brokers and banks, or between each of those broker or banks and their clients, there's no real time, visibility of those movements at all so. But as it relates to what comes onto our register, they can look into their registered through our web facilities at any time and see a live count at that snapshot in time.

Jsmar18 18:53

Yeah, you're right. I think I definitely did answer that question. I mean, asked that question last time. So apologies. The next one, which I don't think I asked is platform reliability, which is kind of a concern as users of Reddit we’re used to a really unstable platform and not being able to log in regularly. So naturally, this concern flows across the broker platforms that we use or transfer agent platforms that we use, as well. So people are interested, what your team has done, essentially to ensure platform reliability?

Paul Conn 19:27

Okay, so that's a good question. And I can assure you didn't ask this question last time, but I'm happy to answer it. We are regularly testing our platforms for volume processing, reliability, etc, etc. I mean, we're a regulated business. So we need to ensure that we can process the business that comes through the pipes efficiently. I think many of you will know that, today, in the US, Computershare already processes business from millions of investors, some who still hold pieces of paper called share certificates and many millions whose shares are registered in DRS form. So you never say volume is never an issue. However, I can assure you we're regularly testing our facilities. And as things currently stand, I don't see any cause for concern whatsoever.

Jsmar18 20:26

Okay, that's great and reassuring to hear, so thanks. And we can move on to some more of the fun stuff now, which I'm sure people will be interested in which is touching on Overstock. So I believe you're allowed to talk about Overstock, as it's in the public domain. Is that right?

Paul Conn 20:40

To the extent that it's in the public domain? No problem. I mean, beyond what's in the public domain is, is a client-agent issue. So... ask the questions, and I'll answer as much as I can.

Jsmar18 20:54

Yeah, okay. No worries at all. I mean, he's kind of vague as well, this question. So feel free to say if you can't answer or go into specific details. It's no worry. So it'd be great to get a general understanding of how that process transpired when it came to the Overstock dividend. And essentially, what was the end result for the shareholders who directly registered Overstock and held with their brokers?

Paul Conn 21:18

Okay, that's a good question. And look, I can talk about that, in general terms. Overstock distributed a stock dividend, and that was subjected to a regulatory filing. So I'm sure Overstock wouldn't mind if we updated our FAQ to include a link to the filing so that people who were interested in getting into the detail can go off and take a look at the fine detail, but it was a stock dividend distribution. We were asked to create the entitlements on Overstock’s subsidiary T zeros blockchain. So we calculated the entitlement to the dividend. We distributed the dividend and we updated wallets on that particular blockchain. It was also distributed to Cede and Co and the DTC nominee holds securities on the ledger. And DTC obviously took the entitlements that it had, and passed them through into the hands of banks and brokers. But that's, you know, one step beyond what we're able to distribute, we can distribute to the direct registered shareholders, whether they're in DRS form or certificated form. And they all went on to the ledger directly. And shares that were held by banks and brokers were distributed through the DTC system.

Jsmar18 22:59

When it comes that wallet, are you saying that you had to pre create the wallet and send the distribution there?

Paul Conn 23:08

Can I answer that through the FAQ? Because I'm a little rusty, I believe we did. But we'll let’s... let us come back to include that in the FAQ about who actually populated the wallet. I believe we did. And I just want to be absolutely certain before answering that definitively.

Jsmar18 23:26

Yeah, I'll put in the transcripts for people to reference when they get to this point as well. Yeah, perfect. Okay. All right. But that's really interesting. Thanks for that I didn't really have a great understanding of the Overstock process in terms of how it works. So thanks for going through it. The next section that we want to move on to is the DTC and Fast. We didn't really touch on it too much before especially the Fast component of how that transfer system works. And people have been really curious about why shareholders are not more encouraged to direct register their shares in the name. So I want to understand what your take on this is, as it's essentially a direct competitor of the DTC in a way.

Paul Conn 24:09

Okay, so there's probably three parts to that question, and we're going to need to remind me as we work through that, but dealing with the Fast agent issue first versus DRS. Generally, the Fast agent arrangement relates to the administration of the Cede and Co. holding for DTC. Yes, as securities come out of DTC and we debit their account and credit your account, Jack in DRS form. We're performing some of that processing on behalf of DTC for its account under the Fast agent rules. The DRS rules that relate to you coming on to the register are quite separate. From that, and I know, you know, there's been some discussion that conflates those particular issues, but they really are quite distinct and separate. And the Fast rules are what enable us to run the Cede and Co. account for DTC without having to have a physical certificate go backwards and forwards between us or for them to hold their securities in DRS. So they have a kind of special-purpose uncertificated account and it's under those Fast agent rules. That's the first part of it. Okay, can you give me the second part again, please, because this whole...

Jsmar18 25:39

So people are interested on your take in regards to why people aren't more encouraged...

Paul Conn 25:46

Okay. So, again, I think this issue is it may also be being conflated. And it's probably because, you know, this is not a common everyday occurrence. But I think there is, there's a delineation between issuers are not able to withdraw all of their securities from DTC. That's a DTC rule. You know, I can't speak to that rule one way or the other, but it is there, and issuers don't have the ability to just pull their shareholders’ securities out of the system. So that I think is governed by a rule. The piece that I'm not sure is whether that extends to issuers being able to just tell their shareholders, what options they have available to them, one being their right to exercise choice to have their shares registered in DRS form. I think I don't think there's any legal impediment to that, I'm not a lawyer. I'm happy to keep having a look at that and talking to our team about that. But I think there's a subtle difference between those two examples that I just gave, but I think the discussion in the marketplace and in the forum is conflating those points. I don't think there's an issue with a company telling their clients that they have a choice as to how they can hold their securities, e.g. in the street through a bank or broker, or in DRS form. They just can't, on a wholesale basis, say we're going to take all of our shareholders’ securities out of the street system, which is obviously a fundamentally different thing.

Jsmar18 27:29

Yeah. Okay. I think that's an interesting perspective, because I think we've definitely been under the assumption that DRS isn't widely known about because the issuing companies aren't allowed to tell retail Hey, DRS your shares, these are the benefits associated with doing the direct registration.

Paul Conn 27:49

I mean, this might go to the third part of your question, which was really, I think, really more about competitive LRS. I think just, I mean, going back to the people know about it, I think, you know, banks and brokers have an interest in performing efficient clearing and settlement of trades that are executed on the marketplace. The way in which they can do that most effectively is by having their clients holding their securities through the DTC system. So I think, you know, banks and brokers would have a preference to clients holding in that particular way. I think many brokers would be very happy to register their clients in DRS form, if that's what the client asked for. But I think over time, it's almost this DRS system has been around for the best part of 20 years, if not 20 years, but it's clear that recent events are focusing the spotlight on it. And it's almost as if it's just been discovered, but that's probably, you know, a number of brokers, particularly those that deal in an online environment don't really want to interact with external registers. So they just, the brokers want the securities to come into the street system.

Jsmar18 29:10

Okay, well, that wraps up all the questions we have. It’s much appreciated. I think your time, your team’s time, Computershare’s time for reviewing our questions. And you know, just giving us quality information is really greatly appreciated.

Paul Conn 29:25

You're welcome, Jack. And thanks very much for the opportunity to come back and complete part two, there was a lot to get in a single session. I'm glad we've been able to chop it up into two sessions, and we'll continue to monitor the discussion and I'm sure people will make their feelings known as we know. We understand that. We're catching up slowly.

Jsmar18 29:47

We'll be back for part three next year as the questions start rolling in.

Paul Conn 29:52

I look forward to that. Great, thanks. Okay. Thank you.

Posted Nov 30, 2021, 4:24 AM UTC · edited

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