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Simplifying Settlements for Global Participants


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As companies expand their equity plans both within the company and around the world, a host of issues can crop up related to transactional settlement and getting cash into the hands of global participants quickly and hassle-free.

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Simplifying Settlements for Global Participants

  1. 1. October 21, 2014 1 Simplifying Settlements for Your Global Participants Presented at GEO NECF 2014 Dorothy Musho, HSBC Patricia Landry, Solium
  2. 2. Picture this… October 21, 2014 2 ABC Telecom, a US company, issues stock options to their head of Indian Operations, Munira Davda (who goes by Moonie). Munira exercises and sells her options. She requests the proceeds be converted to Indian rupees and wired to her bank account in India. Several weeks later, Munira still doesn't have her proceeds. ₹
  3. 3. What happened to Munira’s money? International wires crossed? Currency conversion slow-down? Regulatory requirements missed? Demographic info inconsistencies? October 21, 2014 3
  4. 4. Let’s back up! October 21, 2014 4
  5. 5. Why is global settlement so challenging? October 21, 2014 5 Challenge 1: Currency conversion ▪ Major speed bump ▪ Currency controls can require you to give additional info ▪ Currency restrictions are continually changing ▫ Inflow restrictions ▫ Tax agreements
  6. 6. Challenge 2: Demographic info ▪ First and last names = not a standard construct globally, especially in Asia. ▪ Legal name vs. “what I go by” October 21, 2014 6 Munira Davda Moonie Davda Davda, Munira Why is global settlement so challenging?
  7. 7. Challenge 3: US regulatory compliance – Office Foreign Assets Control (OFAC) October 21, 2014 7 What is OFAC? An office of the US Treasury that enforces economic and trade sanctions against ▪ Targeted countries and regimes ▪ Terrorists ▪ International narcotics traffickers ▪ Those engaged in WMDs ▪ Other threats to US national security Why is global settlement so challenging?
  8. 8. OFAC (cont’d) Bank verifies payee against OFAC’s sanctioned persons list If payee name is similar to a name on list, bank must verify identity before disbursement If verification is not done before a specified time, funds are frozen and remitted to OFAC October 21, 2014 8
  9. 9. International payment methods Wires Local disbursements Payroll Checks  Most costly Most common  The one true int’l process Trackable Safe Good cross- border  Great for big payments High degree of control  Not trackable  Less control  Low-cost  Good for high volumes  Familiar concept to employees  Labor intensive (FX, what rate and why)  Need to set timelines clearly Fewer currency control issues Simple for participants  Unreliable postal service(s)  Manual  Prone to fraud  Can’t cash cross-border Fine nationally  Okay for domestic employees not comfortable with digital, or who are terminated October 21, 2014 9
  10. 10. A closer look at wires October 21, 2014 10 Authorization Munira ABC Telecom’s bank US$ debit Provider processes FX from US$ to ₹ Provider’s bank facilitates settlement Munira’s bank in India ₹ to Munira Most recommended! ! Regulatory checkpoint: Sending bank must check for terrorism ! Must provide rationale to Bank of India ! Potential delays: Naming convention errors, banking info errors, local currency control.
  11. 11. Issuer considerations Decide what payment methods to permit ▪ Just because you can, doesn’t mean you should Communications to participants must CLEARLY identify: ▪ Required naming convention ▪ Required payment instructions fields ▪ Payroll notifications to set expectations ▪ Expected processing time PUBLIC
  12. 12. How your equity plan provider can help? Collecting information ▪ Essential banking info Coordinating payments ▪ Yes, they can do settlement and therefore can help solve mysteries Helping with communications October 21, 2014 12
  13. 13. Pssssst… What did happen to Munira’s money? The money came back because…. She opened her bank account under Moonie Davda. Problem solved! October 21, 2014 13
  14. 14. Thank you! October 21, 2014 14