I have children. Do you have children? I have children. Welcome to my Parents’ Anonymous meeting. What, I wonder, is the most annoying trait of your child?
Oh be quiet! My children’s most annoying trait is their inept duplicity. The way they try to be clever and get around to asking you a question in a way in which you’ll say “Yes” rather than “No”.
Sometimes I feel like taking my hand and, in that classic scene, sweeping the chess board clear of pieces and saying “Just spit it out will you, what do you want??” Ah, the conflicting demands of society, intelligence and hormones!
In the convoluted and mixed up world of financial investments, the role of asset managers can sometimes appear to be as confused as such children. Not through any fault of their own, but because they are similarly caught between several different priorities.
XBRL could help to solve that headache, and in a letter to the Securities and Exchange Commission (SEC) the Asset Managers Forum (AMF) has embraced the new technology for this very reason.
What Are Asset Managers?
Most people have heard of Asset Managers, but few know what they actually do.
Suppose Big Bank has 100,00 savers all of whom have specifically chosen to invest in Big Corp plc. Big Bank does not, of course, administer 100,000 separate investments within Big Corp plc; rather it has one big holding which is then managed in 100,000 different virtual chunks.
It is basically the asset manager’s job to oversee that one big chunk and ensure it is administered correctly for the 100,000 investors.
Therefore as well as engaging in trading and (possibly) advice, the asset manager is also the communications conduit from Big Corp plc to the investor. After all, as far as Big Corp plc is concerned the 100,000 investors don’t exist, only the asset manager does.
This is where the headache for many asset managers lies. As Chris Kentouris has succinctly put it:
Because of the disparate ways in which issuers disclose corporate action notifications, the data must typically be reinterpreted by financial intermediaries and asset managers before reaching end investors. Such a scenario is ripe for mistakes and delays. And banks, brokerages and asset managers could be financially liable if they give clients bad data on corporate action notifications or provide it too late for a decision to be reached.
It would be far better for the announcement by Big Corp plc to be made in XBRL and the information transmitted electronically and uninterrupted to the end investor.
The AMF support this position, with Tina Davies, Chair of AMF’s Corporate Actions Committee recognising that there is:
an opportunity to move forward in reducing risk exposure to market participants that arises from corporate actions processing of today
XBRL Provides Investors With A Two Way Street
However, the story doesn’t end there.
Recently the UK saw a farce unfold in its democratic process when those bastions of high powered legal advice, Carter Ruck, succeeded in blocking The Guardian from publishing details of a Parliamentary Question.
The trouble was, as soon as the injunction was put in place the internet exploded with chatter about the details it was now illegal to publish. Even The Times, that bastion of conservatism, acknowledged it was Twitter Wot Won It.
XBRL can and will bring exactly the same power of democracy and transparency to business reporting and investment.
If Big Corp plc’s investment news can be transmitted directly to the end investor, so can the end investor query the financial figures Big Corp have published.
In effect, it will sweep the chess pieces off the chess board and allow the end investor untrammelled, immediate and electronic access to Big Corp plc’s financial statements.
And that, when a key item of CSR and sustainable business websites is transparency, is no bad thing at all!
Photo Credit: LuMaxArt RSS Megaphone by LuMaxArt under Creative Commons Share Alike License.
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Lucy is Editor at Corporate Eye
