By Christian Reuss, Head Cash Markets Swiss Stock Exchange and Member of the Management Committee, Securities & Exchanges at SIX.
Capital markets are facing a turbulent period, driven by the volatility brought about by Covid-19. The Swiss Stock Exchange shares its unique insights into how capital markets are likely to evolve over the coming months and years.
EXPANDING THE MARKET
Macro-economic and geopolitical issues, combined with investor sentiment affected the IPO market in 2019, nevertheless it was relative resilient supported by a strong equity market. EY reported global IPO deal numbers declined by 19% last year, compared to 2018, while proceeds fell by only 4% and reached $198 billion.
We’ve seen a variety of market developments over the past few years: the rise of private markets; fintech innovation and development; and the emergence of new technology and providers. These factors all point to the potential future in the capital raising space.
Options for raising capital have increased in recent years. Private Equity and Venture Capital grew substantially this past decade, maturing together with the rise in pools of capital at the disposal of family offices and sovereign wealth funds. The overall trend was also supported by the low interest rate environment and the search for yield.
At the same time, alternative technology-enabled options like crowdfunding have emerged, offering smaller businesses and start-ups a new option to fund their growth.
The increased private capital raising options provide companies with greater financial flexibility, and allow them access to the public market – on average – when they are more mature, more sophisticated, and more established.
WAVING THE IPO FLAG
A 2018 survey by the Economist Intelligence Unit and PWC found that, although 50% of executives believe a public listing is becoming less important when it comes to funding, 70% think it would be beneficial for successful companies to go public later in their lifecycles.
IPOs will remain an essential fundraising mechanism for companies moving forward, and that is unlikely to change. There are a number of uniquely correlated benefits of going public: Being public allows companies to raise additional capital efficiently through follow-on equity capital raise and other instruments. And the benefits go beyond the capital raise: the enhanced transparency and corporate governance of being a public company increases visibility and credibility not only among investors but also in the eyes of clients, suppliers and employees.
NAVIGATING AN EVOLVING REGULATORY LANDSCAPE
There are several important aspects which the development of capital raising revolves around. These include global and local regulation for public markets, tax and incentive policies, procedures and compliance requirements. In many ways, these factors weigh heavily on the choices that companies can make. Regulatory requirements are key to protecting investors and issuers alike and striking a balance is fundamental. There are many examples where market euphoria has led to lower regulations and new market segments, ultimately failing investors. (ICOs have been the most recent one in this context). Despite this, small and medium enterprises may need more customized regulatory frameworks to accommodate their route to access public markets – an already popular debate that is further fueled by the Covid-19 lock-downs in recent weeks.
At the moment and apart from the regulatory requirements, raising capital – both publicly and privately – remains a resource-intensive exercise – in particular for smaller companies. Consequently, technological solutions embedded in fully functional ecosystems that streamline the funding process will most likely be the most successful in the long-term. The demand for such improvements, and the arrival of innovative technologies, could impact how markets operate in the future and could create new platforms for capital allocation, consolidate existing and newly created ones, rewire how market participants connect, change processes and procedures, and support, complement and compete with existing stock exchanges.
Ultimately, the range of funding options available to companies of all sizes is likely to continue growing, addressing different needs and available funding pool thereby offering even more alternatives to those wanting to raise capital. For investors, the challenge will likely be finding the right risk-return profile as part of their respective investment portfolio – another question will be how much regulatory requirements can mitigate overall investment risk.
While positioned to continue challenging the public capital markets, private capital should also be seen as a feeder to IPOs. For the foreseeable future, public markets will continue to play an essential role in the global economy; the future development and the importance of all forms of capital raising will be driven by a range of factors including efficiency gains, technology, market environment, the evolution of regulation, and the balance between protecting investors and issuers while fostering market developments.
SIMPLIFYING THE RETIREMENT FUND DEATH CLAIMS PROCESS
By Dolana Conco, Regional Executive at Alexander Forbes
Losing a loved one is one of the most difficult experiences a person can go through, and during this difficult time, you don’t want your loved ones to have to worry about finances.
Your family will receive a share of your retirement savings and a life insurance pay-out if you die while being a member of a retirement fund. The trustees of the fund have a legal responsibility to make sure that death benefits from the fund are paid to those who are financially dependent on you.
If your death benefit is through a policy that is separate to the fund, then the trustees will not be involved and this benefit will be paid out according to the nomination of beneficiaries’ form that you’ve completed with that specific insurer, or else your employer will decide.
What retirement fund members need to do
- Keep your ‘Who needs financial support when I die?’ form up to date
This form is so much more important than anyone thinks – even though it is not a last will and testament. The trustees must, by law, find all the people who are financially dependent on you, as well as those whom you love and would want to leave a portion of your death benefit to when you die. Those who depend on you for financial survival are called your dependants. Examples are your spouse or life partner, children (of any age), parents, people you need to pay maintenance to or anyone else in your life who depends on you financially.
If no one is financially dependent on you in any way, you can choose someone else as a beneficiary (family, friend, or even a charity). If you choose to give your death benefit to a charity when you die, the money will first be paid to your estate and then paid over to the charity of your choice. If this form is not up to date, it could take the trustees much longer to identify who should receive a share of your death benefit from the fund.
- Submit the correct documents
The most common reason for delays in paying an insured death claim is that there are missing, incomplete or incorrect documents submitted with the claim. Your employer can assist with what is needed and can check that the form has been completed fully and correctly before submission. In general, the following information is needed:
- a certified copy of the death certificate
- the identity document or passport of the deceased member
- a copy of a pension-backed housing loan (if applicable)
- proof of the extent of any financial dependency of the beneficiaries
What your retirement fund needs to do
The trustees of your fund have a legal duty when you die to distribute your death benefit from and through the fund. The trustees must find all dependants and nominees to decide how to share the retirement savings and life insurance pay-out fairly. To make a fair decision, the trustees will consider the following factors, among others:
- Age of the beneficiaries
- Relationship to the deceased
- How financially dependent they were on the deceased
- Their financial affairs
- Their future earning potential and prospects
- The total amount of the retirement saving to be distributed
The trustees can choose to give a beneficiary no pay-out, as the law doesn’t say that every beneficiary must get some money. However, they must consider the needs of each beneficiary and the amount available for distribution.
If there’s information that the trustees may not have considered when they made their decision and the draft resolution has already been prepared, your family needs to contact the trustees urgently. The fund’s administrators will pay the death claim once they get a response from all beneficiaries, or if no response has been received within 30 days of sending the draft resolution document.
There are various reasons for delays in paying a death claim from or through the fund, including the employer not completing the claim form in full, missing or incorrect documents, investigations for the trustee resolution taking longer than expected, outstanding tax issues and beneficiaries not providing their bank account details.
Make sure your family knows what can go wrong and what to do to make the process run smoothly – it all plays a part in leaving a legacy that you can be proud of.
THE COMPLETE GUIDE TO TRANSFERRING SHARES FROM ONE DEMAT ACCOUNT TO ANOTHER
A Demat Account functions like a savings bank account with the obvious difference in the fact it stores stocks instead of money. To be similar to a savings account also implies that a Demat Account can be used to transfer shares from one Demat Account to another Demat or trading account.
Shares are generally transferred from one Demat Account to another for the purpose of changing depositories. However, there can also be other reasons for transferring shares such as merging the investments in different Demat Accounts in a single Demat Account.
Whatever the reason, in order to understand how to transfer shares from Demat Account, it is important to first understand what is Demat Account.
What Is Demat Account?
The most simplified way of answering what is Demat Account is to understand it as a digital platform where investors can store all their shares and other forms of investment in an electronic form. Demat is a short form for dematerialization which refers to the process of converting physical share certificates into the electronic form. A Demat Account can only be opened with the help of a Depository Participant or DP and a depository. A DP is an agent or broker who acts as an intermediary between the depository and investor. A depository is a financial institution in which investors open their Demat Account. Read more about what is Demat Account to understand it in more thorough details.
It is necessary to know about Demat Accounts before attempting other things like transferring shares, etc.
How To Transfer Shares From Demat Account
After the meaning of what is Demat Account is cleared, it is time to understand how to transfer shares from Demat Account to another Demat Account. There are two types of transfer:
- Intra-depository transfer: In this type of transfer, shares are transferred from one Demat Account to another in the same depository.
- Inter-depository transfer: In inter-depository transfer, shares are conveyed from one Demat Account to another account which is in a different depository.
The two ways in which shares can be transferred are the manual procedure or online procedure.
Manual Transfer Of Shares
For the manual transfer of shares, investors are required to ask for delivery instruction slip or DIS from their brokers or DPs. DIS is not just an important but also an integral part of the manual transfer of shares. It contains some mandatory fields which have to be filled to process the transfer of shares.
1. Beneficiary Owner ID (BO ID)
Beneficiary owner ID (BO ID) refers to a 16-digit ID number of a broker. An investor has to mention in DIS the IDs of both the current broker and the broker to which the shares will be transferred.
2. International Securities Identification Number (ISIN)
International Securities Identification Number or as it is commonly known ISIN is a unique ID number appropriated to each share of an investor which he holds in a Demat Account. In order for the transfer to take place, ISIN has to be provided to designate which particular shares are to be transferred.
3. Inter or Intra
This is the distinctive part of DIS where an investor has to choose whether to make an intra-depository or inter-depository transfer. In the case of intra-depository transfer, the column denoted as ‘off-market transfer’ has to be selected. Whereas, in the case of inter-depository transfer, the column designated ‘inter-depository’ has to be selected. An investor should be extra careful while filling this part of DIS.
Little needs to be said about this part of DIS. Just like any other important document, DIS too needs to be signed. Once an investor has signed DIS, it should be submitted to the broker.
A broker may charge a small fee for the transfer of shares. It usually takes 3-5 business days for the shares to be transferred.
Online Transfer of Shares
Central Depository Services Limited (CDSL) has made the online transfer of shares a very easy process. All that an investor has to do is to follow these simple steps.
- The ‘Register Online’ option at the CDSL website has to be selected.
- There would appear an option called EASIEST which then has to be selected.
- A form would generate which accordingly has to be filled.
- Once the form fill-up is complete, a print out of the same has to be taken out. This print out is to be submitted to the account holder’s Depository Participant.
- The DP will verify the document and once the verification process is completed, a password will be generated.
Using this password, an investor can log in and transfer shares on his own.
Thus, the two ways in which shares can be transferred from one Demat Account to another is not at all complex and can be easily achieved through both manual and online procedure. With a proper understanding of what is Demat Account and how the transfer of shares takes place, an investor can effectively send the shares to another account either on his own or through the help of a DP.
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