“We have recently been advised by Equiniti as to the extent of the “contribution” they require in respect of system development costs to meet the Euroclear harmonisation requirements.
Equiniti state that they have apportioned the initial charge for 2010 based on market capitalisation, the level of CREST activity and the number of CREST accounts.
This is capped irrespective of any further development work required in the year – but we have been told that for us this represents an additional £30K. This figure equates to approximately 30% of our annual fee. Further charges are also anticipated in 2011 and possibly 2012 but these remain unquantifiable at present.
We understand that Capita and Computershare have already approached clients in respect of similar charges and would be interested to know in respect of all registrars:
a) the manner in which they have calculated charges;
b) the value of the charge as a percentage of the annual registrar’s fee; and
c) the stance companies are taking in respect of these charges.”
Equiniti have quoted us a charge for 2010 of 38% of our annual fee (which we fixed two years ago). They say that this was calculated based CREST activity, CREST accounts, market cap and the extent to which ‘the issuer would benefit from the development as a result of their business activity’. In my view, this does not explain why we are being quoted a charge which is higher than most of those on this board – as we are not a particularly large organisation and Equiniti themselves have admitted that this would be of little benefit to us. We continue to resist this charge.
Equiniti have raised the Euroclear cost issue. My understanding is that they require a one-off payment from us of around £40k – in the region of 20% of our annual fee. We will be very reluctant to pay, as we regard it as a tool for them to conduct their business, and is a cost that should be borne by them in the ordinary course of business.
Our Registrars, Capita, approached us last year (albeit in a letter to all clients stating that a fee would be added to future invoices and this information was buried on the third page – an approach that was a serious misjudgement) for a payment towards their Euroclear costs and we refused to pay on the basis that whilst we appreciated Clients would of course have to pay for the Euroclear facility when it is in operation, but that’s a separate costs from the development of a facility which will ultimately be one of the services provided to clients. They have not approached us since!
Equniti have asked us for £10k for Phase I which is about 25% of our annual fee. This was based on same criteria explained to you. Equiniti were not sure when Phase II would be implemented but thought the charge would be less than Phase I. Equiniti said costs incurred by them to date was £4m. There is nothing in the fee agreement that allows them to levy this charge. We have refused to pay. The costs of upgrading of IT systems should be a cost which falls to all the registrars as a cost of doing business. Communication has been poor, first e-mail indicating there would be any charge at all was beginning of September 2009.
Equiniti have recently informed us that they intend to charge us 26% of our annual fee to cover Phase 1 of their system developments. They have suggested that there would be a further cost of half this much again for Phase 2 payable in 2011, but with no gaurantee of its quantum. We have a fixed fee in place agreed until mid-2011 and have no intention of paying these extra costs.
I believe that Capita took the number of CREST accounts into account when calculating our annual fee which is c £3.5k. Although ‘not over the moon’ about having to contribute to development costs, we did receive a 22% reduction on the original quote. In my opinion, Equiniti’s charges seem rather excessive, but perhaps they are just playing catch up, in view of the fact that the other registrars contacted their clients earlier on in the development stage.
Equiniti have just told us they would like to charge us £25k this year and again next year. Each of these amounts represent around 35% of our annual fee. We intend to push back, and it may be that this, combined with continuing lower levels of service than previously experienced may lead us to re-tender.
I found this charge on our quarterly bills and asked Capita to delete this as I was not prepared to pick up this cost, which they did.They credited us for the charges which had slipped through on one or two earlier invoices.
They have not approached me again about this matter.
We went through discussions with Capita some time ago. The amounts involved were small compared with the figures being quoted by others now. I think we were asked to pay about £2,000 a year by Capita and in the event agreed to pay half.
We have rejected Equiniti’s requests that we accept additional charges in respect of their system development costs in preparation for Euroclear. We take the view that these charges are for Equiniti to absorb as a cost of doing business, and not something that they can pass on directly to their clients. Such charges are outside the scope of the Registrars Agreement that we have in place with Equiniti.
We have recently been advised that we can expect to pay a “contribution” of £50k to Equiniti in this regard. We are not accepting anything until our retender goes live next month.
Computershare charge us a monthly extra contribution for this which works out at less than 10% of our annual fee. When challenged, they said that if they did not charge separately, they would have to increase the annual fees, so we have accepted the charge as it is quite small. I suspect we have a fairly high proportion of shareholders who still hold certificates and this is why it is relatively low.
We are not accepting the notion that Registrars costs of doing business of this type can simply be passed on in the faishon they are attempting. Moreover we have only recently signed a fixed fee agreement with Equiniti at which point no mention was made of any charges of this type. For both these reasons we have said that we will not paying any additional charge. The first part of our additional charge is £10,000 which is around 35% of our annual fee
Computershare have based their approach to this charge on the average amount of CREST network traffic generated by each client. The total development cost being apportioned to each client based on their direct usage, to give a total amount payable. Computershare would then recover the development costs over a two year period. Therefore the total amount (in our case £6,807) was divided by 24 months and then charged monthly. It has not been confirmed whether any additional fees will be levied after the two year period is complete. We did try to push back on these fees but to no avail.
We also have Equiniti as our registrar and have been quoted a higher figure, but representing about 20% of our annual fee.
Capita did try to charge us last year, but I complained and the amount was credited. Capita tried to slip the charge back in this year, but once pointed out it was again credited. There was no particular explanation of how the charge was calculcated.