October 21, 2014 1

Simplifying Settlements for Your Global Participants Presented at GEO NECF 2014

Dorothy Musho, HSBC Patricia Landry, Solium

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.

₹

What happened to Munira’s money?

International wires crossed? Currency conversion slow-down? Regulatory requirements missed? Demographic info inconsistencies?

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Let’s back up!

October 21, 2014 4

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

Challenge 2: Demographic info ▪ First and last names = not a standard

construct globally, especially in Asia. ▪ Legal name vs. “what I go by”

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Munira Davda Moonie Davda Davda, Munira

Why is global settlement so challenging?

Challenge 3: US regulatory compliance – Office Foreign Assets Control (OFAC)

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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?

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

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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

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A closer look at wires

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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.

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

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

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

Thank you!

October 21, 2014 14