Will technology bring registrars in check?: The introduction of Crest, the automated share settlements system, could help to control an unregulated industry. John Willcock reports

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Your starter for 10: which industry is dominated by three high-street banks with 73 per cent of the market and forms a vital part of the securities industry yet is not regulated by the Stock Exchange or the Bank of England - or anyone else, for that matter?

This business charges healthy fees for its service yet shrugs off responsibility for any complaints to the stockbrokers it theoretically serves. This industry is also one of the main culprits in the pounds 400m Taurus automated share settlements debacle and is shaping up as one of the key stumbling blocks to its successor, Crest.

The business is share registrars. The reason you may not have heard of it is because talking about registrars is about as interesting as a Sunday night in Chipping Sodbury.

But this industry is big money and is causing big headaches for the City in its attempts to build an effective automated share settlement system. The stakes are high: the future of London as a global financial centre.

The attacks on the registrars are completely rejected by the banks that own them.

Measured by numbers of shareholder accounts of FT-SE 100 companies, Lloyds has 37 per cent of the market, Royal Bank 26 per cent, Barclays 10 per cent and in-house registrars, such as Abbey National and ICI, 18 per cent. There are a number of independent registrars who make up a further 9 per cent, including Independent Registrars Group and Northern Registrars.

Brokers recall the Abbey National flotation, when sacks of Abbey share certificates handled by Lloyds Bank Registrars, the market leader, ended up in a skip. More importantly, brokers feel that registrars are insufficiently regulated, in that they are not covered by a specific piece of legislation such as the Financial Services Act.

No impropriety is implied, but when mistakes are made the brokers often have to bear the cost.

Many believe that Taurus was a missed opportunity to replace the present fragmented system with a single central computerised share register, similar to the Swansea driving licence centre. Such an option, which would theoretically cut out a whole layer of costs from share dealing, has also been rejected for Crest, although the computer technology is available.

The United States has shifted from a fragmented registrar system to a single computerised one, the Depository Trust Company. The DTC acts as a depository for US shares, which are mainly bearer securities, unlike their UK counterparts.

The Royal Bank of Scotland bought NatWest's registrar business a couple of months ago and has set its sights on wresting market leadership from Lloyds.

Royal Bank is now responsible for about pounds 140bn worth of share holdings. Not surprisingly, Royal's head of securities services, Terry Pearson, rejects the criticisms of his industry.

'The registrar is on the end of a long chain of events and is first in line for any blame for a delay,' he says. 'Brokers haven't always been very good at supplying transfer documents (for share transactions). For brokers to throw stones is rather ironic.'

Mr Pearson admits that there may have been under-investment by registrars in computer systems in the Taurus era, but says they are now ploughing millions into new systems to link up with Crest.

Under the present 10-day settlement period, registrars require a further three-and-a- half days to handle their side of things, whereas under Crest they will take two hours.

'Crest is bringing registration much closer to the securities business, instead of standing to one side,' enthuses Mr Pearson, who has been closely involved in the new system's design and development. 'The register is now a prime marketing tool. A share register is a very valuable mailing list. For instance, Marks & Spencer can mail all their shareholders with their new product news. And in this age of corporate governance, a list of shareholders is very important to a company.'

Mr Pearson rejects the accusation of high costs, saying it is a very competitive business. And the suggestion that it is unregulated will certainly not be true under Crest. Registrars will have to sign service contracts guaranteeing stringent levels of service, such as the new two-hour settlement time.

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