Johannesburg - The competition commission had institutionalised Computershare's monopoly and opted for the line of least resistance in its recent ruling without understanding Strate's business, according to Monica Singer, the chief executive of Strate.
She was referring to the commission's prohibition of the merger between Strate and Ultra Registrars. Strate is a central securities depository (CSDP) and regulates all deposit taking institutions (banks and brokers) that keep share registers on behalf of listed companies.
It announced earlier in the year that it wanted to buy Ultra, which is a transfer secretary, for about R7 million. Transfer secretaries are not regulated by Strate and they deal in the dwindling market for share certificates. Computershare has two divisions, one that is a transfer secretary and not regulated by Strate, and one that is a central securities depository, which is regulated by Strate.
In the transfer secretary space Singer believed that Strate's acquisition of Ultra would have enhanced competition, not hurt it.
"We are arguing that the competition commission has lost it," she said. "People are blurring the truth. The issuers of shares want one interface for their share information. The Strate model, with the acquisition of Ultra, was to offer a one-stop shop. Computershare has already done that and hence it has the monopoly."
Computershare was in favour of the commission's ruling and its local chief executive, Stan Lorge, said that had the deal gone ahead, Strate would have been both a regulator of Computershare's business and a competitor.
However, as pointed out by Singer, Strate does not regulate transfer secretaries. It does regulate CSDPs and is itself a CSDP, but according to the Securities Services Act there is nothing to stop a regulator from acting in its own market. For instance, the JSE could list on its own exchange and have an independent body oversee its listing to cater for governance requirements.
In much the same way, Strate could act in its own market and have an independent committee oversee its behaviour. Lorge went on to say that Strate could also have discriminated between Computershare and Ultra in the provision of shareholder information.
While it is true that once a month Strate collects all shareholder data and passes it on to listed companies, Singer said Strate would never get into the "silly business of handing out data at different times".
"It was a bad argument," she said, adding that nine of Strate's board members were independent. "We have the regulator, the Financial Services Board, on our board. And it is an automated technology that produces the data. The only difference in timing would be that if Ultra was in the same building as Strate then maybe it could run faster to get the CD."
In many instances, added Singer, Computershare didn't give its shareholder information to Strate, passing it directly between its CSDP and its transfer secretary.
Strate will probably take the fight to the competition tribunal, but getting into the transfer secretary business is not the only idea Singer has. She would like to see Strate's technology infrastructure used for recording title deeds, for the identity checks needed for the Financial Intelligence Centre Act and for clearing in the unit trust industry.