TechnologyLSE lets firms exploit list loophole

LSE lets firms exploit list loophole

A loophole has been discovered that will enable accountants to take advantage of London Stock Exchange stock market data without paying for the privilege, despite the exchange's recent introduction of a licensing charge structure.

Accountants were threatened with potentially thousands of pounds of licensing fees for using the exchange’s SEDOL (stock exchange daily official list) numbers, which help accountants calculate clients’ capital gains tax on stock investments.

However the exchange has bizarrely allowed accounting software providers, such as Iris Software, to provide their customers with an alternative cross-reference number, known as an ISIN (international securities identification number).

Jeremy Watson, product manager for Iris personal tax, said: ‘It was obviously helpful to provide this cross-reference for our users, so we will be upgrading Iris in the near future to show ISIN instead. When asked, the London Stock Exchange told us they have no objection to this use of the ISIN and will not require our users to obtain licenses, even though, in most cases, the ISIN contains the seven-digit SEDOL.’

The exchange had provided the information for free until 26 January 2004, when it introduced licensing fees to end-users, mostly accountants and lawyers.

‘It was likely that our customers could have been forced to pay up to £1,500 in charges for using the SEDOL numbers,’ said Watson.

Accountant Edward Aries of Aries & Co insisted said he could live without using codes to crosscheck his client’s stock activities. ‘I couldn’t justify the cost of using SEDOLs. The information I receive from my clients is usually enough for me to work out their capital gains tax.’

Nigel Powell, manager for tax products at Solution 6, said: ‘Basically, there is a way around the SEDOL numbers problem.’

However, Powell warned that accountants who rely exclusively on ISINs must be wary.

‘ISINs are unique to each security, however a stock can have two different SEDOLs if it is traded on a different market.’

He added that some accountants would have faced a cost to use SEDOLs that they ‘hadn’t budgeted for’ and it was essential for Solution 6 to find a way around the system.

The controversy surrounding the use of SEDOL numbers forced accounting software providers to look for alternative means for accountants to crosscheck stock investments of their clients.

Both Iris and Solution 6 stopped carrying the SEDOLs after consulting with their customers.

‘Not one of our customers has asked to put the SEDOLs back into the system,’ said Watson.

For SEDOL information go to www.londonstockexchange.com/techlib/sedol.asp.

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