First Chicago Trust Co., the nation's largest stock transfer agent, announced that it will use the Internet to communicate with its clients' shareholders.
The Jersey City-based subsidiary of $65.7 billion-asset First Chicago Corp. serves as transfer agent for more than 375 U.S. companies with more than 12 million shareholders.
Its use of the so called "information superhighway" is part of a growing trend in which the financial industry uses the Internet for communications and financial transaction applications.
The Internet -- a web of thousands of interlinked computer networks -- provides electronic mail, data base, and bulletin board services to users, who communicate with each other via electronic "addresses."
To access the network, a shareholder's personal computer must be linked to an on-line service, such as Compuserve or America on-line, which provide "gateways" to the Internet.
Shareholder inquiries about dividend payments and other requests for information can be sent to First Chicago Trust's Internet address 24 hours a day.
Andrew J. Lynch, president of First Chicago Trust, called the application a breakthrough that will benefit both shareholders and public companies.
"Communicating electronically offers many efficiencies and also opens up the possibility of a variety of new communications between public companies and their shareholders," he said.
While shareholders initially will be able to send information requests only, additional applications are on the way.
The First Chicago program is slated to also provide the ability to access shareholder account information, initiate transactions, and access information, such as quarterly reports, about First Chicago's client companies.
In addition, First Chicago clients will be able to use the Internet to communicate directly with their shareholders.
The ability to initiate stock transactions, which could be available as early as the second quarter, will force the company to enact stricter security measures, said Michael Foley, First Chicago vice president.
In the current phase of service -- the inquiry-only mode -- the company requires pieces of confirming information from shareholders, such as account numbers or social security numbers.
But for more sensitive transactions, the company plans to assign personal identification numbers to shareholders, Mr. Foley said.
Establishing the means to verify the identity of shareholders will be a critical part of implementing an electronic proxy voting application the company plans to introduce sometime after the transaction capabilities are on-line.
Currently, shareholders vote by mail.
With Internet access, they will log on to the network, call up First Chicago Trust's electronic proxy application, and vote immediately, which will significantly speed up the tabulation process, according to Mr. Foley.
Some regulatory matters will have to be settled before the electronic proxy application is allowed to go on-line.
"Under certain state laws, a valid proxy is described as one with a signature," said Mr. Foley. There is some question as to whether an electronic vote backed up against a secured ID number is considered a signature, he said.
