Corporate Actions Life Cycle
Please find below a brief description of the Corporate Actions Event LifeCycle. In general Corporate Actions Events will follow the same set of processes from its beginning to the end (below descibed as 8 processes).
Please note the ripple-on effect that each activity or information will need to have. Everything has to follow through the chain of market players in the industry all the way down to the final benificary owner of the shares.
1 Communicating the event / Event announcement
Once the issuer has decided that it will start a corporate actions event, it will have to advise all relevant parties about all aspects of the event. Usually the leadagent will write an official document about the event which will be sent to all first ring market participants. It will also go to all CSD's who in turn will notify all direct custodians who will notify all global custodians, etc. There are many ways at which the information can be passed on. Every party in the market needs to be able to gather the information and the speed and accuracy with which market players notify their clients are major competitive factors in the industry.
2 Event creation
Every relevant party, in turn, has to notify their underlying clients about the upcoming event. This usually happens by means of creating an "event" in the inhouse systems. All relevant dates like deadlines, paydates, exdates and recorddates need to be diarised to ensure that important actions are taken at the right moment and are not forgotten (missing a deadline can lead to very substantial losses). All systems and other departments need to be prepared and all necessary amendments to systems need to be made. Often, the information published by the agent has to be translated from another language. All information that is not clear will need to be followed up on by contacting the previous link in the chain.
3 Claims Processing
On and after important dates like record date and exdate, eligible positions need to be established and claims need to be processed. (for a more detailed description on claims processing, please refer to our Jargon Buster.
4 Instrucions processing
In case of voluntary events shareholders are required to send an instruction about what decision they wish to make in regards to the event. The leadagent will set a certain deadline after which no instruction will be accepted anymore. Every party down the chain will offset a certain amount of time in order to be able to receive, interpret, process and pass on the instruction. Setting the tightest deadlines for their clients is something competitors can distinguish themselves on. Many market players will offer their clients to proactively remind their clients about upcoming deadlines, either through electronic systems or by courtesy calls.
5 Entitlement Calculation
Once all instructions for voluntary events are submitted or in the case of a mandatory event a certain date has been reached, everybody needs to establish what their or their clients' entitlements are. Messages need to be sent to underlying clients so that they can prepare themselves regarding what action to take upon receipt of the proceeds.
Once the leadagent releases the proceeds of the event (cash or stock) it is everybody's turn to pay their clients as quickly as possible so that the final shareholder can make use of the proceeds as quickly as possible. Confirmation of Payment messages need to be sent to underlying clients.
Corporate Actions events can be very complex and due to high volumes in trading it can be a challenge to keep track of what you or your clients are entitled to. Therefore every event needs to be reconciled after it has finished to make sure that everything has been processed properly.
Reporting about the event will take place during and after the event.
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