US Corporate Actions Standardization Position Paper
SIFMA’s Operations & Technology Committee and Ernst & Young LLP (EY US) have established a US Corporate Actions Working Group comprised of SIFMA member representatives that have supported the development of this position paper. The paper has been developed based on discussions between Working Group members with the goal of explicitly outlining current challenges in the US Corporate Action environment, identifying possible changes that may simplify the lifecycle, and presenting a call to action for industry members and investors to showcase a path forward.
Introduction
Corporate Actions are an event or activity taken by a publicly traded company that may have a material impact on its securities and shareholder value. Corporate Actions include the issuance of dividends, a stock split or a corporate reorganization with the issuance of additional (or new) stock, among many others.
Over the last few decades, Corporate Actions have played a large role in shaping the global financial industry, serving as a mechanism for companies to grow, restructure debt and distribute profits to investors. These Corporate Actions and their public announcements can significantly impact the valuation of a security, ultimately affecting the returns or decisions for investors. While the industry recognizes many types of events, they can generally be grouped into three categories: voluntary, mandatory and mandatory with choice.
As the global financial industry has evolved in complexity, it is critical to investors that the dissemination of announcements to the market is accurate, timely and trustworthy, specifically as the industry is beginning to accelerate the settlement cycle to T+1, reducing post-trade processing time for broker dealers, custodians, banks and other financial services organizations. Retail investors may also be unaware of the Corporate Actions impacting securities that they own and how they are currently being processed as there is limited standardization in how Corporate Actions are structured, announced and processed in the marketplace.
SIFMA’s Operations & Technology Committee and Ernst & Young LLP (EY US) have established a US Corporate Actions Working Group comprised of SIFMA member representatives that have supported the development of this position paper. The paper has been developed based on discussions between Working Group members with the goal of explicitly outlining current challenges in the US Corporate Action environment, identifying possible changes that may simplify the lifecycle, and presenting a call to action for industry members and investors to showcase a path forward.
Introduction
Corporate Actions are an event or activity taken by a publicly traded company that may have a material impact on its securities and shareholder value. Corporate Actions include the issuance of dividends, a stock split or a corporate reorganization with the issuance of additional (or new) stock, among many others.
Over the last few decades, Corporate Actions have played a large role in shaping the global financial industry, serving as a mechanism for companies to grow, restructure debt and distribute profits to investors. These Corporate Actions and their public announcements can significantly impact the valuation of a security, ultimately affecting the returns or decisions for investors. While the industry recognizes many types of events, they can generally be grouped into three categories: voluntary, mandatory and mandatory with choice.
As the global financial industry has evolved in complexity, it is critical to investors that the dissemination of announcements to the market is accurate, timely and trustworthy, specifically as the industry is beginning to accelerate the settlement cycle to T+1, reducing post-trade processing time for broker dealers, custodians, banks and other financial services organizations. Retail investors may also be unaware of the Corporate Actions impacting securities that they own and how they are currently being processed as there is limited standardization in how Corporate Actions are structured, announced and processed in the marketplace.