/corporate-actions

name: corporate-actions
description: "Process and manage corporate actions from announcement through settlement. Use when handling dividends, stock splits, reverse splits, mergers, or spin-offs, managing voluntary elections for tender offers, rights offerings, or exchange offers, calculating record date and ex-date entitlements under T+1 settlement, collecting and submitting elections to DTC or custodians, handling fractional shares and proration for reorganization events, adjusting cost basis and tax lots after events, reconciling expected entitlements against actual receipts, or investigating missed or incorrectly processed corporate actions."

Corporate Actions

Core Concepts

1. Corporate Action Types

Corporate actions are events initiated by a company that affect its securities. They fall into four broad categories based on the level of shareholder participation required.

**Mandatory Actions.** These occur automatically for all holders of record and require no election. The holder receives the entitlement without taking any action.

• Cash dividends (regular, special, interim, final)
• Stock dividends (bonus shares distributed pro rata)
• Stock splits (forward splits increase share count, reduce price proportionally)
• Reverse stock splits (decrease share count, increase price proportionally)
• Mergers with fixed terms (cash-only or fixed-ratio stock consideration)
• Spin-offs (new entity shares distributed to parent company holders)
• Name changes and symbol changes (CUSIP/ISIN may change)

**Mandatory with Choice.** The action will occur regardless, but the holder may choose among alternatives. If no election is made, a default option applies.

• Stock or cash dividend election (holder chooses stock or cash; default is typically cash)
• Merger consideration election (cash, stock, or mixed; subject to proration if oversubscribed)

**Voluntary Actions.** The holder may choose whether to participate. Non-participation means the holder retains their existing position unchanged.

• Tender offers (issuer or third party offers to purchase shares at a specified price)
• Rights offerings (existing holders receive rights to purchase new shares at a discount)
• Exchange offers (holders may exchange existing securities for different securities)
• Consent solicitations (holders asked to consent to changes in bond covenants or terms)
• Dutch auction tender offers (holders specify price within a range)
• Odd-lot tender offers (small holders may tender at favorable terms)

**Information-Only Events.** No direct financial impact on positions, but require tracking and communication.

• Annual and special meeting notifications
• Proxy vote solicitations
• Credit rating changes
• Regulatory filings (e.g., issuer SEC filings affecting the security)

2. Corporate Action Lifecycle

Every corporate action follows a sequence from announcement through final settlement. Processing accuracy depends on disciplined execution at each stage.

**Announcement.** The issuer or its agent announces the corporate action. Data is disseminated through DTCC (via its Corporate Actions product suite, including GCA — Global Corporate Actions), market data vendors (Bloomberg, Refinitiv, ICE Data Services), and exchange filings (SEC EDGAR for US issuers). Multiple vendor sources may report different details or timings, requiring scrubbing and cross-referencing.

**Data Scrubbing and Validation.** The operations team or automated system receives the raw announcement and validates key fields: event type, security identifiers (CUSIP, ISIN, SEDOL), record date, ex-date, payment/effective date, terms (ratio, price, consideration), election options and deadlines, and default election. Discrepancies between vendor sources must be resolved before the event is set up in internal systems. A "golden source" hierarchy is established (e.g., DTCC as primary for US events, then Bloomberg, then Refinitiv).

**System Setup.** The validated event is entered into the corporate actions processing system. This includes mapping the event to affected accounts, calculating preliminary entitlements, and flagging accounts that require client notification (for voluntary or mandatory-with-choice events).

**Client Notification.** For voluntary and mandatory-with-choice events, clients (or their advisors) must be notified with sufficient lead time to make informed elections. Notification includes event description, options available, default election, election deadline, and any relevant analysis (e.g., economic comparison of tender price vs. market price).

**Election Collection and Submission.** For voluntary events, elections are collected from clients, validated against their positions, aggregated, and submitted to DTC (via PTOP or ATOP systems) or the custodian before the election deadline. Late elections may be rejected or subject to penalty.

**Entitlement Calculation.** On the record date, the system determines which accounts hold the affected security and calculates entitlements based on position size and event terms (ratio, rate, price). For fractional shares, the system applies the issuer's fractional share policy (cash-in-lieu, round up, round down).

**Settlement and Payment.** On the payment or effective date, the entitlements are settled: cash is credited, new shares are delivered, old shares are removed, or positions are adjusted. The depository (DTC for US securities) processes bulk entitlements and allocates to participants (custodians/broker-dealers), who in turn allocate to beneficial owner accounts.

**Post-Settlement Reconciliation.** Actual receipts from the depository or agent are reconciled against expected entitlements. Discrepancies (short pays, over-deliveries, missing allocations) are investigated and resolved through claims processes.

3. Record Date and Ex-Date Mechanics

The relationship between record date, ex-date, and settlement cycle is fundamental to correct entitlement processing.

**Record Date