Corporate actions have been sidelined for too long and deserve to be treated with more respect. No type of investment security can be fully understood without knowledge of its corporate actions. They have implications for the sustainability of an investment's performance but repeatedly more beguiling investment preoccupations put them into the shade.
Together with bank clearing and exchange settlement systems, the administration of corporate actions is one of the key co-operative functions tying our highly competitive global finance industry together. In the financial markets of the developed world the efficiency and "risklessness" of corporate actions processing is entirely taken for granted. Yet the volume of complex corporate actions and a common sense estimate of the likelihood of mistakes occurring suggest that industry practitioners and investing clients may be deluding themselves.
If knowledge of corporate actions brings us to fully understand the securities they relate to, some familiarity with corporate actions processing is important in gaining an insight into the workings of the securities industry as a system. With the exceptions of accountancy and financial regulation, no other activity involves as many kinds of investment industry participant as corporate actions processing.
Corporate actions have been sidelined for too long and deserve to be treated with more respect. No type of investment security can be fully understood without knowledge of its corporate actions. They have implications for the sustainability of an investment's performance but repeatedly more beguiling investment preoccupations put them into the shade.
Together with bank clearing and exchange settlement systems, the administration of corporate actions is one of the key co-operative functions tying our highly competitive global finance industry together. In the financial markets of the developed world the efficiency and "risklessness" of corporate actions processing is entirely taken for granted. Yet the volume of complex corporate actions and a common sense estimate of the likelihood of m...
Preface
Introduction
Quick Guide to Locating Information on Specific Corporate Actions
1. Defining Corporate Actions
The characteristics of a share and its issuer - definitions of corporate actions - how the action is decided upon: articles of association, AGMs & EGMs - the board of directors - chief financial officers and treasury departments - legislation underpinning the system.
2. The...
Preface
Introduction
Quick Guide to Locating Information on Specific Corporate Actions
1. Defining Corporate Actions
The characteristics of a share and its issuer - definitions of corporate actions - how the action is decided upon: articles of association, AGMs & EGMs - the board of directors - chief financial officers and treasury departments - legislation underpinning the system.
2. The Main Corporate Actions
How many types of corporate action are there? - definitions/descriptions of main types of corporate actions (dividends, scrip dividends, scrip issues, return of capital, consolidation, rights issues, takeover bids, agreed takeovers, de-mergers) - benefits or otherwise for shareholders and share prices.
3. The Corporate Actions Process
From the investor's point of view - announcement dates - record dates - ex-dates - effective dates - steps along the way to a takeover - corporate actions information from the share prices pages - typical timetables for returns of capital and rights issues.
4. The Corporate Actions Industry
What goes on behind the scenes - chart of the corporate action flow of information - the connections between the main players - the legislative framework.
5. How Well is the Corporate Actions System Working?
The volume of actions and cost of corporate actions administration; staff, data and investment - risk and the cost of mistakes in processing - where do the problems arise? - who loses out when mistakes are made?
6. Corporate Actions; Technology and the Future
The importance of automation in corporate actions - ISO 15022 and SWIFT - Straight Through Processing (STP) - ISO 20022 - solution providers in corporate actions automation - how likely is it that full standardisation will ever be achieved?
7. Corporate Actions Wreaking Change on Shares
Corporate actions, a winding path - a concrete example - how much does the investor need to know? - how important is corporate action information (or the lack of it) as a factor in selecting a sharedealing/investment service? - different routes for information to reach the investor.
8. Shareholder Voting
How important is it to vote? - voting by investment funds - differences between the UK & the USA - the Myners Report - the state of affairs for the retail/small investor - voting terminology.
9. Corporate Actions and Taxation
Stamp taxes and withholding taxes - illustrations of how different corporate actions can affect income tax and CGT liabilities with some specific shares as examples - treatment of corporate actions for ISA holders - investment funds and
corporate actions.
10. Corporate Actions in Different Jurisdictions
National differences in corporate actions - Japanese dividends - depository receipts - restrictions on foreign share ownership - different rules for shareholder general meetings - bearer certificates - the removal of corporate actions barriers in the EU?
11. Corporate Actions for Debt Securities
The volume of corporate actions relating to bonds - fundamental difference from equity corporate actions - interest and redemption, the basic corporate actions - optional redemption, callable and puttable bonds - variable coupon bonds and floating rate notes - conversions and warrants.
12. Corporate Action Effects Across the Investing Spectrum
How corporate actions affect the calculation of stock exchange indices - how charts handle corporate actions - the effects of corporate actions on futures, options, CFDs and ETFs - corporate actions for CDOs - corporate actions and securities lending - hedge funds and corporate actions - corporate actions and the pension fund trustee - corporate actions and crime.
13. Conclusion
Glossary
Appendices
- List of Central Securities Depositories
- Capital Gains Tax Example - BIFFA/Severn Trent
- Non-rights Issues of Shares
Suggested Reading
Index
Francis Groves studied modern history at the London School of Economics and has many years of experience working for legal and financial publishers including Reuters, the Financial Times and Butterworths. He has written on overseas property investment and created financial literacy training materials. The interaction of politics and finance is a particular interest for him. Francis continues to enjoy reading history, and walking, in his spare time.
Contact the Author
If you would like to get in touch with our author to arrange an interview, article, book signing, speaking arrange...
Francis Groves studied modern history at the London School of Economics and has many years of experience working for legal and financial publishers including Reuters, the Financial Times and Butterworths. He has written on overseas property investment and created financial literacy training materials. The interaction of politics and finance is a particular interest for him. Francis continues to enjoy reading history, and walking, in his spare time.
Contact the Author
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