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.1 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 helped shape 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.
In May 2022, a survey performed by Gallup showed that 58% of American adults report having some money invested in the stock market.2 Over 100 million Americans own securities and therefore require processing and/or notice of Corporate Actions. These shareholders are serviced by broker-dealers, banks or other financial services organizations that are responsible for capturing, processing and notifying their clients of Corporate Actions that affect their holdings.
Companies that have issued securities, or “issuers,” are the creator of the Corporate Actions, and issuers have a significant interest in ensuring their Corporate Actions are completed accurately and in a timely manner. As such, it is critical to issuers, broker- dealers, transfer agents and other organizations to be accurate, timely and transparent in the public dissemination of information and in event processing to give investors access to information affecting their securities.