Financial Markets Operations Management

CHAPTER 11 Corporate Actions

11.1 INTRODUCTION

A corporate action is an event usually initiated by the issuer of the securities (mainly equities but also, to a lesser extent, bonds) and sometimes by a third party. A corporate action can result either in a financial impact on the shareholders or bondholders or on the capital structure of the issuer itself.

There are many different types of corporate action event; the exact number is difficult to calculate. Nevertheless, corporate actions can be grouped into nine event-type categories with numerous sub-types. You will find a list of these categories in Appendix 11.1 at the end of this chapter.

The key relationship has always been between the issuer and the investor. This was certainly true in the days when investors owning registered securities (typically equities) would have their names recorded on the issuer's shareholder register. In today's world, and especially where investors own international securities, this one-on-one relationship is less frequent, as there are a number of intermediaries acting on behalf of both issuer and investor. We will identify these intermediaries and examine their roles and responsibilities in this chapter.

Each and every type of corporate action event requires one or more actions to be taken. For the purposes of this book, we will concentrate on only a few of the more usual types of event. Depending on the type of event, the actions required can and do differ in detail; however, we can summarise ...