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Corporate Actions - A Concise Guide

An introduction to securities events

By Francis Groves

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About the Author

Francis Groves

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 ... Read more on Francis Groves

Contents Listing

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
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 C ...

Jacket Text

Corporate actions are normally considered as incidental to the business of investing and marketing investments, but in fact they are highly relevant. The aim of this concise guide is to define what corporate actions are, list and describe the main corporate actions and show how individual corporate actions are applied to investors' holdings of securities. This will give an overview of the way in which the corporate actions processing function works both in the UK and other important global markets.

The guide is designed to be an introduction to corporate actions for investment industry practitioners in general. Those starting out in corporate actions processing will find it a helpful outline, but it is also designed to be useful for all who encounter corporate actions tangentially in disciplines such as fund management or financial advice provision. Different industry participants have differing interests in corporate actions, and for the sake of consistency the guide is (mainly) written from the point of view of the beneficial owners of securities.

The first section of the book deals exclusively with equity corporate actions, providing the definitions of a corporate action and the legal framework(s) underpinning corporate actions, followed by a look at the most significant actions one by one, and then a detailed examination of the staging of some of these. The corporate actions of debt securities are given separate treatment later in the book.

Next the focus moves from the corporate actions themselves to the industry that has grown up to process them, covering respectively the corporate actions industry, its efficiency and its progress (recent and future).

After that the author takes a look at the impact of successive corporate actions on one particular share and shareholdings in it. This is then followed by a look at the scope investors have for influencing such events through shareholder voting.

The final chapter looks at how corporate actions are treated in the context of stock indices, stock charts and a number of more complex investments.

Those who simply require a handy and straightforward introduction to specific corporate actions will find the quick guide to the content and the glossary of corporate actions terms especially useful.

This guide provides a snapshot of the current state of affairs in the corporate actions industry, alongside some of the forces for change that are at work. The aim has been to provide sufficient detail to give the reader a working model that is helpful in navigating the corporate actions universe.

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