General

Event Announcement - Mandatory Corporate Action

Status: Best Practice Finalised, Last Updated: 28/01/2022

Description:
On the announcement of a mandatory corporate actions event, specific preliminary checks should be undertaken.

Best Practice:
Event details may be received from various vendor sources. As these events cover capital structures that must take place, emphasis should be placed on preliminary checks to ensure there are no restrictions/terms that would require the recall of the loan position before the entitlement date.

Counterparties should ensure they are aware of any specific market nuances or laws that may impact the Corporate event management.

• Key dates should be reviewed and monitored for entitlement-1 or entitlement date, depending on the market.

• Positions should be fully reconciled between parties prior to record date.

• If any difference is identified in the information the identifying party should raise it with their counterparty immediately. (COAC-105)

Actions During the Timeline of an Event - Mandatory Corporate Action

Status: Best Practice Finalised, Last Updated: 28/01/2022

Actions to take during timeline of the event

Description:
During the timeline of a mandatory corporate action event the following actions should be taken.

Best Practice:
On Ex-1, CA teams at both counterparties should notify collateral teams of the event to ensure price adjustments in the market do not prompt incorrect returns of collateral. Restrictions may be placed on the asset from ex date to pay date depending on the event type.

Both counterparties should record the new entitlements within their systems on pay date without delay (in line with https://www.islaemea.org/isla-best-practice-handbook/subsection/COAC-130/" target="_blank">SFTR best practice ). Depending on the event, original (parent) loans may be required to be bilaterally closed.

If pay date is after books closed date; new entitlement shares should remain as a pending settlement on record date +1 until pay date. The beneficial owner will send the recipient counterparty a notification when the new entitlements have been settled.

Both counterparties should notify their collateral teams when closing and creating new positions from the corporate action.

Contract Compare should be checked on pay date +1 to ensure new loan positions are booked and match. Any differences need to be escalated to borrowers in order to match. (COAC-110)

Actions Before Pay Date - Mandatory Corporate Action

Status: Best Practice Finalised, Last Updated: 28/01/2022

Description:
Prior to the pay date of a mandatory corporate actions, certain actions should be taken.

Best Practice:
For mandatory corporate actions parties are not required to notify their counterparties prior to the pay date of the action. (COAC-145)

Actions On and After Pay Date - Mandatory Corporate Action

Status: Best Practice Finalised, Last Updated: 29/11/2021

Description:
On pay date of a mandatory corporate action event, certain actions should be undertaken.

Best Practice:
On the pay date of the event parties should notify their counterparties confirming any closed and reopened trades, as well as any cash movements confirmed with a claim, that have been executed in reference to the corporate action event.

The minimum field list for claims can be found https://www.islaemea.org/isla-best-practice-handbook/subsection/COAC-141/ " target="_blank">here. (COAC-146)

Confirming Notifications - Mandatory Corporate Actions

Status: Best Practice Finalised, Last Updated: 29/11/2021

Description:
When a notification of a mandatory corporate action is received, the recipient counterparty should adhere to the following best practice.

Best Practice:
Recipient counterparty should confirm receipt of the election via email as soon as possible after receipt and before close of business on the same day.

When confirming receipt of elections, the recipient counterparty should also confirm whether or not they agree with the entitlement.

If the entitlement ratio is not announced until pay date or a couple of days before, the recipient counterparty should send an email to the beneficial counterparty confirming the entitlement to be recorded. The beneficial counterparty should check and confirm agreement. Any discrepancies should be raised immediately.

If a counterparty's SSI's are not already in the payee's system, then a signed signature list will be required.

It is essential that recipient counterparties include contact details on email correspondence when agreeing deadlines so the beneficial counterparty can reach the relevant person handling an event if necessary.

No returns should be made by the recipient counterparty after receipt of instructions unless communicated and agreed directly with the beneficial counterparty. (COAC-147)