Event Announcement - Voluntary Corporate Action

Event Announcement - Preliminary Checks>

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

Event Announcement - Preliminary Checks

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

Best Practice:
Both counterparties should review key dates and check current and pending positions including any pending returns.

A pre-advice received should be sent from recipient counterparty to beneficial counterparty on books closed date+1 which should include positions, options, and deadlines. If any differences are identified, these should be raised with the counterparty immediately.

Counterparties should check any potential risks in processing the event on loan. For example:

• Restrictions on oversubscribing

• Scale back ratios, which can leave entitlement differences with loan and custody positions

• Events where market movements are not allowed between record date and instruction deadline

Once risks are identified prompt action to mitigate those risks should be taken. Short notice recalls may be required and system restrictions placed to prevent movement on the security. Any restrictions/issues should be communicated as soon as possible to counterparties in order to highlight any risks or concerns. It may be possible for the recipient counterparty to manufacture entitlements in order to maintain the loan position.

Alternatively, the loan should be promptly recalled and returned if record date has not passed. The beneficial owner counterparty should diarise to send pre-advices to counterparties on the event to agree deadlines. This notification should include all relevant information, positions and instruction deadlines (where applicable), along with options available on the event highlighting the default option.

Pre-advices should be sent to counterparties within a reasonable timeframe of the event, allowing all parties sufficient time to agree terms and where applicable return stock if agreement cannot be reached. (COAC-109)