The processing of voluntary events (eg. rights issues, takeovers), being those where a decision is required on the part of the client or its investment managers. This can be very demanding and must be tightly managed. Errors and omissions can lead to significant losses, so reliability and accuracy are crucial.
Additional independent, reliable and comprehensive sources of information (in the form of multiple third party securities data vendors) are used by the service provider. Data from all sources is matched to validate the core information. Exceptions are investigated and resolved promptly.
The service provider classifies event data to distinguish between 'straightforward' (where there is no doubt as to the consequences for all asset owners) and 'ambiguous' (where there is need for interpretation or further information to understand the consequences). This provides for complete confidence over the large majority of the validated data and highlights all events requiring further investigation.
For all events requiring further investigation, the service provider works with the corresponding sub-custodian to obtain clarification of the event with the issuing company at the earliest opportunity.
The service provider, working with each sub-custodian, takes a proactive stance to press all issuers to take responsibility for clear communication of the corporate actions information they disseminate and the communiation channels used.
Voluntary events (eg. rights issues, takeovers) can be considerably more demanding than mandatory events (eg. bonus issues) and must be tightly managed. Because errors and omissions can lead to significant losses, the service provider acts proactively to be sure of reliable and accurate notification of all voluntary events to the client. The options available, which may be non-standard, are communicated clearly and promptly.
Certain events (such as a hotly-contested takeover) may entail a client making their decision at the very latest opportunity. The service provider is pro-active and able to act in a short time-span. Deadlines are set according to the nature of the event and, as expiration of the deadlines approaches, there is a series of communications: reminders, warning messages, telephone follow-up and, ultimately, escalation within the client organization.
This is a cash management tool: cash components (for some or all categories of corporate action with a cash component) are applied to the client's cash account on the due date for settlement, in place of when the securities component actually settles. This can greatly assist clients in managing available funds.
The late receipt of entitlements may give rise to financial penalties or indirect costs (such as the loss of interest on funds). Many markets have an established mechanism for making a claim (a 'market claim') so that the owner receives compensation for some of the associated costs. The service provider makes these market claims and actively pursues unpaid claims.