Eagle's Accounting solution allows you to process all types of corporate actions. A corporate action is any pending or completed action taken by an issuing corporation that affects the financial and/or physical status of any type of security. A financial status change is an action that influences the original cost, market value, or income earned on that security. A physical status change is an action that changes the appearance of the actual stock certificate. Corporate actions can be modified and cancelled before the ex-date, the date that acts as the "effective date" for the announcement.
The system allows you to add most corporate action types as either mandatory or voluntary. Mandatory corporate action processing is generally a two-step process. The first step involves creating an announcement for the corporate action in Reference Data Center. The second step involves processing the corporate action against the underlying security using the global process panels.
Key Dates
There are several important dates that you enter for a corporate action announcement that the system requires to ensure successful processing:
- Ex-Date. Determines which positions are entitled to the corporate action. Acts as the "effective date" for the announcement.
- Sweep Date. Date used by the global process to extract the corporate action for processing at the global level and apply it to all eligible entities/holdings.
- Pay Date. Date that indicates when the issuing company makes payment on the corporate action announcement.
Statuses
When you use the system to set up announcements, one of the required fields is the Corporate Action Status field. This field allows changes/modifications to be made to an announcement before final processing on ex-date.
If an announcement is set up before the ex-date of the action, the Status field should be set to a value of Pending or Incomplete. If the announcement remains in this status until ex-date, the underlying action will not be processed to any held positions of the security. You must ensure that before ex-date, the status of each impending action is modified to Released. Once an action is in Released status, on ex-date, the announcement action is processed against the underlying security after being requested through the Global Process workspace.
Cancels
Any processed (Released) corporate action can be globally cancelled, if necessary, across all entities. This is also a two-step process where a cancel corporate action announcement is set up against the original released processed announcement. The cancel announcement then needs to be run as a separate global event through the Global Process workspace.
A released cancel corporate action announcement processed globally is updated to a Completed status. If you attempt to process a completed action again, the Completed status prevents the rollback/replay of the originally cancelled corporate action announcement.
Priorities
You can rank corporate actions occurring on the same security on the same ex-date. The Corporate Action Sub Priority field resides on all reference related corporate action panels. The system uses the value entered in this field to prioritize which event to process first, second, and so on. For example, if McDonald's were to undergo a stock split with a Sub Priority of 1 and a cash dividend with a sub priority of 2, the system automatically processes the stock split first, and then the cash dividend based on the modified quantity after the split is processed.
If, in this example, the Corporate Action Sub Priority field value for both events (on the same ex-date) is set to 1, the system processes the actions in the order that they were originally set up in the database. For example, if the cash dividend record was set up first followed by the stock split, both a sub priority of 1, the system processes the cash dividend first, and then processes the split.
Types
The system allows the processing of all types of corporate actions, from cash and stock dividends and stock splits for equity securities, to factors, calls, cash tender and sinks for fixed income, as well as name/identifier changes for all securities.
Most corporate action announcements have an action specific panel for entering the corporate action data and a corresponding event specific global process panel for processing the entitlement. The panels are designed to include only those fields that are specific to the announcement you are entering. For example, the Create Cash Dividend panel has a field to add the dividend rate. This field is not found on the Create Name Change panel, as it is not required for that action.
For corporate action announcements that are similar in nature and require similar data values to be entered, these corporate actions are grouped in a single reference data and event panel. For example, calls, puts, and refunds are transactions that are similar in nature and require the same type of information to be entered and processed. There are not three separate panels to handle each of these announcements, but a single panel where all three can be processed. This panel is called Create Calls/Put/Refund. Accordingly, in the Global Processing panels, there is one panel that is used to run the global event used to process these three entitlements, as well as cash tenders.