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.
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 you to make changes/modifications to an announcement before final processing, which is on ex-date. Or for voluntary corporate action elections that use expiry date processing, and process on expiration date +1, you can make changes/modifications to the announcement before final processing, which occurs on expiration date +1.
If you set up an announcement before the ex-date of the action, you should set the Status field to a value of Pending or Incomplete. If the announcement remains in this status until ex-date, the system does not process the underlying action to any held positions of the security. You must ensure that before ex-date, you modify the status of each impending action to Released. Once an action is in Released status, on ex-date, the system processes the announcement action against the underlying security after being requested through the Global Process workspace.
The same applies to elections that use expiry date processing. If you set up an announcement before the expiration date + 1 of the action, you should set the Status field to a value of Pending or Incomplete. If the announcement remains in this status until expiration date +1, the system does not process the underlying action to any held positions of the security. You must ensure that before expiration date +1, you modify the status of each impending action to Released. Once an action is in Released status, on expiration date +1, the system processes the announcement action 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 used to run the global event used to process these three entitlements, as well as cash tenders.
Corporate Action Announcement Types
You can set up and process many types of corporate actions in Eagle from cash and stock dividends and stock splits for equity securities, to factors (paydowns/payups), calls, cash tender and sinks for fixed income, as well as name/identifier changes for all securities. Here are the types of corporate actions that Eagle can process:
| Corporate Action Announcement Type | Definition |
|---|---|
| Amortizing Notional | The notional principal amount decreases during the life cycle of the swap. |
| Assimilation | The completed distribution of a new securities issue to the public. |
| Calls/Puts/Refunds | A bond that can be redeemed by the issuer prior to its maturity. |
| Cash Dividend | A payment of cash in the same company. |
| Cash in Lieu | Payments made to investors who received fractional shares as a consequence of stock splits, corporate mergers, and reorganizations. |
| Cash Tender | To surrender shares in return for cash payment. |
| Credit Event | A credit event is a negative change in a borrower's capacity to meet its payments, which triggers settlement of a credit default swap (CDS) contract. |
| Dividend Reinvestment | The option to reinvest the original cash dividend to purchase additional shares of the same company. |
| Dividend Reinvestment Position Percentage | Allows you to make a fund election that will support any DRIP corporate action notification and not require an election. |
| Exchange Offer | An offer by a firm to its shareholders to exchange one security into a fixed number of shares of common stock or other debt security. |
| Final Factor | The process of repaying a portion of an outstanding loan balance. |
| Merger (FMV Price) | The business valuation that focuses on a company's net asset value, or the fair-market value of its total assets minus its total liabilities |
| Merger (FMV Rate) | The Fair Market Value rate. |
| Name Change | Change in security reference data such as a security identifier and/or security description. |
| Nominal Value Decrease | Nominal value changes with compensation are the reduction of cost basis. |
| Partial Pre Refunding | Issuing a longer maturity bond in order to pay off an earlier bond to take advantage of a drop in interest rates. |
| Payment in Kind Bond | A type of bond that pays interest in additional bonds rather than in cash. |
| Payment in Kind Preferred | A dividend payment in the form of additional shares. |
| Principal Repayment | Principal repayment is payment toward the original amount of a loan that is owed. |
| Redenomination of Bonds | Converting of quantity and par amount of all debt securities |
| Return of Capitol | A return from an investment that is not considered income. The return of capital is when some or all of the money an investor has in an investment is paid back to him or her, thus decreasing the value of the investment. |
| Rights/Warrants Exercise | A right is a privilege allowing existing shareholders to buy shares of an issue of common stock shortly before it is offered to the public, at a specified (usually discounted) price in proportion to the number of shares already owned. A warrant is a certificate, usually issued along with a bond or preferred stock, entitling the holder to buy a specific amount of securities at a specific price, usually above the current market price at the time of issuance, for an extended period. In the case that the price of the security rises to above that of the warrant's exercise price, the investor can buy the security at the warrant's exercise price and resell it for a profit. Otherwise, the warrant will expire or remain unused. Warrants are listed on options exchanges and trade independently of the securities with which they are issued. |
| Rights/Warrants Issue | |
| Rights/Warrants Redemption | |
| Share Offer | To purchase shares in the same or different company. |
| Share/Cash Tender | To surrender shares in return for shares and/or cash of the same or different company. |
| Sink Schedule | A means of repaying funds that were borrowed through a bond issue. |
| Spin Off FMV Price | A spin off FMV price occurs when a company distributes part of its assets to form a new publicly traded company. |
| Spin Off FMV Rate | A spin off FMV rate occurs when a company distributes part of its assets to form a new publicly traded company. |
| Stock Dividend | A stock dividend is a payment of additional shares in the same company. |
| Stock Split | A stock split increases the number of shares in the same company. |
| Trains | A basket of investment grade bonds. Of a bond falls out of the investment grade category, it is either liquidated from the trust, or delivered to the investor. |
| Underlying Collateral Coupon Reinvestment | The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. |
| Unit Separations/Unit Splits | The separation of two securities in which more than one class of securities is traded together. A unit is usually comprised of a warrant and another debt security. Cost is allocated from the old security to the new security, and interest is distributed from the old debt security to the new debt security. |
Processing Corporate Actions
The system processes mandatory corporate actions that have a status of Released, along with corporate actions with voluntary elections that have a an Entity Election Status of Released. It processes the entitlements to the appropriate entitles/holdings based on the reference data entered for the corporate action. When the events are generated, the system displays the status of the job. For example, pending, completed, failed.
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