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Mandatory Reorganisation

Final Maturity (REDM)

SFTR Report - ETRM | Corporate Action Cluster - Full Return | Cash Move - Y

Description

Final maturity of a security. The redemption of an entire issue outstanding of securities, for example, bonds, preferred equity, funds, by the issuer or its agent, for example, asset manager, at final maturity.

Best Practice

Prior to a redemption event on a position both counterparties should seek, where possible, to return and close out or swap the position to avoid having the asset out on loan over the redemption date.

If a position is outstanding on the redemption date and confirmation from the agent of the redemption, proceeds of this should be agreed between counterparties and paid on the pay date of the event. In the event of a redemption payment being made after pay date, the lender should continue to collateralise the loan until the redemption payment is made.

Where applicable, and if agreed between both counterparties, the redemption proceeds can be netted with any cash collateral that has been exchanged on the position previously. As with redemptions, coupon payments upon confirmation of the event should be paid on pay date of the event. (COAC-50)

Reverse Stock Split (SPLR)

SFTR Report - ETRM / NEWT | Corporate Action Cluster - Return and New Trade | Cash Move - N

Description

Decrease in a company's number of outstanding equities without any change in the shareholder's equity or the aggregate market value at the time of the split. Equity price and nominal value are increased accordingly.

Best Practice

When booking a stock split the original contract of the loan should be terminated and a new contract posted.

On ex date the price should be held stale in order to account for the post split price change on pay date. (COAC-58)

Stock Split (SPLF)

SFTR Report - ETRM / NEWT | Corporate Action Cluster - Return and New Trade | Cash Move - N

Description

Increase in a corporation's number of outstanding equities without any change in the shareholder's equity or the aggregate market value at the time of the split. Equity price and nominal value are reduced accordingly.

Best Practice

When booking a stock split the original contract of the loan should be terminated and a new contract posted.

On ex date the price should be held stale in order to account for the post split price change on pay date. (COAC-57)

Pari Passu (PARI)

SFTR Report - ETRM / NEWT | Corporate Action Cluster - Return and New Trade | Cash Move - N

Description

Occurs when securities with different characteristics, for example, shares with different entitlements to dividend or voting rights, become identical in all respects, for example, pari-passu or assimilation. May be scheduled in advance, for example, shares resulting from a bonus may become fungible after a pre-set period of time, or may result from outside events, for example, merger, reorganisation, issue of supplementary tranches, etc.

Best Practice

When booking a Pari Passu the original contract of the loan should be terminated, and a new contract posted. (COAC-56)

Exchange (EXOF1)

SFTR Report - ETRM / NEWT | Corporate Action Cluster - Return and New Trade | Cash Move - Y

Description

Always initiated by the issuer. Exchange of holdings for other securities and/or cash. The exchange can be either mandatory or voluntary involving the exchange of outstanding securities for different securities and/or cash. For example, "exchange offer", "capital reorganisation" or "funds separation".

Best Practice

When booking an Exchange the original contract of the loan should be terminated, and a new contract posted. (COAC-55)

Detachment (DETI)

SFTR Report - ETRM / NEWT | Corporate Action Cluster - Return and New Trade | Cash Move - N

Description

Separation of components that comprise a security, for example, usually units comprised of warrants and bond or warrants and equity. Units may be broken up at the request of the security holder or based on market convention.

Best Practice

When booking a Detachment the original contract of the loan should be terminated, and a new contract posted. (COAC-54)

Conversion (CONV1)

SFTR Report - ETRM / NEWT | Corporate Action Cluster - Return and New Trade | Cash Move - N

Description

Conversion of securities ( generally convertible bonds or preferred shares) into another form of securities ( usually common shares) at a pre-stated price/ ratio. (initiated by the issuer)

Best Practice

When booking a Conversion the original contract of the loan should be terminated, and a new contract posted. (COAC-53)

Change (CHAN2)

SFTR Report - ETRM / NEWT | Corporate Action Cluster - Return and New Trade | Cash Move - N

Description

US Only - Security Identifier Change

Best Practice

When booking a Change the original contract of the loan should be terminated, and a new contract posted. (COAC-52)

Worthless (WRTH)

SFTR Report - ETRM | Corporate Action Cluster - Full Return | Cash Move - N

Description

Booking out of valueless securities.

Best Practice

Prior to a redemption event on a position both counterparties should seek, where agreed, to return and close out or swap the position to avoid having the asset out on loan over the redemption date.

If a position is outstanding on the redemption date and confirmation from the agent of the redemption, proceeds of this should be agreed between counterparties and paid on the pay date of the event. In the event of a redemption payment being made after pay date, the lender should continue to collateralise the loan until the redemption payment is made.

Where applicable, and if agreed between both counterparties, the redemption proceeds can be netted with any cash collateral that has been exchanged on the position previously. As with redemptions, coupon payments upon confirmation of the event should be paid on pay date of the event. (COAC-51)

Full Call (MCAL)

SFTR Report - ETRM | Corporate Action Cluster - Full Return | Cash Move - Y

Description

Redemption of an entire issue outstanding of securities, e.g., bonds, preferred equity, funds, by the issuer or its agent, for example, asset manager,beforemanager, before final maturity.

Best Practice

Prior to a redemption event on a position both counterparties should seek, where agreed, to return and close out or swap the position to avoid having the asset out on loan over the redemption date.

If a position is outstanding on the redemption date and confirmation from the agent of the redemption, proceeds of this should be agreed between counterparties and paid on the pay date of the event. In the event of a redemption payment being made after pay date, the lender should continue to collateralise the loan until the redemption payment is made.

Where applicable, and if agreed between both counterparties, the redemption proceeds can be netted with any cash collateral that has been exchanged on the position previously. As with redemptions, coupon payments upon confirmation of the event should be paid on pay date of the event. (COAC-49)

Bond Default (DFLT)

SFTR Report - ETRM | Corporate Action Cluster - Full Return | Cash Move - N

Description

Failure by the company to perform obligations defined as default events under the bond agreement and that have not been remedied.

Best Practice

Prior to a redemption event on a position both counterparties should seek, where agreed, to return and close out or swap the position to avoid having the asset out on loan over the redemption date.

If a position is outstanding on the redemption date and confirmation from the agent of the redemption, proceeds of this should be agreed between counterparties and paid on the pay date of the event. In the event of a redemption payment being made after pay date, the lender should continue to collateralise the loan until the redemption payment is made.

Where applicable, and if agreed between both counterparties, the redemption proceeds can be netted with any cash collateral that has been exchanged on the position previously. As with redemptions, coupon payments upon confirmation of the event should be paid on pay date of the event. (COAC-48)

Prefunding (PDEF)

SFTR Report - ETRM / MODI | Corporate Action Cluster - Full or Partial Return | Cash Move - Y

Description

Also called partial defeasance. Issuer has money set aside to redeem a portion of an issue and the indenture states that the securities could be called earlier than the stated maturity.

Best Practice

If a full or partial position is outstanding on the redemption date and confirmation from the agent of the redemption, proceeds of this should be agreed between counterparties and paid on the pay date of the event. In the event of a redemption payment being made after pay date, the lender should continue to collateralise the full loan until the redemption payment is made.

Where applicable, and if agreed between both counterparties, the redemption proceeds can be netted with any cash collateral that has been exchanged on the position previously. As with redemptions, coupon payments upon confirmation of the event should be paid on pay date of the event. (COAC-45)

Partial Redemption Without Pool Factor Reduction (PCAL)

SFTR Report - ETRM / MODI | Corporate Action Cluster - Full or Partial Return | Cash Move - Y

Description

Securities are redeemed in part before their scheduled final maturity date with reduction of the nominal value of the securities. The outstanding amount of securities will be reduced proportionally. It is done without any pool factor reduction. The redemption is reflected in a debit of the face amount (FAMT).

Best Practice

If a full or partial position is outstanding on the redemption date and confirmation from the agent of the redemption, proceeds of this should be agreed between counterparties and paid on the pay date of the event. In the event of a redemption payment being made after pay date, the lender should continue to collateralise the full loan until the redemption payment is made.

Where applicable, and if agreed between both counterparties, the redemption proceeds can be netted with any cash collateral that has been exchanged on the position previously. As with redemptions, coupon payments upon confirmation of the event should be paid on pay date of the event. (COAC-44)

Drawing (DRAW)

SFTR Report - ETRM / MODI | Corporate Action Cluster - Full or Partial Return | Cash Move - Y

Description

Securities are redeemed in part before the scheduled final maturity date. It is done without any pool factor reduction. The redemption is reflected in a debit of the face amount (FAMT).

Best Practice

If a full or partial position is outstanding on the redemption date and confirmation from the agent of the redemption, proceeds of this should be agreed between counterparties and paid on the pay date of the event. In the event of a redemption payment being made after pay date, the lender should continue to collateralise the full loan until the redemption payment is made.

Where applicable, and if agreed between both counterparties, the redemption proceeds can be netted with any cash collateral that has been exchanged on the position previously. As with redemptions, coupon payments upon confirmation of the event should be paid on pay date of the event. (COAC-43)

Partial Redemption wWith Pool Factor Reduction (PRED)

SFTR Report - NONE | Corporate Action Cluster - Economic outside SFT | Cash Move - Y

Description

Securities are redeemed in part before their scheduled final maturity date without reduction of the nominal value of the securities. This is commonly done by pool factor reduction.

Best Practice

For cash payments which do not affect the open SFT, the beneficial counterparty is contractually due payment in full on pay date. If payment is not received, counterparties should raise a query on pay date + 1.

A claim needs to submitted via email as soon as possible after announcement date in order for a payment to be made, the minimum field list for claims can be found here. ]

If payments are not made on pay date the recipient counterparty should provide a valid reason for non-payment.

In addition to reviewing Contract Compare prior to and on pay date, Contract Compare should be checked on pay date+1 to ensure newly created positions are reconciled. Any differences need to be escalated to counterparties immediately. (COAC-42)

Spin Off (SOFF)

SFTR Report - NEWT | Corporate Action Cluster - Addition Sec on Loan | Cash Move - Y

Description

Spin off. A distribution of subsidiary stock to the shareholders of the parent company without a surrender of shares. Spin off represents a form of divestiture resulting in an independent company. E.g. demerger, distribution, unbundling.

Best Practice

When booking a Spin Off a new contract should be created to cover the additional distribution of shares. (COAC-41)

Liquidation (LIQU)

SFTR Report - NEWT | Corporate Action Cluster - Addition Sec on Loan | Cash Move - Y

Description

Distribution of cash, assets or both. Debt may be paid in order of priority based on preferred claims to assets specified by the security.

Best Practice

When booking a Liquidation, a loan contract should be booked in addition to the current contract with your counterparty on the pay date of the event.

Actions undertaken around liquidation events should be considered on a case by case basis, ISLA best practice should be followed in each instance. (COAC-40)

Bonus Issue (BONU)

SFTR Report - NEWT | Corporate Action Cluster - Addition Sec on Loan | Cash Move - Y

Description

Bonus, scrip or capitalisation issue. Security holders receive additional assets free of payment from the issuer, in proportion to their holding.

Best Practice

When booking a Bonus Issue, a loan contract should be booked in addition to the current contract with your counterparty on the pay date of the event. (COAC-39)

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