Consultation Paper High level description, Nordic CSD Corporate ...

5.5.4 Mandatory distributions with options
Mandatory distributions with options are Corporate Actions where the
security holder is required to choose from two or several options that are
available. The Corporate Action itself is mandatory. A typical mandatory
distribution with an option is an optional dividend payment. These Corporate
Actions are commonly seen as voluntary Corporate Actions because there is
the need for the investor to elect from a preferred option. The Issuing Agent
role would be applicable to these types of Corporate Actions.
Example: Optional dividends
In an optional dividend payment the shareholder has to choose whether to
receive the dividend in cash or securities. The default action for this type of
Corporate Action is usually cash, meaning that if the shareholder does not
send an election instruction he/she will receive the dividend in cash.
For these types of Corporate Actions the Issuing Agent would have to notify
the eligible shareholders of the different options and the default action.
Usually there are two options: cash or securities. The cash option is typically
set as default action by the Issuer so that the amount of responses can be
reduced. Therefore only those shareholders who select to receive the dividend
payment in securities send an election instruction to the Issuing Agent.
Owner registered shareholders would have to send an election instruction to
the Issuing Agent by a given deadline set by the Issuing Agent. The Issuing
Agent would then key into the NCSD system the selected option.
For nominee registered holdings the Account Operators/Nominees would
collect the instructions for their clients and send them in ISO format to the
CSD system. The selected option to receive securities would be automatically
updated in the CSD system. The Issuing Agent would receive the information
about the selected options for nominee account holders automatically from
the CSD system.
5.5.5 Mandatory reorganisations with options
Reorganisations are Corporate Actions where a security is replaced by one or
more securities or cash or a combination of both. Mandatory reorganisations
with options are Corporate Actions where the security holder is required to
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