Scope - Clearstream
Scope - Clearstream
Scope - Clearstream
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3. Corporate Actions<br />
3.1.<br />
<strong>Scope</strong><br />
C ORPORATE ACTIONS - MARKET PRACTICE BOOK<br />
The scope of this chapter is related to the timely provision of full and complete corporate<br />
action event notifications. 1<br />
Issuers and their advisers prepare the corporate action notice for the noteholders, either at<br />
the time of the issuance as in the T&C or after the issuance during the life of the security.<br />
As such, corporate actions can be classified in two types of events on which this Market<br />
Practice Book focuses:<br />
• Predictable events: those events for which the securities documentation (such<br />
as the T&C) sets out the mechanics and deadlines for dealing with the event. Some<br />
predictable events are ‘open ended’, they exist at any time during the life of the<br />
security, others are ‘closed ended’, they only take place at specific period(s) during the<br />
life of the security. Predictable events may, or may not, be linked to a triggering event 2 .<br />
• Unpredictable events: those events for which the securities documentation does<br />
not set out the mechanics and deadlines for dealing with the event, e.g. meetings of<br />
holders and modifications by the Agent or Trustee pursuant to the securities<br />
documentation. This information needs to be described in ancillary documentation<br />
when the events occur and must be made available to the market in order to ‘launch’<br />
the event.<br />
In order to allow further adequate processing of corporate actions operations, these two<br />
event classifications can be further refined 3 by the Agents/CD/CSP/ICSDs depending<br />
on whether or not the securities holder needs to take action and respond on the event<br />
notification:<br />
Voluntary events: the holders of a security need to act if the event is to affect their<br />
holdings. The Issuer will usually inform all holders of the event that is about to take place.<br />
Sometimes this notice is provided in the original offering documentation for the security.<br />
If no action is taken by the holder, his holding will normally remain unaffected by the event.<br />
Mandatory events: corporate action events that will occur without any action from the<br />
individual holders of the security. They may involve, for example, an issue of securities,<br />
a reorganisation (e.g. mandatory exchange) or changes to previously defined event terms<br />
(e.g. conversion price or period) contained within the issue’s final documentation.<br />
Mandatory events with options: corporate action events that will occur without any action<br />
from the holders of the security, but in relation to which the holders have some choice as<br />
to the type of proceeds they may receive (e.g. to elect to reinvest a coupon payment and<br />
receive additional securities instead of the cash).<br />
1 Current scope excludes income events such as variable coupons distributions and final predictable redemptions in cash.<br />
2 A barrier or occurrence that, once breached or met, causes the occurrence of another event described in the T&C<br />
of the security.<br />
3 ISO classification.<br />
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