Scope - Clearstream

2. Corporate actions
2.1.
Scope
MARKET PRACTICE BOOK
The scope of this chapter is limited to the timely provision of full and complete corporate
action event notifications. 1
Issuers (and their advisers) prepare the corporate action notice for the noteholders, either
at the time of the issuance as in the T&C or after the issuance during the life of the security.
As such, corporate actions can be classified in two types of events on which this Market
Practice Book focuses:
• Predictable events: those events for which the securities documentation (such
as the T&C) sets out the mechanics and deadlines for dealing with the event. Some
predictable events are ‘open ended’, they exist at any time during the life of the
security, others are ‘closed ended’, they only take place at specific period(s) during the
life of the security. Predictable events may, or may not, be linked to a triggering event 2 .
• Unpredictable events: those events for which the securities documentation does
not set out the mechanics and deadlines for dealing with the event, e.g. meetings of
holders and modifications by the Agent or Trustee pursuant to the securities
documentation. This information needs to be described in ancillary documentation
when the events occur and must be made available to the market in order to ‘launch’
the event.
In order to allow further STP processing of corporate actions operations, these two types of
corporate action events can be further refined 3 by the agents/CD/ICSDs based on whether
the holder 4 of the securities has to take action on the event or not:
Voluntary events: the holders of a security need to act if the event is to affect their
holdings. The Issuer will usually inform all holders of the event that is about to take place.
Sometimes this notice is provided in the original offering documentation for the security.
If no action is taken by the holder, his holding will normally remain unaffected by the event.
Mandatory events: corporate action events that will occur without any action from the
individual holders of the security. They may involve, for example, an issue of securities,
a reorganisation (e.g. mandatory exchange) or certain payments.
Mandatory events with options: corporate action events that will occur without any action
from the holders of the security, but in relation to which the holders have some choice as to
the type of proceeds they may receive (e.g. to elect to reinvest a coupon payment and
receive additional securities instead of the cash).
1 Current scope excludes income events such as variable coupons distributions and final predictable redemptions in cash.
2 A barrier or occurrence that, once breached or met, causes the occurrence of another event described in the T&Cs
3
of the security.
ISO classification.
4 This chapter will take the holders point of view.
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