Managing corporate actions through automation?

[Melinda Wenni]

automated forex trade has actually simplified most of the cumbersome procedures and has attracted more players to this trade. Whatever a big corporate did through its administrative machinery is being done virtually. Corporate actions are benefits given by a company to its investors, and it may be either monetary benefits like dividends, interest or non-monetary benefits like bonus etc. The regulatory authority often facilitates the distribution of corporate benefits.

Monetary benefits to investors are called cash-corporate actions and others as non-cash corporate actions. The issuer announces a record date/book closure period for the purpose of entitlement of corporate benefits. Let us consider the aspects involved in cash corporate actions.

The dividend and interest payment on securities is not within the purview of the regulatory authority’s system. The regulatory authority provides the investor with the ownership details to be given to the issuer and/or R & T agent. Based on this list, the issuer or R & T (Registrar & Transfer) agent directly forwards the dividend payment to the investor, as in case of the physical environment.

Now consider the non-cash corporate actions. The regulatory authority is involved in the distribution of this benefit. It provides the investor with the ownership details to be given to the issuer/R&T agent who will upload the investor’s details to the regulatory authority. The regulatory authority then credits the investor’s accounts by downloading the data to the depository participants.

Consider the bonus/rights issue of securities held in dematerialized form. The bonus/rights issue held against the dematerialized form can be either in the physical/dematerialized form, as per the choice of the investor. If the investor chooses to receive this non-cash corporate action in the dematerialized form, they will be credited into the depository account. However, if no choice is given, by default, the securities will be issued in the physical form.