SIFMA, the Securities Industry and Financial Markets Association, published a paper this week examining how corporate actions are announced in the United States.
The paper — called U.S. Corporate Actions Standardization Position Paper – was developed in conjunction with Ernst & Young. It outlines the challenges of non-standardized corporate action information and examines the lack of uniformity in how it is disseminated to investors.
The current regulatory landscape doesn’t mandate the standardization and dissemination of corporate announcements and their data elements. This leaves investors with a fragmented and disparate perspective on corporate actions. For example, an estimated 46 percent of global event data is published and received manually, driving unnecessary risk and expense to organizations. The paper argues that standardizing the corporate action lifecycle could reduce the effects that fragmentation currently has on the industry.
“Corporate Action announcements and event processing in the U.S. have not undergone any significant changes over the past decade, despite advances in technology and regulation of our financial markets,” Tom Price, SIFMA managing director and head of technology, operations, and business continuity, said. “Corporate actions materially impact shareholders, and it’s critical to investors that the dissemination of announcements to the market is accurate, timely, and trustworthy, particularly as the industry works to accelerate the settlement cycle to trading day plus 1, reducing post-trade processing time for broker dealers, custodians, banks and other financial services organizations.”
The paper was developed by a U.S. Corporate Actions Working Group established by SIFMA’s Operations & Technology Committee and EY. It was based on discussions among working group members to outline current challenges in the U.S. corporate action environment and identify possible changes that may streamline the corporate actions announcement process. It also presented a call to action for industry members and investors to showcase a path forward.
“We recognize that transforming the Corporate Action lifecycle may require additional regulations governing the timing of notifications, submissions, disclosures, and supporting activities, along with critical industry input,” said Price. “SIFMA expects to bring awareness to policymakers, regulators, as well as the issuer community, and ultimately, encourage industry participants to develop guidelines to modernize the Corporate Action lifecycle for the benefit of market participants and investor protection.”
The paper contains several case studies, including one that shows how a foreign securities exchange transformed its corporate action process and another that reveals how potential risk to investors could be mitigated through the standardization of corporate action announcements and processing.