SFTR Corporate Actions Working Group #6 International Securities Lending Click to edit Master title style James Langlois, Lewis Nicholson Association Click to edit Master subtitle style 18 Sep 2019 1
SFTR Corporate Actions: Approach for this Working Group 1- Plan and Scope of the SFTR Corporate Actions Working Group 2- Meetings to Date and Pending 3- Progress Review ✓ Corporate Actions Universe ✓ Cluster Analysis ✓ General Industry and SFTR Specific Issue Analysis 4- Future Activities o Continue CA Issue Analysis – next steps o Best Practice Draft o SFTR Report Testing o Connect with ESMA & Wider Industry
SFTR Corporate Actions: Overall Scope and Plan 1- Define Corporate Actions Universe (Q2 2019) • Form a distinct list of all CAs • Align with the ISO 15022 (SWIFT) and 20022 (STP) standards • Determine attributes and effects of each CA on SFTs 2- Stratify the CAs into Clusters by their effects on SFTs & booking models (Q2 2019) • Review groups of CAs which can be processed similarly • Confirm CAs which have no material effect on SFTs • Confirm booking models for clusters • Define the SFTR reports that each Cluster of CAs affects 3- Agree an SFTR related Best Practice for each CA Cluster (Q3 2019) • Reach agreement on specific booking models which enable SFTR compliant reporting • Determine universal procedures (Best Practice) for processing and communicating CAs on SFTs 4- Connect the SFTR CA WG’s output with the wider industry discussion (Q4 2019) • Contribute to the Securities Lending industry’s general policy (beyond of SFTR)
SFTR Corporate Actions: Timeline JUL 19 OCT 19 JAN 20 APR 20 APR 19 1-2-1s Membership & Workshops, SFTR Report Testing, Responsibilities Reaching out for Surveys, Direct Developing Solutions not Objectives & Scope Industry-wide best Methodology & Plan Member Firm defined in 2019, Support for practice acceptance Baselining Meetings SFTR GO LIVE Information
SFTR Corporate Actions: Meetings Q2 & Q3 2019
SFTR Corporate Actions: Working Group #3/4 Stratify the CAs into Clusters by their effects on SFTs & booking models • Review groups of CAs which can be processed similarly • Review CA Clusters as proposed in SFTR CA WG #2 • Discuss impact of CA types in the CA Cluster to the SFT • Conducted a survey Questionnaire with 13 firm’s responses • Agreed CAs which have no material effect on SFTs (39) • Information Only/ Non-Economic CAs (27) • Cash/ Economics outside of the SFT (11) • Agreed CAs which cause direct downstream effects on SFTR reports and must therefore be aligned by best practice: Cluster # of CAs Full or Partial Return 8 Full Return 5 Addition Sec on Loan 12 Return and New Trade 13 38
SFTR Corporate Actions: Working Group #5 & Discussion Agree an SFTR related Best Practice for each CA Cluster (Q3 2019) • Reach agreement on specific booking models which enable SFTR compliant reporting • Determine universal procedures (Best Practice) for processing and communicating CAs on SFTs Full and Partial Returns Cluster • Effects on the SFTR reports agreed • Booking activities reviewed for each CA type • Corporate Action issues identified Future Activities Agreed • Resolution to define all CA issues both SFTR and general
SFTR Corporate Actions: Information Only - Cluster SFT Cash ISO ISO Name ISO Description Booking EQ FI Status Movement Code (Y/N) (Y/N) Funds related event in which the income (for example accumulation units) that accrues during an ACCU Accumulation accounting period is retained within the fund instead of being paid away to investors. The N N Y Y Corum Agreed retained income is nonetheless deemed to have been distributed to investors for tax purposes. Trading in the security has commenced or security has been re-activated after a suspension in ACTV Active Trading Status N N Y Y Corum Agreed trading. BMET Bond Holder Meeting Physical meeting of bond holders. N N N Y Corum Agreed Legal status of a company unable to pay creditors. Bankruptcy usually involves a formal court BRUP Bankruptcy N N Y Y Corum Agreed ruling. Securities may become valueless. Increase of the current principal of a debt instrument without increasing the nominal value. It normally arises from the incorporation of due but unpaid interest into the principal. This is CAPI Capitalisation N N Y Y Corum Agreed commonly done by increasing the pool factor value, for example, capitalisation, and negative amortisation. Non USTEFRAD CERT N N N Y Corum Agreed Non-US beneficial owner certification requirement for exchange of temporary to permanent notes. Certification CHAN Change Information regarding a change further described in the corporate action details. N N Y Y Corum Agreed Situation where interested parties seek restitution for financial loss. The security holder may be Class Action Proposed CLSA N N Y Y Corum Agreed offered the opportunity to join a class action proceeding and would need to respond with an Settlement instruction. CMET Court Meeting Announcement of a meeting at a Court. N N Y Y Corum Agreed An occurrence of credit derivative for which the issuer of one or several underlying securities is CREV Credit Event N N Y Y Corum Agreed unable to fulfill his financial obligations (as defined in terms and conditions). Security is no longer able to comply with the listing requirements of a stock exchange and is DLST Trading Status Delisted N N Y Y Corum Agreed removed from official board quotation. Requirement for holders or beneficial owners to disclose their name, location and holdings of any DSCL Disclosure N N Y Y Corum Agreed issue to the issuer.
SFTR Corporate Actions: Information Only - Cluster SFT Cash ISO ISO Name ISO Description Movement Booking EQ FI Status Code (Y/N) (Y/N) As stipulated in a bond's Terms and Conditions, the issuer or the bond-holder may prolong the EXTM Maturity Extension maturity date of a bond. After extension, the security may differ from original issue (new rate or N N N Y Corum Agreed maturity date). May be subject to bondholder's approval. Increase in the face value of a single security. The number of circulating securities remains INCR Increase In Value N N Y Y Corum Agreed unchanged. MEET General Meeting N N Y Y Corum Agreed Annual general meeting. Securities Holders MTNG Ordinary or annual or extraordinary or special general meeting. N N Y Y Corum Agreed Meeting OMET Ordinary General Meeting Ordinary general meeting. N N Y Y Corum Agreed OTHR Other Event N N Y Y Corum Agreed Other event, use only when no other event type applies, for example, a new event type. Changes in the state of incorporation for US companies and changes in the place of incorporation PLAC Place Of Incorporation N N Y Y Corum Agreed for foreign companies. Where shares need to be registered following the incorporation change, the holder(s) may have to elect the registrar. Event by which the unit (currency and/or nominal) of a security is restated, for example, REDO Redenomination N N y y Corum Agreed nominal/par value of security in a national currency is restated in another currency. Purchase and sale of remarketed preferred equities/bonds through the negotiation of interest rate REMK Remarketing Agreement N N Y Y Corum Agreed between the issuers and the holders. SMAL Smallest Negotiable Unit Modification of the smallest negotiable unit of shares in order to obtain a new negotiable unit. N N Y Y Corum Agreed SUSP Trading Status Suspended Trading in the security has been suspended. N N Y Y Corum Agreed Tax On Non-Distributed Taxable component on non-distributed proceeds, for example, Australian deemed income or US TNDP N N Y Y Corum Agreed Proceeds 871m income regulation. TREC Tax Reclaim Event related to tax reclaim activities. N N Y Y Corum Agreed Withholding Tax Relief Certification process for withholding tax reduction or exemption based on the tax status of the WTRC N N Y Y Corum Agreed Certification holder. Extraordinary or Special XMET N N Y Y Corum Agreed Extraordinary or special general meeting. General Meeting
SFTR Corporate Actions: Information Only - Cluster Effects on the SFTR reports: 1. Standard SFT conventions as dictated by the Global Master Securities Lending Agreement are followed for all of the activities relating to the processing of these Corporate Actions. 2. None of the Information Only Cluster Corporate Actions require changing the existing SFT booking or necessitate a new SFT booking. 3. As none of the Information Only cluster CAs will necessitate a new SFT booking, there will be no SFTR issues related to new trades i.e. fractional ratios, UTI generation, etc. 4. As value of the security on loan will may change, collateral will move to reflect the new value. These are business as usual changes, which will be reported via the daily COLU (Collateral Update) report.
Recommend
More recommend
