New York, NY, February 9, 2023 – SIFMA today issued a “U.S. Corporate Actions Standardization Position Paper.”  The paper, which was developed in conjunction with Ernst & Young LLP (EY), discusses the current state of how Corporate Actions are announced in the United States, and outlines the present challenges of non-standardized Corporate Action information and a lack of uniformity in how this information is disseminated to investors. The paper also discusses potential objectives in a modern Corporate Action environment. Additionally, the paper contains a case study highlighting how a foreign securities exchange transformed its Corporate Action process and an example use case where potential risk to investors could be mitigated through the standardization of Corporate Action announcements and processing. Finally, the paper outlines the current regulatory structure and culminates a call to action for industry organizations.

“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,” said Tom Price, SIFMA managing director and head of technology, operations and business continuity. “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.”

SIFMA’s Operations & Technology Committee and EY established a U.S. Corporate Actions Working Group comprised of SIFMA member representatives that have supported the development of the position paper.  The paper was developed based on discussions among Working Group members with the goal of explicitly outlining current challenges in the U.S. Corporate Action environment, identifying possible changes that may streamline the Corporate Actions announcement process, and presenting a call to action for industry members and investors to showcase a path forward.

The current regulatory landscape of Corporate Actions in the U.S. financial markets doesn’t mandate the standardization and dissemination of corporate announcements and its data elements, leaving investors with a fragmented and disparate perspective on Corporate Actions.  An estimated 46% of global event data is published and received manually, driving unnecessary risk and expense to organizations, though standardizing the Corporate Action lifecycle could reduce the effects that fragmentation currently has on the industry.

The paper points to the standardization effort undertaken by the Australian Securities Exchange (ASX) in 2014 to transition from manual processes to straight-through-processing (STP), where individual systems or platforms are connected to automate processing and eliminate manual intervention. The foundation of the ASX transformation is built upon “smart forms,” a customizable digital document that supports pre-population of data, automatic data validation, and setting data limits, among other automated processes and controls. The ASX modernization efforts essentially created a single source for Corporate Action announcements in a centralized location, which can be accessible to all investors simultaneously. By presenting validated, uniform and structured data, in a single source, ASX improves the disclosure of Corporate Actions from issuers that make these announcements to the market and its participants that view and interpret these notices, including transfer agents, financial services organizations, and institutional and retail investors.

Pointing to the success of the ASX initiative, SIFMA notes that improvements made in the industry today to modernize and standardize Corporate Action event processing and dissemination will bring longstanding benefits to organizations, individual investors and the broader market and suggests partnering with the listing exchanges on possible solutions in this modernization effort.

“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 policy makers, 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.”

-30-

SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development.  SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA).