Corporate Actions and Securities Processing
This domain tests how entitlements arising from corporate events are calculated, processed and paid or delivered to clients. It covers dividends, rights issues, capitalisation issues, splits, mergers and delistings, with JSE Listings Requirements and Strate timetables.
Core rules and concepts
- Key dates include the last day to trade cum entitlement, the ex-date, the record date and the payment or implementation date.
- Under T+3, a buyer must trade on or before the last day to trade to settle by record date and appear on the register.
- Entitlements are based on the position on record date, subject to the event terms and any withholding tax.
- Dividends may be subject to South African dividends withholding tax; clients may need to submit exemption documentation.
- Rights issues require instructions, payment and allocation; oversubscription and fractional entitlements follow the event timetable.
- Mandatory events are processed automatically; voluntary events require client elections by the stated deadline.
Worked example
A dividend has a last day to trade of Tuesday and a record date of Friday. A client buys on Tuesday. With T+3, the trade settles Friday, so the client is on the register and receives the dividend. A client who buys on Wednesday settles Monday, after record date, and does not receive it. The correct reasoning uses settlement date, not trade date alone. The broker must also check whether the client has submitted a valid dividend tax exemption before payment.
Traps that cost marks
- Using the ex-date instead of the last day to trade for a T+3 market.
- Paying a voluntary election after the deadline.
- Ignoring withholding tax or exemption documentation.
- Applying record-date positions before settlement reconciliation.
Exam focus
Date-line calculations, voluntary elections and tax treatment are commonly tested.