Management of Corporate Actions

Iberclear manages corporate actions carried out regarding securities included in the ARCO System in accordance with the international standards defined by the Corporate Events Joint Working Group (CEJWG) with the purpose of harmonizing all corporate actions related to communication flows, minimum disclosure requirements, key dates and procedures at a European level.

• The issuer entity of the underlying security must inform Iberclear of the single agent bank designated to manage it, which must be an Iberclear participant, with the exception of general shareholders/bondholders meetings. The exchange of information between Iberclear and the participants is performed using ISO 15022 and ISO 20022 standards.
• The issuer and the agent bank must report the details of the corporate action to Iberclear, which will then verify that the information supplied by both entities is valid and consistent. The corporate action announcement will be reported using Swift ISO15022 messaging or the BME-PC application.

According to international standards, there are three types of corporate actions:

• Distributions: The issuer distributes securities or cash to security holders on a specified date, without any impact on the positions of the securities accounts related to the corporate action.
• Reorganizations: When the security associated with the corporate action is replaced with other securities and/or cash.
• Generals: These provide information related to the security code.

This classification applies to voluntary and mandatory corporate actions.

Iberclear manages mandatory corporate actions based on the position held at a given moment by each participant in a given security code at the close of the record date process.

• Ex-Date: The date from which the security will trade without the right to participate in a corporate action. Ex-Date precedes Record Date in a settlement cycle minus one business day.
• Record Date: The date on which positions will be recorded to calculate the action.
• Last Trading Date: The last day of trading for mandatory reorganizations. It must occurr at least one settlement cycle prior to Record Date.
• Payment Date: The date on which the financial transaction is settled. Payment Date must be after Record Date, preferably the next business day.

According to these dates, positions obtained as a result of a trade made during or after Ex-Date are not included because trades made after that date cannot be included in the corporate action.

Iberclear manages voluntary corporate actions and mandatory reorganizations with options when it is optional for holders to participate. Participants will send participation instructions via MT565/ seev.033 messages requesting the security quantities for which they wish to participate in the elective event. 

• Guaranteed Participation Date: The last trading date of the underlying security with the right attached to participate in the corporate action.
• Buyer Protection Deadline: The last date on which the buying counterparty can send a buyer protection instruction to the selling counterparty.
• Market Deadline: The last date on which instructions can be sent to the issuer or its agent bank, based on the options provided by the issuer.
• Payment Date: The date on which the corporate action is settled, which must always be after Market Deadline, and preferably the next business day.

As a result of a corporate action involving a mandatory cash pay-out or distribution of a number of securities, an adjustment may need to be made to credit the participant that is actually entitled to this right according to the dates established for this purpose by the issuer. These adjustments will be made according to the T2S Corporate Action Sub-group market claim standards.

Iberclear generates market claims at the end of the record date and, if necessary, during the market claim detection period which covers the 20 business days after the record date.

There are two types of claims:

     a) Market Claims, in favor of the buyer: Adjustments will be posted for each matched instruction pending settlement with a trade date that is prior to the ex-date.
     b) Reverse Claims, in favor of the seller: Adjustments will be posted for positions that are not eligible to participate in the corporate action despite being settled on the record date.

Whenever the corporate action involves a voluntary corporate action or a mandatory reorganization with options, such as an exchange, conversion or final redemption of securities, Iberclear will carry out the transformation of matched transactions that are pending settlement at the end of Record Date/Market Deadline. Similarly, at the end of each day during the 20 business days following the record date, Iberclear will convert the trades matched during the transformation detection period according to the default option announced by the agent in the corporate action details.

This process enables a buyer which did not receive the securities on time, to instruct the seller as they would have selected if they had received the securities on time.

Once the buyer’s instruction is sent to the seller before the buyer protection deadline, if the failed instruction is not settled at the close of that day, both parties must cancel the instruction pending settlement and issue a new instruction to replace it.

If it is necessary to perform a reversal due to an incorrect settlement of a given corporate action, Iberclear will inform the relevant parties and provide details of the new executed action to correct the cash movements, if necessary.

The issuer will notify Iberclear of its upcoming General Meeting or Assembly as soon as possible, but no later than three days before Record Date. This notification can be sent via BME-PC.

The issuer must include the information detailed in the Iberclear procedure regarding the notification of shareholders and bondholders meetings, including the date and place of the meeting, the record date and the agenda. This information must be provided in both Spanish and English.