SIFMA and EY Assess State of Corporate Action Notifications, Call for Standardization

In a position paper, SIFMA and the accounting firm Ernst and Young ("EY") assessed the current state of corporate action announcement and dissemination policies in the United States and called for more industry standardization.

SIFMA and EY said that there is currently no standardized framework for companies to notify shareholders of a materially relevant corporate event. SIFMA and EY found that due to a lack of consistency, there is a large variance as to (i) when corporate actions are announced, (ii) how the actions are announced, and (iii) the information provided in the announcement.

SIFMA and EY stressed the importance of notifying shareholders of corporate actions in a timely and accurate manner. Further, the paper emphasized that this will be especially important given the anticipated transition to a "T+1" settlement cycle, observing that there may be increased investor risk as financial services firms will have less time to "perform vital reconciliation, calculation and issue remediation activities" (see related news).

SIFMA and EY called for exchanges to utilize existing authority to try to standardize the information provided in corporate actions, pointing to the success of the Australian Securities Exchange leveraged existing smart forms as an example of how to maintain better control over the information provided.