FAQs: Corporate actions
What is a corporate action?
Corporate actions are events initiated by a publicly-traded company that cause a material change to the company's structure, potentially affecting their financial situation, stock price, and stock performance—and possibly your investment mix.
Events can range from changing the company name, issuing dividends or other distributions, to a major restructuring of the company through a merger or bankruptcy.
What are mandatory vs voluntary corporate actions?
A mandatory corporate action is an event initiated by the board of directors of a corporation where participation is automatic for shareholders. In a mandatory corporate action, no direct participation is required from you.
A voluntary corporate action is an event you can choose whether or not to participate in.
What is an event type?
The event type refers to the kind of corporate action being initiated. For more explanation of voluntary event types, visit the Corporate Actions Glossary.
Can Fidelity advise me regarding whether or not to participate?
No, Fidelity can't advise you. We can, however, help you understand how a voluntary corporate action may impact your account so you can make the right decision for you. Each person's investment portfolio is different, so you'll have to consider your individual financial goals and tax implications. If you need additional guidance, consider contacting your tax professional before participating.
Where are all the corporate actions that apply to me?
Your summary page reflects the current voluntary events affecting the securities in your portfolio which require your attention, but it doesn't include mandatory events or optional dividends. We're hoping to add those capabilities in the future.
How long will I be able to view my voluntary corporate actions?
Voluntary events will be visible on your summary page for a year and a half following the announcement of the offer. This can be useful to review during tax time, to understand what changes occurred if you had participated.
How do I participate in a voluntary event?
Refer to the offer terms to determine if you're eligible to participate, or if additional paperwork is required. If you're eligible and choose to participate, call a Fidelity Representative to submit your instructions.
Can I submit instructions after the cutoff date?
You can, up until that option's expiration date and time — however, after the cutoff date we can't guarantee your instructions will be accepted, but we will process them on a reasonable efforts basis.
Where can I see the status of my instructions?
You can view the pending and completed instructions on the Activities & Orders page. If instructions were submitted by an alternative method in accordance with the offer details, they may not be reflected on the Activities & Orders page.
When will I be paid?
In most cases, you'll receive payment within 7-10 business days of the offer expiration date, as long as the offer is completed and all conditions were met. Occasionally an offer will be extended, and in those cases your payment may be deferred. In that case, you'll be able to view that status on your summary page and see that the payment has been deferred.
What happens if an offer is withdrawn after I provide instructions?
For specific information about what happens in the case of a withdrawal, please review the offer terms. You can view the offer terms on the Activities & Orders page.
What's an early premium?
An early premium refers to a company-provided premium for shareholders who participate in an offer prior to the early expiration date as outlined within the offer terms.
What are the different dates within the offer?
Each offer contains several key dates that are important to be aware of. Be sure to read the offer terms to determine what the different options and incentives are, and identify the deadlines for each. Important dates to note may include:
- Expiration date: The expiration date is the last day of the offer. On the expiration date, you may still be able to participate, but we can't guarantee that your instructions will be accepted.
- Cutoff date: The cutoff date is the next deadline during an active offer for you to be able to participate. Some offers may have multiple cutoff dates.
- Early premium date: This is an earlier date to encourage your participation, usually with an offer of an additional distribution if you do so.
What is proration?
Within a voluntary corporate action event, a company may specify a maximum amount of cash or securities they're able to allocate to participating shareholders. If the overall payment for the offer would exceed the maximum cap due to high participation, the company will only accept a proportionate quantity of shares to satisfy their preferred payment. In this case, it's possible for your tender to be accepted in whole, in part, or not at all.
What is oversubscription?
During a rights offer, some shareholders won't exercise their rights. As a result, excess shares may still be available after the offer expires. If you already exercised all of your rights you may have the option, called oversubscription, to buy the excess outstanding shares on a reasonable efforts basis. If an offer is eligible for oversubscription, it will be outlined in the offer details. Oversubscriptions are subject to proration.
In a rights offer, the exercised quantity is based on the number of rights you're exercising. However, the oversubscription portion of a rights offer should be entered based on the number of actual shares you want to oversubscribe for.
Also, your basic exercise quantity is based on the number of rights you were allocated (i.e., you received 3 rights which entitles you to 1 share. You would then exercise your 3 rights to receive that share at the specified offer price). However, using the oversubscription privilege provided to you, you may request to purchase additional shares (i.e., if you requested to purchase 100 additional shares at the offer-specified price, you would elect an oversubscription of 100.)
Because rights offers involve a cash requirement, your accounts will be debited the money required to meet both the basis exercise and oversubscription request at the time of expiration. If the event is prorated, Fidelity will credit the unused money back to your account, without interest. Fluctuation in the foreign exchange rates may adversely affect accounts, especially those that participate in oversubscriptions, which are subject to proration.
What if I have margin on that account?
If you have margin on the account containing a security involved in an offer, it may reduce your ability to borrow against that account or may result in having low equity.
What if I have options trading on that account?
If you have options on an account containing the shares involved in an offer, depending upon what option level you have, you may find that your eligible position is reduced and participation may result in not being able to tender your shares.
What if I have open orders/standing instructions on the account?
If you have open ordersLog In Required on the account containing the shares involved in an offer, participation may result in being short shares to cover the orders or instructions when the tender goes through.
What does it mean when the offer states there is a priority level?
When a company wants to purchase multiple series of their outstanding debt from shareholders within one event, they set a total aggregate maximum amount of capital they're willing to purchase them for. The priority level refers to the order in which each series will be accepted for the offer until the cap is reached.
For example: Securities deemed priority level 1 may be more likely to be purchased than one with a priority level of 10.
Is accrued interest included in the offer?
The inclusion of accrued interest refers to bond offers and varies from offer to offer.
What is a qualified institutional buyer (QIB) or accredited investor (AI)?
A qualified institutional buyer (QIBs), as defined by the Securities and Exchange Commission's (SEC) Rule 501 of Regulation D, is an institution, either foreign or domestic, that owns and invests a minimum of $100 million in securities on a discretionary basis (in comparison, the broker-dealer threshold is $10 million). Individuals, regardless of their wealth level or financial sophistication, can't be QIBs.
An accredited investor, as defined by the SEC's (SEC) Rule 501 of Regulation D, is a person or entity that can deal with securities not registered with financial authorities by satisfying one of the requirements regarding income, net worth, asset size, governance status or professional experience. To be considered an accredited investor, you must have earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR have a net worth over $1 million, either alone or together with your spouse (excluding the value of the person's primary residence).
If the offer states it's only available to qualified institutional buyers (QIBS), accredited investors or non-US persons and I am ineligible to participate, why is Fidelity sending me the details of the offer?
In the interest of transparency, we want to make sure all holders are aware of a voluntary offer that could affect future liquidity or pricing of the security they own. These events are for informational purposes only.
What is an odd lot preference?
In an event which is subject to proration, a company may offer preference to beneficial owners of an "odd lot" (typically 99 shares or less). "Ownership" is defined as having a direct financial interest by SSN. These holders have the ability to have all of their tendered shares accepted in the offer. To receive this preference, you must only hold a total number of shares across all your accounts that meet the odd lot criteria — and you need to tender your full position.
What if this offer is for a fixed income security I own?
The offer may require that you give up your accrued interest in the security (which can be substantial), so be sure that it's worth it before participating. If you have questions, consider contacting your tax or financial planning professional for additional guidance.
Optional dividend events
What’s the difference between a "regular" dividend and an optional dividend?
With a "regular" dividend, you get whatever the company issues—either cash or stock, with a possible option to reinvest. An optional dividend provides the opportunity to choose whether you want cash, stock, a combination of the two, or sometimes a sale of proceeds (announced and given by the company). Some securities only pay optional dividends.
Why haven't I received my payment? My payable date has passed.
If you were eligible for an optional dividend, distributions were allocated when we received them. If the payable date has passed, either the issuing company hasn’t released any of the payments, or the particular option you chose hasn’t been funded or paid out yet.
What is proration?
The right reserved by the issuing company to allocate the optional dividend payment at their discretion, regardless of the option chosen by the shareholder. For example, if too many people elect cash as their dividend option and the total exceeds the cap amount set by the company, the issuer reserves the right to pay the remainder out in stock (or vice versa).
What is meant by "some choices in the terms may have foreign taxes applied?"
Some foreign securities are taxed based on the country where they are issued and/or trade, even if the shareholder is a US resident. For example, the country might have a basic withholding tax; cash might be taxed but not stock; or withholding may be based on the type of account (e.g., retirement, joint, trust, etc.).
What kind of fees may be applied to my optional dividend?
Fees may include custody fees, issuance fees (for new stock), or a tax relief fee (which may depend on a number of factors, including the tax policy where the security is held and/or traded, having favorable or unfavorable tax status, etc.).
Why didn’t my dividend payout instruction on file apply to the offer?
It's rare, but sometimes your dividend payout instructions won't apply due to the offer terms or other restrictions imposed by the issuer. There are also times that you may have to meet certain requirements to receive whatever preference you've indicated (i.e., stock, but sometimes cash).
How do I change my dividend payout instructions on file?
You can change your dividend payout instructions on the Dividends and Capital GainsLog In Required page. Please note: If you change your instructions on file, it will apply to dividends for this event and all others going forward. However, if you contact us to make an election for an optional dividend event, your standing instructions will be overridden only for that event.
What is a due bill?
In some cases, special dividends or stock distributions may have different rules than regular dividends concerning the ex-dividend date. In these cases, the ex-dividend date will be after the record date and pay date. This is called a deferred ex-date.
In a standard dividend scenario, a customer would need to own a stock (settled shares) by the record date in order to be entitled to the dividend. However, when there is a deferred ex-date, if the customer were to sell a stock after the record date but before the ex-dividend date, they would no longer be entitled to the dividend. The shares would be tagged with a "due bill," which means the seller is obligated to pay the dividend to the buyer. Likewise, if one were to buy stock after the record date but before the ex-dividend date (and hold it through the ex-date), they would be entitled to the dividend from the seller.
Why does Fidelity not apply the issuer's default option?
We feel it's better for our customers to rely on the dividend payout instructions that we have on file at the account or security level
Why can rates change? I chose my preferred option based on the rate.
Rates for a particular option may be modified by the company, or in the case of a foreign security, may change due to the exchange rate. If a rate is approximate and subject to change, it will be indicated within the offer terms.
Are there tax implications if the rate contains a mix of long-term capital gains, short-term capital gains and dividends?
Yes, there may be tax implications because all of the components are treated differently from a tax reporting perspective. Fidelity recommends that you speak with your tax advisor for additional information on how you may be impacted.