How to Evaluate Corporate Actions Software

Short answer: evaluate corporate actions software on where events come from (an ISO 15022 MT564/MT566 depository feed, with ISO 20022 capability), which event types it covers, how it calculates each beneficiary's entitlement, how it handles elections and withholding tax, who approves before anything posts, and whether positions, cash and the general ledger update in the same step. Then ask each vendor to run one real event, from announcement to client statement, live.

Banks, custodians and brokers usually buy corporate actions software after a bad event: a missed election, a dividend paid on the wrong position, or a split that left average cost wrong for months. This guide is a checklist for comparing vendors on the same terms. For how the automated lifecycle works step by step, read our companion guide, Corporate Actions Automation.

The Evaluation Criteria

1. Event Capture

• Does the system read MT564 announcements and MT566 confirmations straight from the depository or custodian?
• Are cancellations, replacements, withdrawals and reminders applied to the existing event, or keyed again?
• Can events also arrive by file, by manual entry and from custodian or broker feeds?
• Is ISO 20022 (MX) supported, so the platform is ready as depositories move?

2. Event Coverage

• Mandatory events: cash and share dividends, bonus issues, splits, reverse splits, coupons and redemptions.
• Mandatory events with options and voluntary events: rights issues, tradable rights, mergers and conversions.
• Spin-offs, capital reductions and returns of cash, which change cost as well as quantity.
• Fixed income and sukuk: coupon accrual, partial and full redemptions.

3. Entitlement Calculation per Beneficiary

• Is entitlement calculated for every holder, sub-account and custodian, including omnibus structures?
• Can you choose between traded and settled positions on the record date, per market?
• How are fractions handled: round up, round down, or cash in lieu?
• Are average cost and historical prices adjusted for splits and spin-offs?
• Do lenders receive manufactured payments on securities out on loan or in repo?

4. Elections

• Can clients or relationship managers submit elections before the deadline, with a default option if none arrives?
• Are election instructions sent to the custodian (MT565) and tracked?
• Can operations subscribe to rights on behalf of clients who do not use digital channels?

5. Tax and Withholding

• Is withholding applied per market, custodian and client residency, without manual overrides?
• Are dividends accrued when the payment date is in the future, and reversed cleanly if terms change?
• Does tax post to the ledger with the income, so tax reports tie to the books?

6. Control and Approval

• Does every event enter as a draft, with a beneficiary list operations can review and export?
• Is approval by a second authorised user enforced by the system, not by procedure?
• Can each market be set to auto-post or manual review?
• Is a wrong event reversed with a full record, never deleted?

7. Posting to Positions and the Ledger

• Do positions, cash and general ledger entries update together when the event posts?
• Is there an interface or overnight file between the corporate actions tool and the ledger?

8. Client Notifications and Audit

• Are affected clients told about the event, their entitlement and their election deadline?
• Can an auditor see who created, reviewed, approved and posted each event, and when?

Where the Operational Risk Sits

Most corporate action losses come from a small set of points. Test each one in the demo:

• Changed terms: a replacement message arrives after operations has already worked the event.
• Positions in transit: trades executed before the record date but not yet settled.
• Securities on loan: the borrower holds the shares, but the lender is owed the income.
• Fractions: rounding rules that differ by market and instrument.
• Wrong tax rate: a client's residency or treaty status not reflected in withholding.
• Election deadlines: client instructions that arrive late or not at all.
• Corrections: an event fixed by editing records rather than by reversal, which leaves no trail.

Cost and Fit for Banks

Banks asking for an affordable corporate actions solution should look at the total cost of running it, not only the licence. A standalone tool needs interfaces to custody, settlement and the general ledger, and someone to reconcile those interfaces every day. A corporate actions module that runs on the same record as positions and the ledger removes that work. Ask how pricing is set, whether by module, users or deployment, and whether subscription and perpetual licences are both available.

Questions to Ask a Vendor

• Show one real event end to end: MT564 in, beneficiary list, approval, posting, ledger entries and the client statement, live.
• Show a replacement: what happens when the depository changes the ratio after the event is drafted?
• Show a reversal: how is a posted event corrected, and what stays on the record?
• Which depositories do you connect to today? Name the markets and the message standards.
• How are lent and repo positions treated? Who receives the income, and how is it booked?
• Can an automated event post without a person approving it? If so, who can switch that on?
• What does it cost to run? Include interfaces, reconciliation staff and upgrades.

How ZagTrader Handles It

ZagTrader runs corporate actions on the same platform as custody, settlement and the general ledger. More than 100 institutions run on ZagTrader technology, with $500B+ in client assets on the platform. Against the checklist:

• Event capture: MT564 announcements and MT566 confirmations arrive over ISO 15022, with eligible-balance, cancellation, replacement and reminder handling. Events can also come from a file, manual entry or drop copy from custodian and white-label broker feeds. SWIFT Suite covers MT564, MT565, MT566 and MT568, with ISO 20022 (MX) format capability.
• Coverage: cash and share dividends, bonus issues, forward and reverse splits, rights and tradable rights with subscription windows, spin-offs, mergers, conversions, returns of cash, and bond and sukuk coupons and redemptions.
• Entitlements: calculated for every holder, sub-account and custodian on the right settlement date, with your rounding rules and cash in lieu for whole-share instruments. Splits re-base positions and adjust price history, spin-offs move cost to the new shares by relative value, and manufactured coupons go to lenders during repo and lending.
• Elections and notifications: elections processing and client notifications are part of the lifecycle, and operations can subscribe to rights on behalf of offline clients.
• Tax: withholding applied per market, custodian and client residency, with dividends accrued when the value date is in the future.
• Control: every event enters as a draft, operations reviews and exports the beneficiary list, and a different authorised user approves and posts. Each market is set to auto-post or manual review, and events ingested automatically stage as drafts unless a market is configured otherwise.
• Posting: positions, average cost, cash and the general ledger update together, and a corrected event reverses cleanly with a full audit trail.
• Cost: pricing is based on the modules you select, the number of users and your deployment model, with subscription pricing for cloud and perpetual licences for on-premise.

Related: see Corporate Actions for the depository feed and beneficiary engine, Custody & Back Office and Finance & Accounting for where events post, and ZagTrader for Custodians for the wider post-trade platform. For a wider vendor checklist, read How to Choose a Capital Markets Platform.