In an "Alert Investor" newsletter, FINRA's Office of Investor Education ("OIE") reviewed six common types of public company corporate actions and how they impact investments. FINRA defined "corporate action" as "an event by a public company that may affect the company's securities and, therefore, its shareholders and bondholders." OIE focused on:
- Name or Trading Symbol Changes, which may require a company to obtain a new CUSIP number;
- Stock Splits, which change the number of shares owned by a shareholder, but do not affect a shareholder's proportionate equity in a company;
- Dividends, which result in shareholders receiving a portion of a company's earnings through cash or stock distributions;
- Mergers and Acquisitions, which involve two companies agreeing to become a single entity, or one company purchasing a majority of another company's stock;
- Rights Offerings, which entitle shareholders to buy additional shares directly from a company in proportion to their existing holdings; and
- Liquidation and Dissolution, in which assets are sold and potentially redistributed to shareholders.
FINRA further explained that it is responsible for processing corporate action announcement requests for companies that trade in the over-the-counter marketplace. FINRA reviews such requests for compliance with applicable laws and regulations, but does not approve or disapprove of the actions. FINRA warned investors that any company claiming FINRA "approval" of a corporate action is not sharing accurate information, and listed resources that can provide further information.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
