thewealthworks Customer Support Portal

Overview

A capital event is made up of layers, each of which must be defined in turn. The top layer is the event itself, described in general event ‘terms’. Beneath is layer are the event options or options followed by the elements for each option. Having set up the details of the event it is then necessary to specify which option was accepted by each client, and then having authorised the actions, to post them. These options can be set up and posted either globally or by client. It should be noted that an event set up within a client is available across all clients.

The following steps will guide you through setting up and posting a rights issue.

Setting up an Event

There are three stages to setting up a capital event for a rights issue. Firstly, working from Wealth Management, the Investment tab, and the menu option Capital Events – Add, add a new event for the rights issue.

• Select the investment and enter the event title (a description of the event). Enter the Action Date (a date by which a decision should be made) and click Accept. After accepting the event description, the Add button becomes active and the options and elements of the event can be added:

• Add the options and elements by clicking ‘Add’ towards the bottom of the screen.

This must be done at the time of initial event creation. Whilst details can be edited later all terms and elements must be added at the same time so that Troika will consider all the elements and options together.

Enter the option title (rights issue for example) and use the option type of either ‘Rights (same stock)’ or ‘Rights (different stock)’.

The entitlement for a rights issue should be set to ‘renounceable’ so decisions can be made for each client holding this stock.

Absolute means that all holders will receive this event. For a multi-element event, this setting should only be used if all clients are to be processed as a batch and not individually. If this is not done there is the possibility of posting clients before you are ready.

Renounceable means that it is possible to take up none, some or the entire event, such as a rights issue. This setting should also be used for any multi-element event when clients will not all be processed at the same time.

Alternative means that there is more than one choice available, as in the example with the A and B share above. In this case the New Option button will become active.

If the rights are to be posted on a different stock, select the investment from the drop down list.

Enter the rest of the details as requested. The dates are linked in pairs. The books date will initially be the same as the ex-date and the pari passu date will be the same as the issue date. Entitlements will be calculated on the ex-date and the transaction entered on the issue date. Click Accept to add the ‘option’ to the event, and then close to return to the event screen.

The exclamation button gives a list of all clients affected by the event, together with an indication of the result of the different options.

• Create the action records by clicking ‘Create Acts’ (these are like transactions waiting to be posted)

This will create the action records prior to authorisation/posting. It will use the holdings at the present time. It may be necessary to repeat this option later to take into account changes to holdings.

• Having created the event, it is then necessary to decide what is to happen for each client. Select the menu option Capital Actions – Authorise. Select the investment and event. Using the Edit button, access the details for each client. Enter the number of units to either
  • Take up
  • Lapse – no proceeds
  • Sell Nil Paid

Click Accept to save the unit decisions, then close to return to the screen to make further decisions.

• NB If any client in the event is selling the entitlement to the rights, nil paid, it’s necessary to process the event for these clients first, and on a client by client basis from the Transactions – Add menu option, so the rights proceeds can be processed with the correct accounting treatment. Select the client from the client tab, and then access the Transactions – Add menu option. Select the investment button and then the investment from the drop down box.

Enter the transaction date and select the transaction type ‘capital event’. Select the event from the event drop down list.

You may be prompted to confirm if you wish the existing holding to replace the original, or to leave both the existing holding and new holding in place as ledgers. Select Yes or No as appropriate. On the next screen, confirm the number of units to sell nil paid and select ‘Accept’ to continue.

• If not already entered, you may be prompted for the First Market Values (FMV) of the Nil Paid Rights and the original holding. You can enter either the adjustment factors or FMV’s at this point.

• The posting options screen is then displayed. Enter the unit price for the nil paid rights, and this will calculate the rights proceeds at the bottom of the screen. Alternatively you can enter the amount received by the client directly into the proceeds box. Enter any dealing costs which may be deducted from the settlement due.

• If not already entered, you may be prompted for the First Market Values (FMV) of the Nil Paid Rights and the original holding. You can enter either the adjustment factors or FMV’s at this point.

• The posting options screen is then displayed. Enter the unit price for the nil paid rights, and this will calculate the rights proceeds at the bottom of the screen. Alternatively you can enter the amount received by the client directly into the proceeds box. Enter any dealing costs which may be deducted from the settlement due.

The 5% rule is applied at this point to determine the correct accounting treating and apportionment of cost. Rights issues which are taken up have their cost apportionment's calculated when processed and posted. The rights sold are posted according to the value of the proceeds. If the proceeds are less than 5% or £3000, the posting will be treated as a reduction of cost by default. If the proceeds are more than 5% or £3000, they are treated as a partial disposal and the cost apportioned on the basis of the new market values.

The treatment can be overridden at this point by selecting from the options available including ‘process all as profit’.

• Click OK to post the sell nil paid rights for the selected client

• Work through the other clients sell nil paid rights as shown above.

• The remainder of the processing of the event can be completed from the global menu option or you can continue to process the holdings on a client by client basis in turn.

From the Capital Actions – Authorise menu option, select the investment and event from the drop down lists. Click on the ‘Authorise’ button.

This next screen will show, in a summary, what shares have been taken up, allowed to lapse, sell nil paid or undecided. If this was an absolute event, all units would be shown as taken up and the All OK box would be checked. As this had a renounceable entitlement, only the client where a decision was entered under capital event actions has any shares to take up. To move to the next stage check the boxes in the first column.

NB For sale of rights, selecting:

OK + clicking Action SNP, will only process items originally set to Sell nil paid

OK + clicking Action All will not process records

All OK+ clicking Action SNP will only process items originally set to Sell nil paid

All OK+ clicking Action All will process all authorised transactions both Sell nil paid and take up.

Any marked as lapsed will simply be removed from the pending transactions. Any shares not authorised will be treated as lapsed and treated accordingly.

Clicking Accept at the next screen will start the posting of all the authorised transactions.

If a new stock is involved you will be asked to confirm whether the original stock remain in existence.

NB Yes will replace the original holding. Please make sure this question is answered carefully and correctly.

If an apportionment of costs will be involved you will be prompted for the market value of the units. This may happen more than once if several investments are involved. Make sure that the correct value is input for each stock. These values will be retained and used when processing other actions for this event. The values can be edited from the Edit Capital Events option. Editing will not affect an entry that has already been posted. After entering a value press Accept.

You will be given a last chance not to proceed with the posting. After this screen you are committed to the posting. The following screen allows the addition of information for the posting.

Description In is the details to be included with the new stock; the report narrative is the same as that used in ordinary investment postings. It will be used to add information to the share schedules.

Description Out is the details to be included with the original stock; the report narrative is the same as that used in ordinary investment postings. It will be used to add information to the share schedules.

Transaction date and Value date will default to today's date, or the issue date set up in the event details if that is later.

General Account is the account where any cash movements are accounted for.

Accept will post the authorised transaction. A screen confirming the number of transactions will be displayed.

This articles is confirmed to be applicable from Troika release 2.08.020.