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Trade Lifecycle
Post Settlement Activities
Learning Outcome
5
Identify corporate actions and their impact.
4
Understand post-settlement accounting updates.
3
Explain reporting and regulatory compliance.
2
Understand reconciliation and discrepancy checks.
1
Explain post-settlement activities and their importance.
Reconciliation
Definition: The process of comparing the firm's internal records with statements from the custodian, depository, or clearing entity, to confirm that securities and cash positions match exactly.
Why it matters: Any mismatch is caught early and corrected, preventing errors from carrying forward into future trades and reports.
Reporting
Definition: Preparing and submitting records of settled trades to regulators, internal management, and clients, as required.
Why it matters: Ensures compliance with regulatory requirements such as those set by SEBI, and keeps clients and management informed of completed activity.
Accounting Updates
Definition:
Reflecting the settled trade in the firm's or client's books — updating cash balances, security holdings, and profit or loss.
Why it matters:
Keeps the client's portfolio and account accurate, and ensures financial statements reflect the true position after settlement.
Handling Corporate Actions
Definition: Events initiated by a company that affect the securities held by investors, such as dividends, bonus issues, stock splits, or rights issues.
Post settlement role: Once a client holds a security after settlement, the firm must track and apply any corporate action correctly to the client's holding, such as crediting a dividend or adjusting the quantity after a bonus issue.
Example:
If a client holds shares of a company that announces a 1:1 bonus issue, the client's holding must be updated to reflect the additional shares credited.
Summary
5
Corporate actions update eligible investor holdings.
4
Accounting updates cash, holdings, and profit/loss.
3
Reporting supports compliance and transparency.
2
Reconciliation ensures records match.
1
Post-settlement activities follow trade settlement.
Quiz
Which of the following is an example of a corporate action?
A. Trade confirmation
B. Settlement instruction
C. Dividend payment
D. Order placement
Quiz-Answer
Which of the following is an example of a corporate action?
A. Trade confirmation
B. Settlement instruction
C. Dividend payment
D. Order placement
Trade Lifecycle & Reconciliation Operations - Post Settlement Activities
By Content ITV
