Corporate action events
DRCA: Cash Distribution From Non-Eligible Securities Sales
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DRCA is a cash distribution to holders that comes from the sale of securities they were not eligible to receive, most often in a depositary receipt programme: the depositary sells the entitlement and passes the net proceeds to the receipt holders.
- Code
- DRCA
- Usually announced as
- MAND
What DRCA means
When a company whose shares sit behind depositary receipts distributes securities, such as rights or shares in a spin-off, the depositary may be unable to pass them on to receipt holders, for legal, regulatory or practical reasons. Instead, it sells them in the market and distributes the cash, after fees and expenses, per receipt.
The payment is related to the original distribution but is a separate event, because the holder receives cash instead of the securities and the amount depends on the sale proceeds, not on a declared rate. Entitlement follows the record date of the receipt programme.
When you see it
- An MT564 with
:22F::CAEV//DRCAand:22F::CAMV//MAND, a CASH option, the rate per receipt (often only known after the sale) and the payment date. Euronext lists DRCA among the mandatory cash distributions. - It differs from DVCA, which passes on a cash dividend declared by the issuer, and from SOFF or RHDI, which deliver the securities themselves to eligible holders.
What to do next
- No instruction. Link the event to the original distribution so clients understand why they received cash instead of securities.
- When the MT566 arrives, reconcile the gross and net amounts and the depositary fees. Check the tax treatment: proceeds from sold entitlements are often treated as a disposal rather than income, but this depends on the market and the client.