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Corporate Actions and Rights Issues

If you buy shares using a CFD you don't own the physical shares. Your broker will hold them on your behalf and enter a swap like transaction (the CFD) with you. This means you'll own the right to 100% of the profits as well as 100% of the losses.

However, the CFD contract will mean you have the right to any dividends (some brokers only pay 90% of the value, others 100%). More information on Dividends and CFDs.

Corporate Actions and Rights Issues
CFDs and a Rights Issue
The CFD holder will hold the right but not obligation to buy more of a company's shares if they enter into a Rights Issue. But of course, like any corporate action the rights won't have to be taken up if you don't want to buy more shares.
Make it fail safe - Ask your broker for confirmation

When it comes to money and investing it's easy to lose money, or the potential of extra profits, by not being completely on the ball.

So if I was trading a share using CFDs and the company announced a rights issue, or another corporate action I'd be on the phone to my CFD broker double checking the options open to me.

My policy is simple -

There are no stupid questions when it comes to trading our money. See Secret 6 - Ask - there are no stupid questions - which is one of this site's 10 Secrets to Good Personal Finance.

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