SIFMA Ops 2026: The Growing Operational Risk in No-Claim and Direct Payment Recoveries
Earlier this month at SIFMA Ops, Emily Fortin, Director of Product Strategy at FRT, and Jatan Pathak, Head of Data Managed Services, Corporate Actions at S&P Global Market Intelligence, shared their insights on an operational risk that’s been growing in securities recovery: no-claim and direct-payment distributions are scaling faster than most firms’ operating models were built to handle.
The conversation covered where the friction is coming from, who is most exposed, and what it actually takes to get ahead of it.
No-Claim Distributions: No Longer a Back-Office Exception
“No Claim Required” settlements, cases where distributions go directly to eligible investors without any affirmative filing, have grown from roughly ten per year to upwards of 20-30. They span Delaware Chancery Court breach of fiduciary duty cases, SEC Fair Funds, and other class action structures. The volume increase alone would be manageable. The problem is that most firms still treat these as one-off exceptions rather than a recurring operational opportunities.
The result is predictable: payments arrive without warning, ops teams scramble to figure out what they received and why, and the downstream work — reconciliation, allocation, reporting — piles up under time pressure.
Five Ways the Problem Shows Up in Practice
The discussion identified five distinct failure points that surface when firms lack timely, structured, and standardized data on these distributions:
- Can’t identify. Unexpected cash hits the account and nobody knows what it relates to. Recording, categorizing, and reconciling an unrecognized payment takes time that most teams don’t have to spare.
- Can’t validate. Even when a payment is recognized, firms often lack the data to confirm whether the amount received is correct and complete.
- Can’t allocate. Nominees and custodians bear the heaviest burden here. Allocating payments correctly across underlying accounts requires security identifiers, record dates, eligible position logic, and per-share payment amounts — data that frequently isn’t available at the time the payment lands.
- Can’t prepare. Without advance notice, there’s no runway to work through the above. What should be an orderly process becomes a fire drill, particularly when client SLAs are involved.
- Can’t report. Manual, siloed tracking of these settlements — separate from standard workflows and third-party provider systems — makes them difficult to fold into normal reporting and audit processes.
The Information Gap
Most of these problems trace back to the same place: teams don’t have what they need, when they need it.
The ask is not complicated. Firms need to know a payment is coming, ideally at the time of settlement, so they can plan for it. And when the payment arrives, they need enough structured data — security identifiers, record date and eligible position logic, per-share amounts, payment source — to actually do something with it. That combination of early notice and decision-ready data is what separates a controlled process from a reactive one.
Complexity compounds the problem in specific ways. Stock lending arrangements and short positions can create allocation disputes or, in some cases, net liabilities for certain account holders. Closed accounts and clients who have moved to different providers mean payments arrive for relationships that no longer exist in the same form. These situations require even earlier information — ideally as soon as the potential liability or entitlement is created — and clear workflows for how to handle them.
SEC Fair Funds
Fair Funds present a related but distinct set of challenges. Documentation requirements have become significantly more demanding, and rejection rates have climbed sharply as a result — in some recent distributions, the majority of filed claims were rejected. Requirements also vary across administrators, making it difficult to build reliable, repeatable processes.
One operational wrinkle gaining attention is the shift toward direct payment by check rather than wire, driven by the SEC’s goal of maintaining full accountability for government funds from distribution through receipt by the beneficial owner. For firms accustomed to standard wire-based workflows, this creates additional handling and reconciliation work.
Where Automation Is Making a Difference
As volumes and complexity grow, more firms are turning to technology to reduce the manual load. The most automation-ready parts of the process right now include:
- Timely case data to flag upcoming distributions and create advance notice
- Structured payment data to support validation and allocation decisions
- Automated flagging and resolution of data exceptions
- Automated recognized loss calculations
- Claims package and remittance report generation
The broader shift is from case-by-case reaction to a more systematic operating model — one where the right information arrives early, repetitive steps run automatically, and ops teams spend their time on the work that actually requires judgment.
To connect with a member of the FRT team or learn more about how FRT supports no-claim and direct-payment recoveries, reach out to your FRT representative or email learnmore@frtservices.com.