Investing term

What is Default action?

What your broker will do on your behalf if you take no action by a corporate-action deadline.

A default action is what your broker does automatically if you don't respond to a corporate action by its deadline. For events that require a choice — like a rights issue or a cash-or-stock election — inaction doesn't mean nothing happens; the broker applies a preset outcome, which may not be what you'd have chosen. Knowing the default is why reading corporate-action notices matters.

For example

You ignore a rights-issue notice; the broker's default action lets the rights lapse, so you simply forgo the discounted shares you could have bought.

Default action is taught hands-on in Stage 8 — Corporate Actions: What Lands in Your Account.

See the lesson →

Related terms

AcquisitionOne company buys another. The bought company's shares are converted to cash, acquirer stock, or a mix at the closing price.Carve-outA parent company sells part of a subsidiary in an IPO, keeping a stake.Corporate actionAny event initiated by a company that changes its securities or distributes value to holders.Cost basisWhat you originally paid for a holding, used to calculate gains and losses when you eventually sell.
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