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 mandatory events — a cash dividend, a stock split — nothing is required of you and the default is simply that it processes itself. The trap is voluntary events that require a choice.
For those — a rights issue, a cash-or-stock dividend election, a tender offer — inaction doesn't mean nothing happens. The broker applies a preset default outcome, which is often the option least in your favour, such as letting valuable rights lapse worthless or defaulting you into cash when stock might have been better. Knowing that a default exists, and what it is, is the whole reason reading corporate-action notices matters: silence is itself a choice, just not one you made.
For a voluntary corporate action, responding lets you choose; ignoring it triggers the broker's default — often the least favourable option, like letting rights lapse worthless.
For example
You ignore a rights-issue notice; the broker's default lets the rights expire worthless — forfeiting value you could have used or sold.
Learn it by doing
That's Default action in theory — it clicks when you use it. Practise it hands-on in a free, interactive lesson (Stage 8, Corporate Actions: What Lands in Your Account).
Try the free lesson →Why it matters to you
Default actions matter because they turn inattention into a decision made on your behalf — frequently the wrong one. A voluntary corporate action you ignore doesn't pause and wait; the broker applies a default, and forfeited rights or a suboptimal election can cost real money. Understanding that every corporate-action notice with a deadline has a default outcome is what motivates you to read it and respond, rather than assuming silence is safe.
⚠ Assuming ignoring a notice means 'nothing happens'
With a voluntary corporate action, doing nothing isn't neutral — the broker applies a default, often the least favourable option, like letting rights lapse worthless. Investors who treat every notice as safe to ignore can quietly forfeit value. When a corporate-action notice asks you to decide by a deadline, the default is rarely in your favour.