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Question

Difficulty: MediumSettlement Dates, Trade Confirmations, and Corporate Actions

Match each settlement date, trade confirmation disclosure, or corporate action concept on the left with its corresponding rule or market effect on the right.

  • Regular-way settlement cycle for corporate stock transactionsT+1 (settles one business day after the trade date)
  • Ex-dividend date for a regular-way cash dividendOccurs exactly one business day prior to the record date
  • Trade confirmation requirement when a firm acts in an agency capacityMust state the amount of commission charged to the customer
  • Effect of a reverse stock split on an investor's positionReduces total share count while increasing the per-share price proportionally

Answer

Each settlement, confirmation disclosure, and corporate action concept is paired with its precise regulatory rule or operational outcome under standard T+1 market practices.
Each concept on the left matches its corresponding rule: regular-way equity settlement takes place on T+1; the ex-dividend date is one business day prior to the record date under T+1 settlement; acting as an agent requires disclosing the commission on the trade confirmation; and a reverse stock split decreases the number of shares outstanding while increasing the per-share market price proportionally.

Step-by-Step Solution

1
Determine regular-way settlement for corporate equity securities
Equity trades settle on T+1 (one business day after trade date).
Standard settlement rules established by the SEC require T+1 regular-way settlement for stocks, corporate bonds, and municipal bonds.
2
Calculate the ex-dividend date relative to record date under T+1 settlement
The ex-dividend date is one business day before the record date.
An investor buying stock on or after the ex-dividend date will settle after the record date and will not receive the declared dividend.
3
Identify required trade confirmation disclosures for agency trades
Agency trades require explicit commission disclosure.
FINRA Rule 2232 mandates that broker-dealers disclose their capacity and, if acting as agent, the remuneration (commission) earned.
4
Analyze position changes caused by a reverse stock split
Share quantity decreases while share price increases proportionally.
Reverse splits consolidate equity shares without altering total investor equity prior to tax/fractional adjustments.

Key Concept

Settlement Cycles, Confirmation Capacity Disclosures, and Corporate Actions
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Topics

Settlement Dates, Trade Confirmations, and Corporate Actions