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Question

Difficulty: MediumSettlement Dates, Trade Confirmations, and Corporate Actions

Pinnacle Logistics Corp. announces a regular quarterly cash dividend payable to shareholders of record on Wednesday, June 10. Under current FINRA regular-way T+1 settlement rules, what is the ex-dividend date for this cash distribution?

  1. Wednesday, June 10Answer
  2. B
    Tuesday, June 9
  3. C
    Monday, June 8
  4. D
    Thursday, June 11

Answer

Wednesday, June 10
Under current T+1 regular-way settlement rules, stock purchases settle one business day after the trade date. To be registered as a shareholder of record on Wednesday, June 10, an investor must purchase the stock no later than Tuesday, June 9. Shares purchased on Wednesday, June 10, will settle on Thursday, June 11—after the record date—and will trade without the dividend attached. Consequently, the ex-dividend date falls on the record date itself, Wednesday, June 10.

Step-by-Step Solution

1
Identify the specified record date for the dividend distribution.
The record date is Wednesday, June 10.
The record date determines which registered shareholders are entitled to receive the declared dividend.
2
Apply current T+1 regular-way settlement rules to determine the settlement date for trade executions.
A purchase on Tuesday, June 9 (T) settles on Wednesday, June 10 (T+1), entitling the buyer to the dividend.
Regular-way settlement for corporate stock completes one business day after the trade date.
3
Determine the first trade date on which a buyer no longer receives the dividend (the ex-dividend date).
A purchase on Wednesday, June 10 (T) settles on Thursday, June 11 (T+1), which is after the record date. Thus, Wednesday, June 10, is the ex-dividend date.
Under T+1 settlement rules, the ex-dividend date for a standard cash dividend coincides with the record date.

Key Concept

Ex-Dividend Date Determination under T+1 Regular-Way Settlement
Estimated Time:1m 0s
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Topics

Settlement Dates, Trade Confirmations, and Corporate Actions