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Question

Difficulty: MediumSettlement Dates, Trade Confirmations, and Corporate Actions

Match each settlement, trade confirmation, or corporate action concept on the left with its correct regulatory rule or market characteristic on the right under standard FINRA and SEC rules.

  • Regular-Way Settlement for Municipal and Corporate SecuritiesOccurs on the first business day following the trade date (T+1T+1).
  • Agency Trade Confirmation Disclosure RequirementMust explicitly state that the firm acted as a broker and disclose the commission charged.
  • Ex-Dividend Date for Standard Cash DistributionsSet by SRO rules as one business day prior to the record date.
  • Reverse Stock Split Position AdjustmentDecreases the investor's total number of shares while increasing the per-share market price proportionally.

Answer

Each term accurately pairs with its corresponding rule: Regular-Way Settlement corresponds to T+1T+1 settlement; Agency Trade Confirmation requires disclosing broker capacity and commission; Ex-Dividend Date is one business day prior to record date under T+1T+1; Reverse Stock Split decreases share count while proportionately increasing per-share price.
Each concept accurately reflects securities regulations: Regular-way settlement is T+1T+1; agency trade confirmations require commission disclosure; the ex-dividend date is one business day before the record date under T+1T+1; and a reverse split reduces share volume while proportionately raising share price.

Step-by-Step Solution

1
Identify the settlement timeframe for regular-way securities transactions.
Regular-way settlement for equities, corporate bonds, and municipal bonds is T+1T+1 (trade date plus one business day).
SEC Rule 15c6-1 establishes the T+1T+1 standard settlement cycle.
2
Determine confirmation requirements for agency transactions.
Agency trades require confirmation stating the broker-dealer acted as agent and disclosing commission.
SEC Rule 10b-10 dictates capacity disclosure on trade confirmations.
3
Establish the relationship between the ex-dividend date and record date.
Under T+1T+1 settlement, the ex-date is set one business day prior to the record date.
Purchasers buying on or after the ex-dividend date settle after the record date and do not receive the dividend.
4
Analyze the impact of a reverse stock split.
Fewer shares exist post-split, but each share has a higher market price.
Corporate reverse splits consolidate shares without changing total overall position value.

Key Concept

Rules governing settlement timing (T+1T+1), trade confirmation capacity disclosures, dividend timeline calculations, and corporate action adjustments.
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Topics

Settlement Dates, Trade Confirmations, and Corporate Actions