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Question

Difficulty: HardSettlement Dates, Trade Confirmations, and Corporate Actions

The Board of Directors of Apex Technology Corp. declares a 2-for-1 stock split structured as a stock dividend payable to shareholders of record on Thursday, October 15, with a payable date of Friday, October 30. Assuming all dates fall on business days without intervening holidays, on which date will Apex Technology Corp. stock begin trading ex-distribution under FINRA rules?

  1. A
    Thursday, October 15
  2. B
    Friday, October 16
  3. Monday, November 2Answer
  4. D
    Wednesday, October 14

Answer

Monday, November 2 is the ex-distribution date because for stock splits or stock dividends exceeding 25%, the ex-date is the first business day after the payable date.
Under FINRA Uniform Practice Code rules, when a corporate stock dividend or split represents 25% or more of the outstanding shares, the ex-distribution date is deferred until the first business day following the payable date. Since the payable date is Friday, October 30, the stock begins trading ex-distribution on Monday, November 2.

Step-by-Step Solution

1
Identify the type of corporate action and distribution size.
The corporate action is a 2-for-1 stock split (a 100% stock distribution, which is ≥25%\ge 25\%).
Different FINRA Uniform Practice Code rules apply depending on whether a corporate dividend/distribution is a small cash dividend or a large stock split.
2
Determine the governing ex-date rule for distributions of 25% or greater.
Under FINRA Rule 11140, the ex-dividend (ex-distribution) date for stock splits/dividends of 25% or more is fixed on the first business day AFTER the payable date.
Trades occurring between the record date and payable date carry due bills to transfer the dividend shares from seller to buyer.
3
Calculate the specific calendar date based on the declared payable date.
The payable date is Friday, October 30. The first business day following Friday, October 30 is Monday, November 2.
Excluding weekend days (Saturday, October 31 and Sunday, November 1), the next trade settlement date is Monday.

Key Concept

Ex-Distribution Date Rules for Large Stock Dividends and Splits
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Topics

Settlement Dates, Trade Confirmations, and Corporate Actions