An investor purchases 200 shares of common stock in a regular-way transaction on Tuesday, June 9. The corporation's board of directors has declared a cash dividend with a record date of Wednesday, June 10. Under standard FINRA settlement rules, which of the following statements correctly identifies the trade's settlement date and the investor's dividend eligibility?
- The trade settles on Wednesday, June 10, and the investor is eligible for the dividend because the trade settled on the record date.Cevap
- BThe trade settles on Thursday, June 11, making the investor ineligible for the cash dividend.
- CThe trade settles on Wednesday, June 10, but the dividend is retained by the seller because the National Securities Clearing Corporation (NSCC) holds custody of shares during ex-dividend dates.
- DThe trade settles on Wednesday, June 10, but the purchasing firm must act as a principal dealer to transfer dividend rights to the customer.
Cevap
The trade settles on Wednesday, June 10, and the investor is eligible for the dividend because the trade settled on the record date.
Under current T+1 regular-way settlement rules for corporate securities, a trade executed on Tuesday, June 9 settles one business day later on Wednesday, June 10. Because settlement occurs on the declared record date (June 10), the investor becomes the shareholder of record on that date and is fully entitled to receive the cash dividend.
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Regular-way T+1 settlement and dividend record date eligibility
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