2.2 Corporate Actions & Dividend Dates
Corporate actions such as dividends and stock splits alter share counts and market prices without changing the investor's total percentage equity.
Key FINRA Exam Takeaways
- Order of Dividend Dates: Declaration -> Ex-Dividend -> Record -> Payable (DERP).
- Ex-Dividend Date under T+1: Exactly 1 business day BEFORE the record date.
- Stock price is reduced by the gross dividend amount on the ex-dividend morning.
- Forward Stock Split (e.g. 2-for-1): Increases shares, decreases price per share proportionally; total position value unchanged.
- Reverse Stock Split (e.g. 1-for-10): Decreases shares, increases price per share to boost stock price above exchange minimums.
Knowledge Checkpoint • Section 2.2
Under current T+1 regular-way settlement rules, if the record date for a cash dividend is Friday, May 16, what is the ex-dividend date?