Corporate Actions: Rights and Warrants
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Questions and Answers

Which of the following transactions does not require a risk disclosure?

  • A stock transaction not recommended by a BD or a RR (correct)
  • A product dividend distribution to an established customer
  • A mutual fund transaction not recommended by a RR
  • A stock transaction recommended by a BD

    • What is the purpose of the Ex-Dividend Date in dividend distribution?

  • To determine the stockholders of record for dividend distribution
  • To make the dividend payment to the stockholders
  • To trade the stock without the dividend (correct)
  • To declare the dividend to the public

    • Who sets the Record Date in the dividend distribution process?

  • The Board of Directors (BOD) (correct)
  • FINRA or the exchange
  • The brokerage firm
  • The stockholders of record

    • What is the meaning of the acronym DERP in the context of dividend distribution?

    <p>Declaration, Ex-Date, Record, Payment</p> Signup and view all the answers

    How many business days does it take for a trade to settle?

    <p>2 business days</p> Signup and view all the answers

    What is the exception to the Ex-Date rule in dividend distribution?

    <p>For cash transactions and mutual funds, the Ex-Date is the business day after the Record Date</p> Signup and view all the answers

    What is the purpose of a buyback?

    <p>To invest in itself or improve its financial ratios</p> Signup and view all the answers

    What is a tender offer?

    <p>An offer to buy a security directly from shareholders</p> Signup and view all the answers

    Why might a company make a tender offer on its own debt?

    <p>To retire the debt early</p> Signup and view all the answers

    What is the tax implication of a stock split or stock dividend?

    <p>It is never a taxable event</p> Signup and view all the answers

    What happens to the number of outstanding shares when a company buys back its own shares?

    <p>It decreases</p> Signup and view all the answers

    Why might a company prefer share buybacks to paying dividends?

    <p>To increase the ownership stake of shareholders</p> Signup and view all the answers

    What is the maximum duration for a rights offering?

    <p>90 days</p> Signup and view all the answers

    What is the main difference between rights and warrants?

    <p>All of the above</p> Signup and view all the answers

    What happens to the number of shares outstanding in a forward stock split?

    <p>Increases</p> Signup and view all the answers

    What is the tax consequence of a stock dividend?

    <p>Non-taxable</p> Signup and view all the answers

    What is the purpose of an antidilution provision?

    <p>To prevent dilution of ownership</p> Signup and view all the answers

    What is the term for a long-term contract to buy stock at a specific price?

    <p>Warrant</p> Signup and view all the answers

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