Quick Answer
All transactions in securities except cash transactions go ex-dividend, ex-rights or ex-warrants on the day the Uniform Practice Code Committee designates, or on the day the appropriate national securities exchange specifies. For a stock dividend, distribution or warrant issue, the normal date turns on whether it is less than 25 percent of the value of the subject security.
An ex-date decides who is entitled to a distribution, so it sits directly on top of the settlement timetable. The Uniform Practice Code sets it, and the size of the distribution moves the anchor the date is measured from.
Which Transactions Take an Ex-Date, and Who Sets It?
The ex-dividend dates rule reaches all transactions in securities, except "cash" transactions. Those transactions shall be ex-dividend, ex-rights or ex-warrants on one of two days.
- The Committee's day. The day specifically designated by the Committee after definitive information concerning the declaration and payment of a dividend, or the issuance of rights or warrants, has been received at the office of the Committee.
- The exchange's day. The day specified as such by the appropriate national securities exchange which has received that definitive information in accordance with the provisions of the untimely dividend announcement rule.
Exam Tip: Gotchas
- Cash transactions are the one carve-out. Every other transaction in securities takes an ex-date under this rule, so an answer that excludes a broader category than cash transactions overstates the exception.
- The rule names two date-setters, not one. The Committee designates a day after definitive information reaches its office, and the appropriate national securities exchange may specify the day instead once it has that information.
What Is the Normal Ex-Date for a Dividend or a Warrant Distribution?
Two branches split on a size test, and the test moves the anchor rather than merely shifting the day.
| Corporate action | Normal ex-date |
|---|---|
| Cash dividends or distributions, or stock dividends, and the issuance or distribution of warrants, which are less than 25 percent of the value of the subject security, where the definitive information is received sufficiently in advance of the record date | The record date where the record date falls on a business day, or the first business day preceding the record date where it falls on a day the Committee designates as a non-delivery date |
| Cash dividends or distributions, stock dividends and/or splits, and the distribution of warrants, which are 25 percent or greater of the value of the subject security | The first business day following the payable date |
| Stock dividends and/or splits relating to American Depository Receipts (ADRs) and foreign securities | Designated by the Committee |
The two size branches are not written with the same list of corporate actions. The smaller branch names cash dividends or distributions, stock dividends, and the issuance or distribution of warrants. The larger branch names cash dividends or distributions, stock dividends and/or splits, and the distribution of warrants.
Exam Tip: Gotchas
- The 25 percent test moves the anchor. Below 25 percent, with timely information, the ex-date is the record date where that date is a business day. At 25 percent or greater it is the first business day following the payable date, so the two branches do not merely differ by a day.
- The smaller branch has a condition the larger branch does not. It applies only where the definitive information is received sufficiently in advance of the record date, and it has its own non-delivery-date fallback.
What Is the Normal Ex-Rights Date?
Transferable rights subscription offerings run on their own provision. Where definitive information is received sufficiently in advance of the effective date of the registration statement, the date designated as the ex-rights date shall be the first business day after the effective date of the registration statement.
Exam Tip: Gotchas
- The ex-rights date is anchored to a registration statement, not to a record date. It runs from the effective date of the registration statement, which is why the rights provision sits apart from the dividend and warrant branches.
What Happens When the Information Arrives Late?
Two separate late-information provisions exist, and each is tied to the branch it rescues.
- Late dividend or warrant information. Where definitive information is not received sufficiently in advance of the record date to permit designation of an ex-dividend or ex-warrants date under the smaller-distribution branch, the date designated shall be the first business day which, in the opinion of the Committee, shall be practical having regard to the circumstances pertaining.
- Late rights information. Where definitive information is not received sufficiently in advance of the effective date of the registration statement to permit designation of an ex-rights date under the rights provision, the date designated shall be the first business day which, in the opinion of the Committee, shall be practical having regard to the circumstances pertaining.
Exam Tip: Gotchas
- The two late-information provisions key on different dates. The dividend and warrant version measures lateness against the record date. The rights version measures it against the effective date of the registration statement.
- A late designation is the Committee's judgment call. The rule fixes no number of days. It asks for the first business day the Committee thinks practical having regard to the circumstances.
What Should You Check on Exam Day?
- Confirm the transaction is not a cash transaction. Only cash transactions sit outside the ex-date rule.
- Size the distribution against the subject security's value first. Below 25 percent, with timely information, the ex-date is the record date if a business day; at 25 percent or more, the first business day after the payable date.
- On a smaller distribution, ask whether the record date falls on a business day or on a Committee-designated non-delivery date.
- For stock dividends and splits on ADRs and foreign securities, expect a Committee-designated date rather than a computed one.
- On a rights offering, anchor to the effective date of the registration statement, not to a record date.