Equity Characteristics

Exam Weight: ~4 questions (3% of exam)

Prerequisite: Equity Securities (types of equity, preferred stock types, ADRs)

This unit covers the rights, restrictions, and features of equity ownership. Understanding shareholder rights, restricted stock rules, dividend mechanics, and employee stock options is essential for the exam.

What You'll Learn

• Shareholder rights including voting methods, preemptive rights, and liquidation preferences
• Restricted stock, control securities, and SEC Rule 144 resale rules
• Cash dividends, stock dividends, stock splits, and key dividend dates
• Employee stock options: ISOs vs NSOs and their tax treatment
• Synthesis: Putting equity characteristics together

The Big Picture

Think of it this way: The previous unit taught you what types of equity exist (common, preferred, ADRs). This unit teaches you the rights and rules that come with equity ownership: how shareholders vote, when restricted shares can be sold, how dividends work, and how employee stock options are taxed.