Unit 1 Quiz 1

Record date vs. ex-dividend date

1. Record date - date you must own the stock to have a right to vote 2. Ex-dividend date - establishes who will received the dividend from the stock when there was a previous transaction (buyer or seller) - as the buyer you must own the stock by this date in order to received the dividend *** YOU STILL NEED TO ESTABLISH BOTH IN ORDER TO RECEIVE DIVIDEND *** - own it two days before record date, one day before ex-dividend date

What is preemptive rights?

Allow existing common stock shareholders to buy new shares before they are offered to the public in order to maintain their percentage in ownership DOES NOT APPLY TO PREFERRED STOCK

SEC Rule 144

Applies to the sale of unregistered securities owned by affiliates or their household members and also control stock. Allows people to sell restricted or control securities (S/O or shares) in the public market w/out registering them. - must follow certain guidelines

CUMULATIVE vs. NON-CUMULATIVE preferred stock

CUMULATIVE is the main driver! 1. If the preferred stock is cumulative, then - the company must pay back all dividends it may have missed or is late on paying 2. If it is NON-cumulative, - they DO NOT have to pay back missed dividends

Voting share limits

If an individual or person living with them own at least a combined 10% of a company's voting shares & they want to sell some of their shares then, 1. Both people are considered affiliates 2.Subject to 144 limits

What is an ADR?

It is a way to buy foreign securities using dollar denominated money - trades on US exchanges

What is convertible preferred stock?

Preferred stock that is able to be converted into common stock. - applies to any convertible security, preferred stock, or debenture Appealing because as the price in common stock rises, there is more of an incentive to convert. - opportunity to participate in company growth Preferred stock has it's cons as well: - conversion price is set at time of issuance - interest on debt is always paid first - usually there is a "pecking order" on who gets paid first w/ preferred stock

What is control stock?

Stock that is owned by someone w/ significant influence over a company like a major stakeholder or director.

If a woman owns 9% of the common shares of XYZ and her spouse owns 2% and wishes to sell his shares, which of these is true? i) He is considered an affiliate. ii) He is not considered an affiliate. iii) He must file a Form 144 to sell. iv) He does not have to file a Form 144 to sell.

ii and iv If a married couple (either individually or jointly) owns a combined total of 10% or more of a corporation's voting shares, they are considered affiliates and are subject to the requirements of SEC Rule 144. For exam purposes, assume spouses share the same residence.