Series 99 Corporate Actions & Reorganizations 2

Question 1

What is the primary purpose of a 'due bill' in the processing of corporate actions?

Accepted Answer

To ensure a buyer of a security receives a pending corporate action benefit when settlement occurs after the record date

Answer

A due bill is attached to a security sold before the record date but settling after it, obligating the seller to pass through the corporate action benefit (e.g., dividend) to the buyer.

Question 2

In processing a tender offer, the operations department must primarily ensure:

Accepted Answer

Client shares are tendered and received by the depositary before the offer's expiration deadline

Answer

Operations is responsible for ensuring that client elections are submitted and shares are delivered to the depositary agent before the tender offer's expiration deadline to secure the premium price.

Question 3

What happens to fractional shares that result from a corporate action?

Accepted Answer

They are typically settled in cash based on the market value of the fraction

Answer

Fractional share entitlements arising from stock splits, mergers, or other corporate actions are typically paid out in cash to the shareholder rather than issued as partial shares.

Question 4

During a rights offering, what is the 'subscription period'?

Accepted Answer

The window of time in which shareholders may exercise their rights to purchase additional shares

Answer

The subscription period is the designated timeframe, typically several weeks, during which eligible shareholders can exercise their subscription rights at the specified offering price.

Question 5

What is the role of the Depository Trust Company (DTC) in corporate actions processing?

Accepted Answer

DTC acts as a central record-keeper and distributes corporate action entitlements to participant firms

Answer

DTC serves as the central clearinghouse that receives corporate action announcements from issuers and distributes entitlements (cash, shares, rights) to its participant member firms on behalf of beneficial owners.

(Series 99) Operations Professional Exam Practice Test

(Series 99) Operations Professional Exam Practice Test

Series 99 Corporate Actions & Reorganizations 2