TESTGEEK EXAM PREP, LLC.
Important Update –
The SEC has instituted a mandatory change in settlement from 3 business days (T+3) to 2 days (T+2) effective September 5th, 2017.
Series 6 Exam –
For the Series 6 exam, the only effect will be the FRB’s mandatory payment requirement (Reg. T) and the relationship between the ex-dividend date and the record date on individual stock trades.
Series 7 Exam –
For the Series 7 exam, several areas of the exam will be affected: the FRB’s mandatory payment requirement (Reg. T); the relationship between the ex-dividend date and the record date on individual stock trades and accrued interest calculations on bonds. This will have no effect on mutual fund transactions or Government securities.
Payment for securities transactions will now be T+2+2. In other words, payment is now required no later than the 4th business day rather than the 5th business day (Notice, however, it remains 2 business days after the settlement date).
For dividends, the ex-dividend date will now be 1 business day prior to the record date.
Trade Settlement FRB (Reg. T)
Record Date – The date in which you must be shareholder of record in order to receive the dividend. Since settlement (transfer of ownership) is 2 business days, you must purchase the stock at least 2 business days prior to the record date in order to receive the dividend. If you purchase it only 1 day prior, you will be too late (ex-dividend date).
Trade Record Date
Accrued Interest – Interest accrues on all bonds up to the day before settlement. For corporate and municipal bonds, this will now be the day after the trade date. For example, if an investor sells their bond on Friday April 15th, they will receive accrued interest up to Monday April 18th since the settlement date is Tuesday April 19th (Remember, settlement does not include weekends. Accrued interest, however, does).
For Government bonds, there is no change in settlement (T+1) and, therefore no change in accrued interest calculations. The interest accrues up to the day before the settlement date which, of course, is the trade date.
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