Spin-off Carve-out Stock Dividends

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Dividends Or Distributions 25 Percent Or Greater Than Security Value The second method, under subparagraph (b)(2) of Rule 11140, provides that for dividends or distributions that are 25 percent or greater of the value of the subject security, the ex-date shall be the first business day following the payable date.

For example, if an issuer has announced August 10 as the record date and August 31 as the payable date, then the ex-date will be September 1, the first business day after the payable date. In this example, September 1 is the day on or after which a buyer would purchase the security without the dividend and, therefore, the day on which the price of the stock is adjusted downward.

In this example, a seller of the security on August 15, even though the holder of record to receive the dividend, would have to relinquish the dividend to the buyer. Indeed, because the value of the security on August 15 has not yet been adjusted downward to reflect the
dividend distribution, the seller in this example would be unjustly enriched by keeping the dividend.

The seller would have received the value of the dividend twice: first, as fully reflected in the unadjusted price of the stock on August 15; and secondly, as subsequently paid
by the company to record date holders.

This Notice reminds member firms and their associated persons that ex-dates are determined differently, depending on the size of the distribution. Current and historical
dividend information is maintained by The Nasdaq Stock Market and can be found on the Nasdaq Trader Web Site at www.nasdaqtrader.com/dailylist/dl_di_ind.stm.

Endnote
1The term “record date” under the Uniform Practice Code means the date fixed by the
trustee, registrar, paying agent, or issuer for the purpose of determining the holders of
equity securities, bonds, similar evidences of indebtedness, or unit investment trust securities entitled to receive dividends, interest or principal payments, or any other
distributions.

© 2000, National Association of Securities Dealers, Inc. (NASD). All rights reserved. Notices to Members attempt to present information to readers in a format that is easily understandable. However, please be aware that, in case of any misunderstanding,
the rule language prevails. NASD Notice to Members 00-54

http://www.nasd.com/web/groups/rules_regs/documents/notice_to_members/nasdw_003997.pdf