National Energy Group (fka NEGI)

[JimProfit]

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.

© 2000, National Association of Securities Dealers, Inc. (NASD).