January 26, 2024
Nasdaq Issuer Alert Focuses on Upcoming Settlement Changes
Last week, Nasdaq Regulation published Issuer Alert 2024-1, which is focused on the impending changes to the settlement cycle and the impact on certain distributions with a record date after May 28, 2024. Nasdaq recently adopted a rule addressing this topic. With respect to regular distributions, the Nasdaq alert notes:
Among the rules and processes that are impacted by this change is Nasdaq Rule 11140(b)(1), which establishes the “ex-dividend date” for most distributions of cash, stock or warrants. The ex-dividend date is the date on which a security is first traded without the right to receive that distribution. While previously the ex-dividend date was generally one business day before the record date, that will change for distributions with a record date after Tuesday, May 28, 2024, and the ex-dividend date after that will generally be the same date as the record date. In addition, Nasdaq and the other Self-Regulatory Organizations have agreed with the DTCC, which processes distributions for publicly traded securities, that no securities will be ex-divided on May 28, 2024, to avoid confusion about the proper settlement.
Issuers should be aware that the first RECORD DATE to which the new ex-dividend date ruling rationale will be applied will be Wednesday, May 29, 2024.
With respect to large distributions, the alert notes:
Nasdaq Rule 11140(b)(2) establishes the ex-dividend date for cash dividends or distributions, stock dividends and/or splits, and the distribution of warrants, which are 25% or greater of the value of the subject security. These distributions are declared ex dividend on the first business day following the payable date for the distribution. While Nasdaq did not amend Rule 11140(b)(2), in order to avoid an ex-dividend date of May 28, 2024 under this rule, issuers are advised to NOT set May 24, 2024 as the payment date for any dividend or distribution that may exceed 25% of the value of the subject security.
For more information regarding the SEC’s move to T+1 settlement, check out our “Settlement” Practice Area.
– Dave Lynn