Investment Company and. Variable Contracts Products Principals (Series 26) Practice Exam

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What is the ex-date in relation to a distribution?

The last day a purchaser is eligible to receive it
The first day a purchaser is ineligible to receive it
The last day to buy the security
The day before the record date

The correct answer is: The first day a purchaser is ineligible to receive it

The ex-date, short for the "ex-dividend date," is a critical date in the context of security distributions, such as dividends or interest payments. It designates the first day on which a buyer of the security is not entitled to the distribution. When a company declares a distribution, it sets a record date, which is the date that determines which shareholders are entitled to receive the distribution. To be eligible for the distribution, an investor must purchase the security before the ex-date; once the ex-date arrives, new purchasers will not receive the upcoming distribution. This is why the statement regarding the first day a purchaser is ineligible to receive the distribution is correct—it clearly defines the role of the ex-date in the distribution process and its significance for potential investors. Understanding this concept is fundamental for investors to know if they qualify for distributions based on their transaction timing.