Stock dividends are excluded from the definition of sale and offer.

• A. True
• B. False
• C. Only in certain states
• D. Not specified

Answer: (A)

Stock dividends are distributions of additional shares to existing shareholders, issued pro rata, without new money changing hands. Because there is no solicitation of investors or sale of securities to new buyers, this corporate action is not an offer to sell or a sale of securities and is excluded from the definition of sale and offer. The investor simply ends up with more shares, and the issuer does not raise capital through that action. Therefore, the statement is true. This distinction matters because registration and antifraud rules apply to true offers and sales to the public, not to automatic corporate actions like stock dividends that don’t involve a new sale.