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FINRA requested comment on proposed amendments to FINRA Rule 11880 ("Settlement of Syndicate Accounts") to shorten the permitted settlement time. FINRA Rule 11880(b) currently establishes a 90-day limit for the final settlement of syndicate accounts. The proposed amendments would establish a 30-day limit. FINRA stated that the amendments would reduce the impact of unpaid settlement amounts of firms' net capital and reduce exposures to credit risk.
The proposed amendments would shorten this timeline for public offerings of corporate debt securities. FINRA noted that, in 2009, the MSRB changed its timeline for the final settlement of syndicate accounts for municipal offerings to 30 calendar days. FINRA also requested comment on (i) whether the 30-day timeline is manageable for other types of corporate debt offerings and (ii) a potential shortening of the settlement timeline for all corporate securities, including equity offerings.
Comments on the proposed amendments must be submitted by January 18, 2022.
Commentary
The inability to count unsecured syndicate profits from an underwriting as good capital works a hardship on smaller firms that participated in the underwriting.
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