ARTICLE
17 November 2021

FINRA Proposes To Shorten Syndicate Account Settlement Times

CW
Cadwalader, Wickersham & Taft LLP

Contributor

Cadwalader, established in 1792, serves a diverse client base, including many of the world's leading financial institutions, funds and corporations. With offices in the United States and Europe, Cadwalader offers legal representation in antitrust, banking, corporate finance, corporate governance, executive compensation, financial restructuring, intellectual property, litigation, mergers and acquisitions, private equity, private wealth, real estate, regulation, securitization, structured finance, tax and white collar defense.
FINRA requested comment on proposed amendments to FINRA Rule 11880 to shorten the permitted settlement time.
United States Finance and Banking

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.

Primary Sources

  1. FINRA Regulatory Notice 21-40: FINRA Requests Comment on Amendments to Rule 11880 Shortening the Settlement of Syndicate Accounts

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