BDA Draft Letter to FINRA on Corporate Syndicate Settlement Period

Please see attached a draft letter from the BDA to FINRA, asking FINRA consider amendments to Uniform Practice Code Rule 11880, to reduce the period to settle corporate syndicate accounts from 90 days to a shorter time period. 

BACKGROUND:

FINRA Uniform Practice Code Rule 11880 stipulates that corporate underwriting syndicates must be settled no later than 90 days after the closing date of the deal. The current version of this provision of the rule was put in place in 1987.

The SEC’s net capital rule, Rule 15c3-1, specifies that dealers may count certain receivables towards regulatory capital, but only receivables 30 days old or younger. Underwriting receivables due to co-managers in underwriting syndicate do not count as regulatory capital after 30 days. For co-managers in a corporate new-issue underwriting syndicate, capital is tied up for the last 60 days of the FINRA 90-day period and cannot be counted towards compliance with capital rules. Additionally, the MSRB amended its Rule G-11 governing underwriting syndicates in 2009, reducing the time to settle a syndicate from 90 days after closing to 30.

Please review the draft letter, which BDA plans to send early next week, and let Kelli McMorrow know if you have questions or concerns by COB Monday, December 9. Thank you.

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