FINRA proposed amendments to FINRA Rule 11880 ("Settlement of Syndicate Accounts") to shorten the permitted syndicate account settlement timeframe for corporate debt offerings.
The proposed amendments include a two-stage syndicate account settlement approach that would require syndicate managers to (i) remit at least 70 percent of the gross amount due to each member within the first 30 days of settlement and (ii) pay any final remaining balance within 90 days of settlement. FINRA underscored that these amendments would only apply to corporate debt offerings. FINRA stated that it is not considering shortening the settlement timeframe for public offerings of equity securities.
FINRA noted that the MSRB shortened the settlement timeframe from 90 days to 30 days in 2009 to help reduce credit risk and potential credit default. FINRA stated that the proposed amendments will benefit syndicate members by reducing exposure to the credit risk of a syndicate manager during pending account settlements. Additionally, FINRA said the proposal would allow syndicate members to obtain earlier access to funds earned from an offering without significantly increasing the risk of resettlements.
The proposed effective date is January 1, 2023 and if approved, will be published in a FINRA notice.
