Notice To Members 85-59

Effectiveness of Amendment to the Uniform Practice Code to Require Prompt Settlement of Syndicate Accounts

Published Date:

TO: All NASD Members and Other Interested Persons

ATTN: Syndicate Department

The NASD has adopted an amendment to its Uniform Practice Code to require syndicate managers to settle syndicate accounts within 120 days of the syndicate settlement date. The text of the amendment, which will be effective October 1, 1985, is attached.

Explanation Of Proposed Amendment

As a result of industry concerns about delays in settling syndicate accounts, the NASD's Corporate Financing Committee considered the need for more prompt settlement of syndicate accounts in the distribution of corporate securities. Syndicate accounts are ordinarily established by underwriting groups to process the income and expenses of the syndicate. Delays in settling these accounts can result in unnecessary outlays of time and money by syndicate participants.

After consideration of the matter, the NASD concluded that the problem of delays in the settlement of syndicate accounts which the industry has been experiencing should be addressed by establishing a period within which syndicate accounts must be settled.

The NASD has, therefore, amended the Uniform Practice Code to add new Section 66, which requires the final settlement of syndicate accounts by the syndicate manager within 120 days of the date securities are delivered by the issuer to or for the account of syndicate members.

After one year, the NASD will review the experience under the 120-day requirement with a view to reducing the time period to 90 days.

Effective Date

New Section 66 will become effective October 1, 1985 but will not apply to offerings which became effective before that date. Therefore, syndicate accounts are required to be settled within 120 days with respect to all corporate securities offerings effective on or after October 1, 1985.

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All comments or questions pertaining to these new requirements may be directed to the NASD's Corporate Financing Department, at (202) 728-8258.

Sincerely,

Frank J. Wilson
Executive Vice President
Legal and Compliance

Attachment

NEW SECTION 66

UNIFORM PRACTICE CODE

Section 66

Settlement of Syndicate Accounts

(a) Definitions:
(1) "selling syndicate" means any syndicate formed in connection with a public offering to distribute all or part of an issue of corporate securities by sales made directly to the public by or through participants in such syndicate.
(2) "syndicate account" means an account formed by members of the selling syndicate for the purpose of purchasing and distributing the corporate securities of a public offering.
(3) "syndicate manager" means the member of the selling syndicate that is responsible for maintenance of syndicate account records.
(4) "syndicate settlement date" means the date upon which corporate securities of a public offering are delivered by the issuer to or for the account of the syndicate members.
(b) Final settlement of syndicate accounts shall be effected by the syndicate manager within 120 days following the syndicate settlement date.