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93-19 NASD Reminds Members to Settle Syndicate Accounts Within 90 Days of the Settlement Date

SUGGESTED ROUTING

Senior Management
Legal & Compliance
Syndicate

Executive Summary

The NASD is reminding members that Section 66 of the NASD Uniform Practice Code (UPC) requires syndicate managers to settle syndicate accounts within 90 days of the syndicate settlement date. Members are, therefore, reminded to mail or, where appropriate, deliver checks to syndicate participants no later than the 90th day following settlement of the syndicate account. The relevant portion of the text of Section 66 follows this Notice.

Background

Section 66 of the UPC requires the syndicate manager to make final settlement of syndicate accounts within 90 days of the syndicate settlement date.

It has come to the attention of the NASD that some syndicate managers are engaging in practices that flout the intent of Section 66. Syndicate members have reported receiving payments several days or weeks later than the 90th day but dated as of the 90th day. These circumstances suggest that syndicate managers are engaging in practices that effectively delay final payment of syndicate participants beyond the 90th day in circumvention of Section 66.

The NASD reminds members that the intent of Section 66 is to ensure that final settlement of syndicate accounts occur not later than the 90th day after the syndicate settlement date. The NASD believes that compliance with Section 66 mandates that syndicate managers mail or, where appropriate, deliver checks to syndicate participants no later than the 90th day following settlement of the syndicate account. Section 66 serves to set an outside limit on settlements. Members, however, are encouraged to settle accounts as quickly as possible.

The NASD also notes, however, that Section 2 of the UPC permits the Operations Committee to entertain a request for a delayed settlement date, under the Committee's authority to issue rulings concerning the operation of the Code, if final settlement on the 90th day is not possible due to extraordinary circumstances beyond the member's control.

Questions concerning this Notice may be directed to Elliott R. Curzon, Senior Attorney, Office of General Counsel, at (202) 728-8451.

Uniform Practice Code

Settlement of Syndicate Accounts

Sec. 66

(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 the 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 90 days following the syndicate settlement date.
(c) No later than the date of final settlement of the syndicate account, the syndicate manager shall provide to each member of the selling syndicate an itemized statement of syndicate expenses . . . .

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