Amendments Approved to Rules G-11 AND G-12 Regarding Settlement Dates and Payments of Designations
On September 28, 2009, the Securities and Exchange Commission approved amendments to Rule G-11, on new issue syndicate practices and Rule G-12, on uniform practice.[1] The amendments accelerate the settlement of syndicate accounts and secondary market trading accounts, and the payment of designations, by shortening certain time periods within the rules. The amendments are designed to reduce the exposure of syndicate and secondary market trading account members to the risk of potential deterioration in the credit of the syndicate or account manager during the pendency of account settlements.
The amendments change the deadline in Rule G-11(i) for settlement of syndicate accounts from 60 calendar days following the date all securities have been delivered by the syndicate or account manager to the syndicate or account members to 30 calendar days after the issuer delivers the securities to the syndicate (“bond closing”). The amendments change the deadline in G-11(j) for the payment of designations from 30 calendar days after bond closing to 10 calendar days after bond closing. To facilitate implementation of these reduced time periods, the proposed amendments add a new requirement that all syndicate members submit their designations to the syndicate manager within two business days after bond closing. Finally, the amendments change the deadline for the settlement of joint or similar accounts formed in the secondary market (now referred to as “secondary market trading accounts”) from 60 days following the date all securities have been delivered by the syndicate or account manager to the syndicate or account members (“delivery date”) to 30 calendar days following the delivery date.
The amendments to Rule G-11 are effective for new issues of municipal securities for which the Time of Formal Award (as defined in Rule G-34(a)(ii)(C)(1)(a)) occurs after October 28, 2009. The amendments to Rule G-12 are effective for secondary market trading accounts formed after October 28, 2009.
Questions about the amendments may be directed to Peg Henry, Associate General Counsel, at 703-797-6625.
September 30, 2009
TEXT OF AMENDMENTS [2]
Rule G-11: New Issue Syndicate Practices
(a) – (h) No change.
(i) Settlement of Syndicate or Similar Account. Final settlement of a syndicate or similar account formed for the purchase of securities shall be made within [60] 30 calendar days following the date [all securities have been delivered by the syndicate or account manager] the issuer delivers the securities to the syndicate [or account members].
(j) Payments of Designations. All syndicate or similar account members shall submit the allocations of their designations according to the rules of the syndicate or similar account to the syndicate or account manager within two business days following the date the issuer delivers the securities to the syndicate. Any credit designated by a customer in connection with the purchase of securities as due to a member of a syndicate or similar account shall be distributed to such member by the broker, dealer or municipal securities dealer handling such order within [30] 10 calendar days following the date the issuer delivers the securities to the syndicate.
* * * * *
Rule G-12: Uniform Practice
(a) – (h) No change.
(i) Settlement of [Joint or Similar] Secondary Market Trading Account. Final settlement of a [joint or similar] secondary market trading account formed for the purchase of securities shall be made within [60] 30 calendar days following the date all securities have been delivered by the [syndicate or] account manager to the [syndicate or] account members.
(j) No change.
