Unit 5-Syndicate Time Frames

Question 1

What does SEC 15c2-12 Entail

Answer 1

That underwriting is an implied recommendation by underwriters and therefore underwriters must diligently review the OS (or other relevant documents of the issuer) to ensure that everything is on the up and up

Question 2

When do underwriters have to distribute final OS to any potential customers?

Answer 2

-90 days following the date secondary trading starts
or until docs are publicly available on NRMSIR
-At least 25 days after the underwriting period upon written request. (response must be within 1 NRMSIR business day)

Firms are typically exempt from reporting if muni denominations are in 100K increments, are sold to 35 or less sophisticated investors, mature in 9 months or less, or are puttable/tenderable at least every 9 months

Reporting is also not needed if the aggregate debt of the issuer is 10 million or less (including the new issue)

Question 3

G-17

Answer 3

Requires BDs do deal fairly in regard to underwritings (disclose all material facts)

Question 4

G-19

Answer 4

BDs should not recommend a muni security to someone without a reasonable belief it is suitable

Question 5

What is the Official Notice of Sale

Answer 5

When a muni issuer releases details of a new issue (Bond Buyer) they would like to bring to market. It serves as an open invitation for IBs to research the details and bid if they see fit

Question 6

30 day visible supply

Answer 6

Published once a week in Bond Buyer

-Details the total dollar volume of new muni issues expected to hit the market in the next 30 days

Question 7

When are syndicates formed?

Answer 7

Once a notice of sale has gone out from the issuer

-IBs typically work together on issues. So its likely these IBs have dealt with each other before

Question 8

What is Agreement of Underwriters?

Answer 8

A document detailing each syndicate members roles and responsibilities

Question 9

Syndicate Agreement/Letter (competitive) or Contract (negotiated)

Answer 9

Details levels of participation, order priority, duration of syndicate account, appointment of syndicate manager, takedown, and fees

Question 10

When does the syndicate manager have to disclose fees he received to other members?

Answer 10

Before the date of sale

Question 11

When are syndicate bids entered

Answer 11

• Usually on a date specified on the notice of sale

- Bid must be submitted with good faith deposit

Question 12

When are commitment wires sent

Answer 12

• By the manager when the bid is awarded (competitive)

- When the contract is signed (negotiated)

Question 13

When can syndicate members bail?

Answer 13

Up to the date of bid submission

Question 14

When are syndicate accounts created?

Answer 14

As soon as the issue is awarded

Question 15

What is Underwriting Fee?

Answer 15

Money from the spread that is contributed to the syndicate account for underwriting expenses.
-Excess is distributed proportionately at the end of the underwriting

Question 16

What’s in the total (gross) spread?

Answer 16

• Manager’s Fee
• Underwriting Fee
• Total takedown (which may be split into concession and additional takedown)

Question 17

What is total takedown

Answer 17

• The amount that remains after subtracting manger’s fee and underwriting fee
• The ultimate compensation an underwriter receives
• If only syndicate members sell the issue, they are entitled to full takedown
• If selling group members are used, it becomes concession and additional takedown

Question 18

When does all or none apply?

Answer 18

• Only if stated in the official terms of the offer

- Cannot be stated in a firm commitment, as the syndicate has already to promised to buy the entire issue

Question 19

Different definitions for Date of Sale

Answer 19

Competitive: The date the bid is awarded
Negotiated: Date on which contract is signed

-It is also the date the commitment wire is sent

Question 20

Who sets the order period?

Answer 20

The syndicate manager

Question 21

What goes on during the order period?

Answer 21

Members solicit customers for the new issue

-Usually lasts a few hours after the award

Question 22

When does the order period begin?

Answer 22

The earliest of the first bid to the syndicate to buy the new issue OR the purchase of securities from issuer by the syndicate (depends on the commitment type)

Question 23

When does the order period end?

Answer 23

The later of the issuer delivering securities to the syndicate OR when the syndicate no longer has any bonds to sell

Question 24

When does allocation have to be completed?

Answer 24

Within 24 hours of commitment wire being sent

Question 25

When does the syndicate manager have to tell other members what orders received priority?

Answer 25

Within 2 business days of the date of sale

Question 26

When does the syndicate manager have to disclose details surrounding designated orders?

Answer 26

Within 10 business days of the date of sale

• Must name dollar amount, and who is receiving credit
• Customer name is NOT disclosed

Question 27

When are designated order credits paid?

Answer 27

Within 10 calendar days of the date of sale (when issuer delivers securities to syndicate)

Question 28

If the issuer itself designated a portion of the takedown to a particular syndicate member, when is that disclosed?

Answer 28

Within 15 business days following the date of sale or 3 business days after the issuer informs the manager of the special designation

Question 29

G-11

Answer 29

Stipulates the manager must provide an accounting to syndicate members at or before settlement of syndicate account
G-11 also states that when a syndicate member submits a group order, the identity of the person placing the order must be disclosed to the manager

Question 30

G-12 and the Settlement of the Syndicate

Answer 30

States the syndicate account must be settled within 30 days following the date the manager delivered securities to members

Question 31

Related Portfolio

Answer 31

When a syndicate member directs an issue to its own account or one it controls
-Deemed a member order

Question 32

When are good faith deposits returned?

Answer 32

Within 2 business days of settlement

Question 33

If a muni advisor helps prepare the OS, when must it deliver the OS to the syndicate manager?

Answer 33

Promptly after the bid is awarded and at least 2 days before the manager delivers securities to the syndicate members

Question 34

In a negotiated underwriting, when must CUSIP be obtained?

Answer 34

By the manager no later that the date of final pricing

Question 35

If a muni advisor is helping an issuer with a competitive bid, when must CUSIP be obtained

Answer 35

No later than 1 business day following dissemination of Offer of Sale

Question 36

G-37

Answer 36

Political Contribution rules

-Report must be filed electronically month end after a quarter ends