The SEC published guidance to help investors prepare for upcoming changes to the standard settlement cycle. On September 5, 2017, the standard settlement cycle for most securities transactions will be shortened from three business days after the trade date ("T+3") to two days ("T+2") (see Exchange Act Rule 15c6-1).
In the Investor Bulletin, the SEC provided the definition of "settlement" and highlighted some of the practical implications of the change. For example: (i) an investor may need to deliver a securities certificate to a broker-dealer earlier than they did under the longer standard settlement cycle, (ii) a broker-dealer must deliver securities on behalf of an investor one day earlier under the shorter settlement cycle, and (iii) investors may need to pay for securities transactions one day earlier under the shorter cycle. The SEC also advised investors to consult with their brokers in order to ascertain how the settlement cycle may affect margin agreements.
The SEC also noted that the T+2 transition will apply to the same group of securities that are covered by the T+3 cycle currently: transactions for stocks, bonds, municipal securities, exchange-traded funds, certain mutual funds, and limited partnerships that trade on an exchange.
The SEC directed interested parties seeking additional information to the SEC Order Approving the "T+2" Settlement Cycle (see previous coverage).
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