May 13, 2024

Countdown to T+1: Are You Ready?

We are now just a little over two weeks away from the new T+1 settlement timeframe, which will be implemented over the Memorial Day holiday weekend across securities markets in the U.S. What seemed like a distant to-do list item the last time I blogged about the move to T+1 is now very much a reality. Here are few last-minute considerations for you as we hurtle toward this more rapid settlement cycle:

1. If you have a contemplated capital markets transaction over the course of the next few weeks, it will be important to adjust the timeline for when you will conduct diligence calls, obtain signed documents and make filings with the SEC. For example, deal teams will need to prepare for a much quicker timetable for filing a prospectus or prospectus supplement in a T+1 settlement cycle, even though SEC rules permit filing on the second or fourth day after first use of a prospectus or prospectus supplement.

2. If you have a selling securityholder transaction that will settle after the T+1 settlement cycle goes into effect, keep in mind all of the documents and actions that will be required in anticipation of settlement, including such things as medallion guarantees, delivery of “wet ink” signatures and “know your customer” or “customer due diligence” documentation and delivery of delegending and local counsel opinions. Now is the time to plan for these matters given the impending compressed settlement timeframe.

3. For issuers with active “at-the-market” or “ATM” offerings, note that, after the Memorial Day weekend, ATM sales will settle on a T+1 basis, so now is a good time to modify your procedures and timelines around ATM sales to accommodate the faster settlement cycle.

4. Beginning on May 29, 2024, the ex-dividend and ex-rights dates for dividend payments and rights distributions will be the same date as the record date for the relevant dividend or distribution. During the transition, ex-dividend dates will be as follows: (i) if the Record Date is May 24, the Ex-Dividend Date will be May 23; (ii) if the Record Date is May 28, the Ex-Dividend Date is May 24; and (iii) if the Record Date is May 29, the Ex-Dividend Date is May 29.

5. If you are contemplating a global securities offerings, note that markets outside North America will remain on their current settlement cycle, potentially resulting in conflicting timelines for documentation and funds flow. These issues may be particularly acute when dealing with markets in Asia due to time zone issues.

With just two weeks to go, now is the time to act! This is one of those times when pulling out the last deal’s timeline and documents just won’t cut it, you will need to dig deep to anticipate all of the potential consequences of a faster settlement, while managing your client’s expectations.

– Dave Lynn