May 22, 2024

T+1: Next Tuesday Is the Day

While we celebrate the unofficial start of summer and observe Memorial Day this weekend, U.S. securities markets will transition to securities settlements of T+1, returning us, as Chair Gensler noted, to “the settlement cycle that we had in the United States most of the first 50 years of Memorial Days.” Yesterday, Chair Gensler issued a statement on the upcoming implementation date touting the immediate benefit to everyday investors — if they “sell their stock on a Monday, shortening the settlement cycle will allow them to get their money on Tuesday” — and highlighting the SEC staff’s efforts to monitor and facilitate this transition:

Since the SEC voted to establish a T+1 settlement cycle in the U.S., SEC staff has been monitoring on a continuous basis the efforts of market participants to prepare for the shorter settlement cycle and coordinating with regulatory authorities in North America, Europe, Asia, and other jurisdictions around the world. In March, to help market participants prepare for the upcoming move to T+1, SEC staff published a risk alert, responses to frequently asked questions, and an Investor Bulletin.

As the compliance date of May 28, 2024 approaches, the Commission will continue its efforts to help facilitate a successful transition.

For issuers and offerings, this Wilson Sonsini alert reminds us that parties can still agree to a longer settlement cycle for firm commitment underwritten offerings under Rule 15c6-1 — traditionally used for debt capital markets transactions rather than equity. And despite the T+2 timeframe for offerings that price after 4:30 p.m. ET, “the majority of equity transactions, including IPOs and follow-on offerings, will close one day after trading begins.”

Meredith Ervine