United States – Moving to Trade Date + 2 Days: Is Your Company Ready?

United States – Moving to Trade Date + 2 Days: Is Your

This GMS Flash Alert reports that corporate issuers and equity managers have about six months to prepare for new rules that give them one day less to settle equity awards.

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In the United States, trade date plus three business days (T+3) will be changing to trade date plus two business days (T+2) later this year.  A Proposed Rule1 issued by the U.S. Securities and Exchange Commission that would change the settlement period for broker-dealer trades from three days from the trading date (T+3) to two days from the trading date (T+2) has a proposed effective date of September 5, 20172.  This date is subject to regulatory support and completion of industry-wide testing in the second and third quarters of 2017.

For more details, see “T+2 and You: Considerations for the Equity Administrator,” (PDF 69 KB) a newsletter published by the KPMG International member firm in the United States.    

WHY THIS MATTERS

As a result of this rule change, corporate issuers and equity managers will be faced with one day less to settle equity awards.  And they have less than six months to prepare; therefore, they should be assessing the scope, requirements, and changes needed to facilitate the implementation of T+2.   

Background

Currently, settlement (i.e., when securities are available to the employee plan participant) for certain securities and asset classes is trade date plus three business days, often referred to as T+3.  The SEC issued a Proposed Rule to change the settlement period for broker-dealer trades to two days from the trading date – that is, T+2 – which was published in the Federal Register on October 5, 2016.

KPMG NOTE

A concerted effort between government and industry is underway to prepare for T+2 settlement.   

Equity administrators should examine their programs and prepare for this upcoming change – looking at process, documentation, and systems, while continuing to monitor the final effective date of the T+2 change.    

FOOTNOTES

1  81 FR 69240. 

2  See www.UST2.com, Frequently Asked Questions, What is T+2?

3  81 FR 69240. 

The information contained in this newsletter was submitted by the KPMG International member firm in the United States.

© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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