5530. New issue letter

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    1. To obtain the reduced margin requirements in section 5521 for an underwriting commitment, a Dealer Member must be party to a new issue letter.

    2. In subsection 5130(5), a new issue letter is defined as an underwriting loan facility in a form satisfactory to IIROC. For the letter to be satisfactory, it must contain the following minimum terms and conditions:

      1. the letter issuer must provide an irrevocable commitment to advance funds based only on the strength of the new issue and the Dealer Member,

      2. the letter issuer must advance funds to the Dealer Member for any part of the commitment not sold, for an amount based on a stated loan value rate, at a stated interest rate, and for a stated period of time,

      3. the letter issuer must not, if the Dealer Member is unable to repay the loan at the termination date resulting in a loss or potential loss to the letter issuer, have or seek any right of set-off against:

        1. collateral held by the letter issuer for any other obligations of the Dealer Member or its clients,

        2. cash on deposit with the letter issuer for any purpose, or

        3. securities or other assets held in a custodial capacity by the letter issuer for the Dealer Member’s own account or for the Dealer Member’s clients,

        4. to recover the loss or potential loss.

    3. If the new issue letter issuer is not an acceptable institution, the funds that can be drawn under the new issue letter must either be fully collateralized by high-grade securities or held in escrow with an acceptable institution.

    5531. - 5539.  Reserved.

    There is no history log for this rule.

    There is no history log for this rule.