An underwriting syndicate for a new municipal offering of $10,000,000 has been formed. The syndicate letter specifies that the syndicate is a divided syndicate. Syndicate member, THN Securities has taken a 10% bracket in the offering. When sales begin, THN sells $1,000,000 in bonds. At the end of the offering period, there are $500,000 bonds left unsold. What is the liability of THN at this point?
a) $500,000
b) No further liability
c) $50,000
d) $5,000
The correct answer is b.
A divided or “Western” syndicate is one in which the members stand alone. When a member of such a syndicate has sold its allocation—or bracket—it has no further liability. This is in direct contrast to the undivided—or Eastern—syndicate in which the members have a continuing liability, at their original bracket, for any unsold securities.


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