The U.S. Securities Exchange Commission’s “T+1” Rule Now in Effect for Securities Transactions

June 3, 2024 Brian K. Fullmer Business & Corporate Law

By: Brian K. Fullmer

May 28, 2024, marks the first day of the new reduced settlement cycle for most broker-dealer securities transactions pursuant to amended rules adopted by the U.S. Securities Exchange Commission (the “SEC”) on February 15, 2023. These changes reduce the required “settlement time” for stocks, bonds, municipal securities, exchange-traded funds, certain mutual funds, and other securities from two business days to a single business day.

Under the previous rules, if a seller sold shares of a particular stock on Monday, the transaction would not be deemed “settled” for regulatory purposes and, thus, not complete or closed until the following Wednesday. Under the amended rules, however, all applicable securities transactions will settle in a single business day from the date of the transaction – the sale on a Monday, thus, would be deemed settled on Tuesday.

 This reduction in settlement time for public securities transactions can have multiple practical and legal implications for buyers and sellers. If the securities subject to a transaction are held in the form of a physical certificate, full compliance for any transfer may require that the seller of such securities deliver the applicable physical certificate to the broker-dealer on an earlier date. On the buyer’s side, any securities held by broker-dealers will be delivered one day earlier on a seller’s behalf.

For buyers, the reduction in settlement period may require payment for securities transactions one business day earlier, thus potentially requiring firms and individuals to affirm transactions on a “same-day” basis or provide funding earlier than anticipated. In addition, for those trading securities on margin, this reduction in time may conflict with certain terms and provisions in an underlying margin agreement or other terms and conditions of a margin account – for example, a margin agreement may indicate that payment is not due for any margin transactions for two business days, rather than under a reference to the applicable settlement time under prevailing SEC rules. In particular, the change in settlement time may result in a margin interest charge with broker-dealers in the event an investor does not have sufficient funds available in a money market fund to cover the purchase. Because a margin call may settle in less time, investors trading on margin have less time to provide funds to meet the margin call, running a risk of a broker selling securities to meet the margin call.

The reduced settlement time may further have tax implications for buyers and sellers. The cost basis for a transaction in securities is set for tax purposes upon the completion of settlement, and as such, any cost basis decisions in a trade, including commissions or fees paid or dividend reinvestment options, must be made in half the time, with less time to correct any mistakes or make any changes.

While the majority of securities transactions occur on an electronic basis with broker-dealers who require advance funding, and thus the SEC predicts impact from this change to be minimized, all investors should carefully monitor their transactions in the near future to ensure that, if selling, funds are being appropriately swept into interest-bearing money market accounts prior to any transfer to a bank account, and that in the event any unforeseen delays occur due to transaction processing, an appropriate accounting is made for any transaction to ensure that the appropriate amounts of securities and funds were transferred upon settlement. In particular, those individuals with IRAs, 401(k)s, or other retirement plans who are currently making contributions or withdrawals should ensure that funds are being appropriately transferred and swept in or out of portfolios without issue.

If you have any questions regarding the amended rules or the practical implications for your portfolio or business, please email Brian Fullmer at or Jeremy Jarrett at