We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is a Distributing Syndicate?

Malcolm Tatum
By
Updated: May 17, 2024
Views: 6,169
Share

A distributing syndicate is a collection of investment banks that band together for the purpose of underwriting and acting as the distributor for a new offering of a given security. Sometime referred to as an underwriting group or investment banking syndicate, the member banks who are part of a distributing syndicate are able to pool resources in order to accomplish the distribution to maximum effect. At the same time, the banks involved in the syndicate share the potential risk associated with underwriting and distributing a new security offering.

The creation of a distribution syndicate has several advantages, even for smaller banking institutions. By joining with other banks that are primarily located in other parts of the country or the world, the smaller banks establish a network for distribution that they would never be able to create on their own. Since each of the member banks brings contacts into the network that are unique, the ability to distribute the new security to a wider range of prospective investors is greatly enhanced. Thus, a security that might have undergone a relatively slow period of growth over a longer period of time may receive much more attention from more investors in a shorter period of time.

Banding together in a distributing syndicate also helps to minimize the risk associated with launching a new security. This is especially important for smaller banks, since they are less likely to have enough resources on hand to absorb the loss in the event the security fails to perform as expected. However, the distributing syndicate strategy means that no one member has to incur the entire loss if the security does not attract investors and does not rise in value within a reasonable period of time.

Coming together as a distributing syndicate also makes it possible for smaller banks to effectively compete with larger institutions. While no individual member bank has the resources needed to successfully distribute a new security offering, the cumulative resources found among the member banks can make it possible for the syndicate to handle even large business projects. From this perspective, the syndicate arrangement is a definite benefit to the member banks, as the distributing syndicate makes it possible for them to secure business that they could never have managed to secure on their own.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.

Editors' Picks

Discussion Comments
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
Share
https://www.wisegeek.net/what-is-a-distributing-syndicate.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.