Divided account

A divided account, also sometimes referred to as a Western account, is a kind of agreement among syndicates, or groups of underwriters. Under this syndication, each member of the group is given an allotted percentage of the new issue, and holds responsibility for the sale of this allotment alone. Should one underwriter be unable to place his portion of the issue, this will be of no concern to the other members of the syndicate. In the same way, once an underwriter places his part of the issue with investors, his task is done.

The opposite of a divided account is an undivided account. Also known as an Eastern account, such a system places the responsibility of selling the entire issue on every member of the syndicate. Each underwriter is still given an allotment, but if there is a portion which remains unsold, all members of the group must take necessary steps in order to expedite its placement.

The system under a divided account may provide an advantage, particularly to investment-savvy underwriters. Those who are able to place their portions immediately do not have to worry about the performance of the rest of the syndicate, which translates into not having to do more work than has been originally assigned. A weak member, for instance, will not be able to slow down the rest of the team, at least not directly. This may also encourage each member to work independently and aggressively, rather than depend on the help of other members. After all, if an underwriter has already sold more than what was originally assigned to him, it may be quite frustrating to have to take responsibility for any unsold portions assigned to other team members.

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