If the syndicate agreement were that each member must pay to the syndicate manager the full selling price in order to get delivery of bonds, then the manager would have ac cumulating, for the member's account, this $143.25 for each bond sold. Of course the manager may distribute this fund of unneces sary syndicate capital back to the members, from time to time as it accumulated. As will be indicated later, several other plans are possible. Though the term is not com monly used, the amount the members pay the manager in order to get bonds for delivery is sometimes called the "take-down price." Often it is stated simply that the member "pays" the manager for the bonds.
We have assumed the situation of an ac count undivided as to carrying, in which all the bonds are carried by a loan arranged by the manager. If the syndicate has divided the bonds for carrying purposes and each member has arranged the loan for the amount of its own participation, deliveries to pur chasers would be made only through notifi cation to and instruction from the mana ger. In this way the manager keeps entire control of the account and can adjust the amount of bonds each member is carrying in proportion to that member's participa tion. Members must report all sales to the manager promptly, as in the case of the un divided carrying account. The manager will either direct the member to make delivery from bonds the member is carrying or will procure bonds from some other member for the member who has made the sale. If the member makes delivery from the bonds it is carrying, it will be accountable to the syndi cate manager for the difference between the purchase price, which the member has already paid, and the price at which the bonds are sold. If the manager wishes to supply the member which has made the sale with bonds for delivery from those which some other member is carrying, then the manager will call on the selling member to pay just the same as in the case of the undivided carrying account, and, of the money so paid in by the selling member, the manager will pay over to the carrying member, from which the manager wants to take the bonds, a sum equal to the purchase price of the bonds, which is the amount the carrying member had borrowed and advanced to carry them. The carrying member then has the funds to pay off the pro rata of its loan and is reimbursed for the pro rata of the capital advanced for the syndicate operation.
To recapitulate, let us take the case of the first account presented. We assumed that the syndicate sold all the bonds at the full price of 98.50 and that the syndicate expense totaled $27,500, of which profit on the inter est account reimbursed $2500. Assume that this account was undivided as to carrying and that the members were to pay the man ager the full selling price when calling for bonds to deliver. Then, taking a single bond as the unit transaction, we get these results: All the conditions governing the conduct of the account are not necessarily determined at the time the syndicate is formed. Ordi narily only absolutely necessary matters are stipulated at the time the members agree to join. After the formation of the syndicate the members hold a meeting to settle such further things as need to be determined. Even so important a consideration as the exact selling price may be left to this meeting. The several banking houses joining in the account will not sign a formal legal document drawn up by their lawyers. They will simply confirm by an exchange of letters the understanding arrived at in the formation of the account and in the subsequent meeting.
Our discussion of the account has shown in a general way the powers and duties of the manager. We assumed, what would ordina rily be the case, that the member who had control of the issue, or who was most influ ential in forming the syndicate, became manager. Such an account as we have dis cussed has really the characteristics of a partnership and the manager would in no sense be a dictator. Each member would have an opportunity to exert an influence in determining the conduct of account affairs. Naturally the manager would keep the books of the account and attend to the distribution of profits or apportionment of losses.
Showing the informal manner of the or ganization of such a syndicate as we have described these letters might be the only evi dence in writing of its terms: — Since these syndicate transactions are regularly entered into and carried out in good faith, and the parties are thoroughly familiar with them, serious difficulties seldom arise. The agreements, however, might well be more fully expressed.