T+1 Starts in May. Are You Ready?

"The switch to T+1 also means that these transactions will align with the settlement times for options and government securities, which currently operate on a next-day settlement schedule," according to FINRA.

The Change to T+1

Under the new T+1 settlement cycle, most securities transactions will settle on the business day following their transaction date.

"You might not notice a change, as many brokerage firms currently require investors to have the needed funds in cash accounts before making a purchase," FINRA states.

"But if you normally initiate an Automated Clearing House (ACH) payment for your purchases the day after your trade is executed (e.g., you wait for trade confirmation before sending money from a linked bank account), you'll likely need to make payments a day earlier under the T+1 cycle to ensure the payment has posted by settlement date," according to FINRA.

"Simply initiating an ACH transaction doesn't meet payment requirements; the funds must be deposited in your brokerage firm's bank account."

The SEC "cautions that if you hold a physical, paper securities certificate, you might need to deliver it to your broker-dealer earlier to meet the new shorter settlement cycle," FINRA's guidance warns. "However, it's increasingly rare for investors to hold paper securities certificates."

If a client holds their securities in an electronic format with their broker-dealer, the broker-dealer "will deliver the securities on your behalf one day earlier under the new rule," according to FINRA.

Further, FINRA explains that even though margin requirements in margin accounts are computed on a trade-date basis and aren't changing, "the payment period for Regulation T (initial) margin calls also has been reduced by one day to T+3."

"This means that the change in settlement date doesn't change the time periods related to meeting maintenance margin calls, as these are set based on the date the call occurred," FINRA said.