4.2.2.2.5. Forming the Syndicate: Syndicate Letter
Before a corporate offering of securities, underwriters may solicit interest from potential investors, but they cannot take presale orders. Since municipal bonds are exempt from the Securities Act, however, municipal underwriters can take presale orders from clients, and they do so assuming various interest rates. This helps them gauge the demand for the issue and determine what their bid should be.
To get the broadest possible view of the market and reach the maximum number of prospective investors, underwriters will form a syndicate prior to securing an underwriting bid.
Prior to making their bids, potential underwriters try to collect as much information as pos