Syndicate

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A syndicate is a self-organizing group of individuals, companies, corporations or entities formed to transact some specific business, to pursue or promote a shared interest.

Contents

Etymology

The word syndicate comes from the French word syndicat which means "trade union" ( syndic meaning "administrator"), from the Latin word syndicus which in turn comes from the Greek word σύνδικος (syndikos), which means "caretaker of an issue"; compare to ombudsman or representative. [1]

Definition

The Merriam Webster Dictionary defines syndicate as a group of people or businesses that work together as a team. This may be a council or body or association of people or an association of concerns, officially authorized to undertake a duty or negotiate business with an office or jurisdiction. It may mean an association of racketeers in organized crime. It may refer to a business concern that sells materials for publication (newspaper, radio, TV, internet) in a number of outlets simultaneously, or a group of newspapers under one management. [2]

Labor syndicates

A syndicate, labor syndicate [3] or worker's syndicate can also mean a trade union. This usage mirrors the common meaning of the word's etymological cousins in languages such as French and Spanish.

Worker-managed enterprise

In this sense, the term is also associated with anarchist theory, specifically anarcho-syndicalism, in which trade unions form an alternative to both the nation state and capitalist corporations. Anarchists, syndicalists, and other libertarian socialists use the word "syndicate" to refer to an enterprise managed by its workers. Such an enterprise is governed by a face-to-face meeting of everyone who works there, in which each worker has one vote. Either there are no managers, or the managers are directly elected and recallable. In either case, the most important decisions are made collectively by the whole workforce. This is known as workers' self-management.

Crime syndicates

Crime syndicates are formed to coordinate, promote, and engage in organized crime, running common illegal businesses on a large, national, or international scale. The subunit of the syndicate is a crime family or clan, organized by blood relationships, as seen in the Italian Mafia and the Italian American Mafia crime families (the Five Families dominating New York City crime, namely, the Gambino crime family, Genovese crime family, Lucchese crime family, Bonanno crime family, and the Colombo crime family).

Media syndicates

In media, syndicates are organizations by name and credit. For example, BBC Radio International is a radio syndicated business. A news ticker, residing in the lower third of the television screen image, usually shows syndicated news stories.

Print syndication distributes news articles, columns, comic strips, and other features to newspapers, magazines and websites. They offer reprint rights and grant permissions to other parties for republishing content of which they own/represent copyrights.

Business syndicates

A group formed of several business entities, like companies or corporations, which share common interests in a market but usually are not direct competitors. Larger companies or corporations form syndicates to strengthen their position in the market. Internet companies and corporations, focusing on various Internet ventures, tend to form syndicates within their own group, with direct competitors involved. In such cases, they share a certain type of market, like brand management or search engine optimization, and usually form a Conglomerate Syndicate. They may be syndicated nationally or internationally.

Sales syndicates

A sales syndicate is a cartel with a joint sales agency. [4] Such combinations were widespread before Second World War. The organizational merger of the sales departments of the individual enterprises caused an increased dependence of the cartel member on the cartel administration. This in trend stabilized these combinations. Some headquarters and other premises of these syndicate cartels have remained up to the present via their monument status as historical buildings.

Finance syndicates

In finance, a bank syndicate, often referred to simply as a syndicate, is a group of banks lending a usually large amount of money for a specific purpose and to one single borrower. Syndicated loans are loans underwritten by a bank syndicate and are more common in the US, where financial markets are in corporate ownership rather than private equity markets as in Europe or South America.

Insurance syndicates

Insurance contracts (contracts of indemnity) processed under the syndicate form of business organization date to the Hammurabi Code. The notion of insurance syndicate as a process for supplying indemnity was first codified in Lex Rhodia and is still used today as shipping's Law of General Average.

The Insurance Syndicate as Distinguished from the Corporate Insurer

It is canon to the operation of the insurance syndicate that the liability of the suppliers of surplus is several and not joint. This means that members or subscribers at insurance syndicates obligate themselves to a precise individual separate and several liability rather a joint liability. Insurance syndicates are not "incorporated" and may not be incorporated: the US Supreme Court has held in Roby v Lloyd's [5] that insurance syndicates have no separate existence.

Today, insurance syndicates seem present in three forms:

The UK-based Lloyd's of London Insurance Exchange Model

Some insurance markets such as Lloyd's of London provide insurance coverage underwritten by syndicates of investors who bear the full liability for meeting the costs of any claims. Each member of the syndicate has several liability which is a full and unfettered liability for the costs and expenses for the consequences of the underwriting entered into by the syndicate. [6]

The US-based Insurance Exchange Model

In the United States there are four major insurance syndicates that supply indemnity through the several liability of their syndicate names - which are called subscribing members.

These types of insurance syndicates are operated by Attorneys-in-Fact.

Unregulated governmental and industrial insurance syndicates

Because these arrangements are neither public nor regulated, they are hard to describe and attribute. But upon information and belief, there are thousands of such arrangements in existence around the world where risks are shared by affinity/governmental/industrial groups on a several liability basis. [5]

Lottery syndicates

Lottery syndicates are formed to pool tickets thus increasing the chances of winning. Lottery syndicates are more common in the UK and Europe in general. They are legal in the US, but legal problems are regularly reported. [11]

Crowdfunding

Researchers argue that syndicates may reduce the potential for market failure in crowdfunding, a method that allows creators to raise funds for projects from many different investors through online platforms. Equity crowdfunding allows creators to issue equity to investors when they make an investment in the project. In equity crowdfunding, information asymmetry between the creator and investor may result in a variety of problems and, in some cases, market failure. [12]

A syndicate can be started by an individual, angel investor, or venture capitalist. An individual who wants to form a syndicate creates an investment strategy and discloses it on a crowdfunding platform. Other investors can choose to back the individual, who is the leader. The backing investors must follow the leader's investment strategy and pay them a fee. Syndicates do not exist on all equity crowdfunding platforms. [12]

See also

Related Research Articles

Insurance Equitable transfer of the risk of a loss, from one entity to another in exchange for payment

Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss.

Lloyds of London Insurance market located in the City of London

Lloyd's of London, generally known simply as Lloyd's, is an insurance and reinsurance market located in London, United Kingdom. Unlike most of its competitors in the industry, it is not an insurance company; rather, Lloyd's is a corporate body governed by the Lloyd's Act 1871 and subsequent Acts of Parliament. It operates as a partially-mutualised marketplace within which multiple financial backers, grouped in syndicates, come together to pool and spread risk. These underwriters, or "members", are a collection of both corporations and private individuals, the latter being traditionally known as "Names".

Financial services Economic service provided by the finance industry

Financial services are the economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit-card companies, insurance companies, accountancy companies, consumer-finance companies, stock brokerages, investment funds, individual managers, and some government-sponsored enterprises.

A joint venture (JV) is a business entity created by two or more parties, generally characterized by shared ownership, shared returns and risks, and shared governance. Companies typically pursue joint ventures for one of four reasons: to access a new market, particularly emerging markets; to gain scale efficiencies by combining assets and operations; to share risk for major investments or projects; or to access skills and capabilities. Work by Reuer and Leiblein challenged the claim that joint ventures minimize downside risk.

Underwriting (UW) services are provided by some large financial institutions, such as banks, insurance companies and investment houses, whereby they guarantee payment in case of damage or financial loss and accept the financial risk for liability arising from such guarantee. An underwriting arrangement may be created in a number of situations including insurance, issues of security in a public offering, and bank lending, among others. The person or institution that agrees to sell a minimum number of securities of the company for commission is called the Underwriter.

General insurance

General insurance or non-life insurance policies, including automobile and homeowners policies, provide payments depending on the loss from a particular financial event. General insurance is typically defined as any insurance that is not determined to be life insurance. It is called property and casualty insurance in the United States and Canada and non-life insurance in Continental Europe.

Marine insurance covers the loss or damage of ships, cargo, terminals, and any transport by which the property is transferred, acquired, or held between the points of origin and the final destination. Cargo insurance is the sub-branch of marine insurance, though Marine insurance also includes Onshore and Offshore exposed property,, Hull, Marine Casualty, and Marine Liability. When goods are transported by mail or courier, shipping insurance is used instead.

A reciprocal inter-insurance exchange is an unincorporated association in which policyholders exchange insurance policies to spread around risk by pooling their money together. In the reciprocal setup, the carrier is owned by policyholders, but managed by an attorney-in-fact (AIF). Policyholders of a reciprocal insurance exchange can be individuals, partnerships or businesses and are referred to as subscribers.

Equitas is a group of companies that was formed in 1996 to assume by way of reinsurance the vast and crippling liabilities that had accumulated in the syndicates at Lloyd's of London on insurance policies written on the 1992 and all prior years of account. These liabilities were reinsured by Equitas Reinsurance Limited (ERL), which was also appointed as the run-off agent. The liabilities were then retroceded to Equitas Limited, to which ERL also delegated its run-off function.

Reinsurance sidecars, conventionally referred to as "sidecars", are financial structures that are created to allow investors to take on the risk and return of a group of insurance policies written by an insurer or reinsurer and earn the risk and return that arises from that business. A re/insurer will only pay ("cede") the premiums associated with a book of business to such an entity if the investors place sufficient funds in the vehicle to ensure that it can meet claims if they arise. Typically, the liability of investors is limited to these funds. These structures have become quite prominent in the aftermath of Hurricane Katrina as a vehicle for re/insurers to add risk-bearing capacity, and for investors to participate in the potential profits resulting from sharp price increases in re/insurance over the four quarters following Katrina. An earlier and smaller generation of sidecars were created after 9/11 for the same purpose.

Tokio Marine HCC

Tokio Marine HCC is an international specialty insurance group with offices across the United States, the United Kingdom, Spain, and Ireland. The company is based in Houston, Texas, U.S.A. but has major offices in Atlanta, Barcelona, Boston, Chicago, Dallas, Detroit, Farmington (CT), Frederick (MD), Ireland, Leicester (UK), London, Los Angeles, Madrid, Mount Kisco (NY), and New York City.

ERS (insurance company)

ERS is a specialist motor insurer. It has been providing insurance products for more than 70 years and now provides cover solely via Lloyd's Syndicate 218. ERS offers a diverse range of products, including private car, classic car, van, motorcycle, taxi, minibus, fleet, haulage, agricultural vehicle and motor breakdown.

Beazley PLC is the British parent company of specialist insurance businesses with operations in Europe, the US, and Asia. Beazley manages six Lloyd's syndicates. All Lloyd's syndicates are rated A (Excellent) by A.M. Best and also benefit from the Lloyd's chain of security. Beazley plc is incorporated in the UK. It is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index.

Catlin Group Limited was a Bermuda-based specialty insurance and reinsurance company. Catlin operated six underwriting hubs worldwide and operated more than 55 offices worldwide. It owned the largest syndicate at Lloyd's of London, based on 2011 gross written premiums. Catlin shares were listed on the London Stock Exchange until it was acquired by XL Group plc in May 2015.

Hiscox

Hiscox Ltd. is an Anglo-Bermudan insurance provider, listed on the London Stock Exchange. An underwriter at Lloyd's of London, the company largely specialises in niche areas of the market, offering property and casualty insurance aimed at companies and high-net-worth individuals, as well as cover against such risks as hacking, kidnapping and satellite damage. The company is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index.

Chaucer Holdings

Chaucer is a leading international specialty insurance and reinsurance group. They are headquartered in London, with international hubs for Europe, MENA, Bermuda, Latin America and Asia. Chaucer was acquired by China Reinsurance (Group) Corporation in 2018.

Crowdfunding is a process in which individuals or groups pool money and other resources to fund projects initiated by other people or organizations "without standard financial intermediaries." Crowdfunded projects may include creative works, products, nonprofit organizations, supporting entrepreneurship, businesses, or donations for a specific purpose. Crowdfunding usually takes place via an online portal that handles the financial transactions involved and may also provide services such as media hosting, social networking, and facilitating contact with contributors. It has increased since the passage of the Jumpstart Our Business Startups (JOBS) Act.

Argo Group

Argo Group International Holdings, Ltd, or Argo Group, is a Bermuda-based international underwriter of specialty insurance and reinsurance products in the property and casualty market. In 2017, the San Antonio Express News wrote that "The company has made more than $1 billion in profit over the last decade as a mid-sized player in a niche field insuring complex or hard-to-price risks other insurers won’t touch." Argo was listed on the New York Stock Exchange in May 2018.

Equity crowdfunding is the online offering of private company securities to a group of people for investment and therefore it is a part of the capital markets. Because equity crowdfunding involves investment into a commercial enterprise, it is often subject to securities and financial regulation. Equity crowdfunding is also referred to as crowd-investing, investment crowdfunding, or crowd equity.

Crowdfunding is the practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the Internet. Crowdfunding is a form of crowdsourcing and alternative finance. In 2015, over US$34 billion was raised worldwide by crowdfunding.

References

  1. "What is a syndicate?". http://www.answers.com/: Answers.com. Syndicate comes from the French word syndicat which means trade union (syndic meaning administrator), from the Latin word syndicus, which in turn comes from the Greek word (syndikos), which means caretaker of an issue, compared to ombudsman or representative.Missing or empty |url= (help)
  2. "syndicate". Merriam-Webster, Incorporated. 2014. Retrieved 27 February 2014.
  3. Randal C. Archibold (26 February 2013). "Powerful Leader of Mexican Teachers' Union Is Arrested". The New York Times. Retrieved 25 May 2018. The leader of Mexico’s powerful teachers’ union, the largest labor syndicate in Latin America, has been arrested . . .
  4. Robert Liefmann: Cartels, Concerns and Trusts, Ontario 2001 [London 1932], p. 65, 194.
  5. 1 2 Roby v Lloyd's; 996 F.2d 1353, 61 USLW 2796, Fed. Sec. L. Rep. P 97,458, RICO Bus.Disp.Guide 8307, 1993 U.S. App. LEXIS 13089
  6. "Glossary - Several liability". Lloyd's of London. Retrieved 4 November 2017.
  7. NAIC # 25941; FEIN 74-0959140; TDI Company Number 14-86800; Current TDI Certificate of Authority [CofA] # 14585 granted on April 2, 2008. Unlawfully commenced inter-insuring by receipt of a syndicate name's deposit against a reciprocal contract on either June 20 or June 22, 1922. First one year license (expired February 28, 1926) to commence inter-insuring by reciprocal contract granted on or slightly before March 23, 1925 (two and nine years after USAA's unlawful 1922 "receipt of a first deposit from a "syndicate name").
  8. NAIC # 15598; FEIN: 95-0865765; California Company ID (CA DOI) 0392-1; Certificate of Authority [CofA] granted to commence inter-insuring by reciprocal contract on October 4, 1912
  9. FEIN 25-0466020; PA SOS Entity # 112672; SEC File Number 0-24000 CUSIP 29530P-102; Incorporated April 14, 1925
  10. FEIN 95-0725935; NV Entity C1096-1927 Incorporated 17 Oct 1927; CA [foreign] Entity C0126554
  11. Sarah Coles (28 February 2013). "The dangers of joining a lottery syndicate". AOL.com. Retrieved 27 February 2014.
  12. 1 2 Agrawal, Ajay, Christian Catalini, and Avi Goldfarb. "Are Syndicates the Killer App of Equity Crowdfunding?" California Management Review (2015): 1-16.