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91-63 SEC Approval of Amendments to the NASD Uniform Practice Code

SUGGESTED ROUTING:*

Operations
Trading
*These are suggested departments only. Others may be appropriate for your firm.

EXECUTIVE SUMMARY

On September 13, 1991, the Securities and Exchange Commission (SEC) approved amendments to the NASD's Uniform Practice Code (Code or UPC) to update and amend, where necessary, provisions that were obsolete or that did not conform to current industry standards and procedures. The amendments to the Code, among other things, consolidate redundant provisions, clarify certain provisions, and provide for the ultimate delivery of aged fails, such as non-transferable, bankrupt, worthless, and expired securities. The amendments will take effect on November 1, 1991. The text of the amendments follows this notice.

SUMMARY OF PROPOSED AMENDMENTS

Section 3 — Definitions

Section 3 is amended by adding definitions of the terms "ex-date," "trade date," and "immediate return receipt." In addition, the amendments clarify the definitions of "written notices," "Committee," and "record date."

The definition of the term "ex-date" is the date on which a security is traded without a specific dividend. The definition of the term "trade date" is the date on which the dealer in a later time zone accepts the trade, provided that dealer is accepting a bid or offer. The definition of "immediate return receipt" is being added to clarify the process for the transmittal of written notices and means the acknowledgement by the receiving member of a written notice. The return receipt must be made via the same media as the notice.

The amendments to the definitions permit a written notice to be delivered by fax, in addition to the methods currently specified. The definition of "record date" will now include equity securities among the types of securities, and dividends or any other distribution among the types of distributions, for which a record date is fixed for a distribution.

Section 4 Delivery Dates

Subsections (a) through (d), relating to "cash," "regular way," "seller's option," and "buyer's option" delivery dates, respectively, are being deleted from Section 4 and added to Section 12. Subsections (e) and (f), relating to "when, as, and if issued/distributed" delivery dates, will be retained in Section 4 and renumbered as subsections (c) and (d).

New subsections 4(a) and 4(b), relocated from Section 11, set forth the requirements for the contents of confirmations related to "when, as, and if issued/distributed" contracts. New Section 4, when published in the NASD Manual, will also include the sample form confirmations now located after Section 11.

Section 5 — Transactions in Securities "Ex-Dividend," "Ex-Rights," or "Ex-Warrants"

The NASD is adding language in subsection 5(b) to codify the current treatment of cash dividends or distributions, to reorganize subsection 5(b), and to eliminate current subsections 5(d)(1) and 5(d)(2) as redundant with language contained in renumbered subsections (b) and (c).

Section 6 — Transactions "Ex-Interest" in Bonds Which Are Dealt in "Flat"

The NASD is amending Section 6 to conform it to amended Section 5 and to renumber certain subsections.

Section 7 — "Ex" Liquidating Payments

The NASD is amending Section 7 to add a reference to Section 6 to the current reference to Section 5 to reflect that liquidating payments may be applied to both equity and debt.

Section 11 Reserved

Section 11 currently addresses confirmations on "when, as, and if issued/distributed" contracts. The changes move the language of Section 11 to Section 4 and reserve Section 11 for future amendments to the Code.

Section 12 — Dates of Delivery

The NASD is moving language from Section 4 relating to the time, place, and date of delivery for all types of transactions to Section 12. New subsections 12(e) through 12(g) relate to contracts due on holidays or Saturdays, delayed delivery, and prior to delivery date. The existing language of Section 12 relating to time and place of delivery is retained and renumbered as subsection 12(h).

Under new subsection 12(e), contracts due on a nonbusiness day mature on the next business day. New subsection 12(f) provides that delayed delivery shall be at the office of the purchaser on the date agreed to at the time of the transaction. Finally, new subsection 12(g) provides that if a seller tenders delivery before the stated time, acceptance shall be at the buyer's election, and rejection of delivery will not prejudice the buyer's rights.

Section 27 — Delivery of Securities Called for Redemption or Which Are Deemed Worthless

The NASD is adding a new subsection 27(b) to provide an alternative method of resolving a fail-to-deliver where the security is deemed worthless. The new subsection 27(b) provides that where securities have no market value and there has been a public announcement to that effect, delivery may consist of the worthless securities or a Letter of Indemnity securing any rights and privileges that may accrue to the holders of the physical security. Such delivery will close out the contract and must be accompanied by documentation evidencing the worthlessness of the security.

Section 29 — Assignments and Powers of Substitution; Delivery of Registered Securities

The NASD is consolidating the provisions of Section 38 into new subsection 29(e) and renumbering, as necessary, the remaining subsections of Section 29.

Sections 31, 32, 35, 36, 37, and 38 Elimination of Notorials and Miscellaneous Amendments

The NASD is amending Section 31 to eliminate the requirement that notorials be attached to securities if the transfer books are closed indefinitely. A transfer indemnification may be used in lieu of a notorial. The NASD believes that the amendment will eliminate the need to attach large quantities of paper to securities and will allow the removal of such notorials where they are currently used. Under the amendments, the member will then assume liability for the correctness of the certificate. The NASD does not believe the member will be exposed to any significant liability, and that any additional exposure will be offset by the availability of timely settlement.

Amendments to Section 32 eliminate reference to notorials and reference the transfer indemnification provision set forth in Section 31. The changes to Section 36 reflect the renumbering of Section 29.

The provisions of Section 35, relating to certificates in the name of married women, are being deleted as obsolete, and the section reserved for use in later amendments. And finally, the provisions of Section 37 relating to certificates in joint tenancy are being eliminated as redundant of the provisions in Section 29, and the section reserved for use in later amendments.

The provisions of Section 38 are being consolidated into Section 29 and the section reserved for later amendments.

Section 56 — Irregular Delivery — Transfer Refused — Lost or Stolen or Confiscated Securities

The NASD is adding the term "confiscated" to the category of irregular deliveries to accommodate situations in which government officials seize securities.

Section 60 — "Selling Out"

The NASD is properly identifying the Uniform Reclamation Form (Form) and providing for equivalent depository-generated advice in the absence of the Form. Subsection 60(b) relating to the proper notice of sell-out is being amended to conform to the recent amendments to Section 59 on buy-ins. Section 59 was amended pursuant to NASD rule filing SR-NASD-90-1, approved by the SEC on December 18, 1990.

Section 61 — Rights and Warrants

The NASD is providing for alternative methods of settling contracts when the securities have expired by their terms. The method may only be used more than 30 days after expiration. Deliveries under this method shall consist of the expired securities or a Letter of Indemnity, and, in the case of units in which some of the components have expired, the unexpired components.

EFFECTIVENESS OF AMENDMENTS

These amendments, which were approved by the SEC on September 13, 1991, will become effective on November 1, 1991.

Questions regarding this rule filing may be directed to Elliott R. Curzon, General Counsel's Office, at (202) 728-8451, or to Dorothy Kennedy, Uniform Practice Department, at (212) 858-4340.

TEXT OF AMENDMENTS TO THE UNIFORM PRACTICE CODE

(Note: New language is underlined; deleted language is deleted.)

* * * * *

Definitions

Sec. 3.

* * * * *

Written notices

(b) The term "written notice," as used in this Code, shall include a notice delivered by hand, by letter, teletype, telegraph, TWX, FAX or other comparable media.

Record date

(d) As used in this Code the term "record date" means the date fixed by the trustee, registrar, paying agent or issuer for the purpose of determining the holders of equity securities, bonds, similar evidences of indebtedness or unit investment trust securities entitled to receive dividend, interest or principal payments or any other distributions.

Ex-date

(e) The term "ex-date" as used in this Code shall mean the date on and after which the security is traded without a specific dividend or distribution.

Trade date

(f) In a transaction between time zones where the bid or offer is accepted in a later time zone than that of the originator, the correct trade date shall be the day on which the dealer in the later time zone accepts the trade.

Immediate return receipt

(g) The term "immediate return receipt" as used in this Code, shall mean the acknowledgement by the receiving member of a written notice and which shall be issued, upon receipt, via the media in which such notice is received.

Delivery Dates

Sec. 4.

[For "cash"

(a) In connection with a transaction for "cash," delivery shall be made at the office of the purchaser on the day of the transaction.]

["Regular way"

(b) In connection with a transaction "regular way," delivery shall be made at the office of the purchaser on, but not before, the fifth business day following the date of the transaction; except that if the seller tenders delivery before the fifth business day, acceptance shall be at the option of the purchaser, and rejection of such delivery by the purchaser shall be without prejudice to his rights.]

["Seller's option"

(c) In connection with a transaction "seller's option," delivery shall be made at the office of the purchaser on the date on which the option expires; except that delivery may be made by the seller on any business day after the fifth business day following the date of transaction and prior to the expiration of the option, provided the seller delivers at the office of the purchaser, on a business day preceding the day of delivery, written notice of intention to deliver. Contracts maturing on a Saturday, half-holiday, or holiday shall carry over to the next business day.]

["Buyer's option"

(d) In connection with a transaction "buyer's option," delivery shall be made at the office of the purchaser on the date on which the option expires; except that if the seller tenders delivery before that time, acceptance shall be at the election of the purchaser, and rejection of such delivery by the purchaser shall be without prejudice to his rights. Contracts maturing on a Saturday, half-holiday, or holiday shall carry over to the next business day.]

Confirmations or comparisons

(a) A confirmation covering a transaction in a security "when, as and if issued" shall adequately identify the security and the plan, if any, under which the security is proposed to be issued.
(b) A confirmation covering a transaction in a security "when, as and if distributed" shall adequately identify the security and the plan, if any, under which the security is proposed to be distributed.

"When, as and if issued"

(c)[e] In connection with a transaction in a security "when, as and if issued," delivery shall be made at the office of the purchaser on the date declared by the Committee: except that if no delivery date shall be declared by the Committee, [(a)](1) delivery may be made by the seller on the business day following the day upon which the seller has delivered at the office of the purchaser written notice of intention to deliver, and [(b)](2) open market "when, as and if issued" contracts in securities currently being publicly offered through a syndicate or selling group shall be settled on the date such syndicate or selling group contracts are settled: provided, however, delivery of securities in accordance with this subsection shall be made during the normal delivery hours in the community where the buyer is located.

"When, as and if distributed"

(d)[f] In connection with a transaction in a security "when, as and if distributed," delivery shall be made at the office of the purchaser on the date declared by the Committee: except that if no delivery date shall be declared by the Committee, delivery may be made by the seller on the business day following the day upon which the seller has delivered at the office of the purchaser written notice of intention to deliver.

Standard Form of "When, As and If Issued" or "When, As and If Distributed" Contract

No change.

Standard Form of "When, As and If Issued" or "When, As and If Distributed" Contract

No change.

Transactions in Securities "Ex-Dividend," "Ex-Rights" or "Ex-Warrants"

Sec 5.

* * * * *

Normal ex-dividend, ex-warrants dates

(b)(1) In respect to cash dividends or distributions, or stock dividends, and the issuance or distribution of warrants, which are less than 25% of the value of the subject security, [except as noted below,] if definitive information is received sufficiently in advance of the record date, the date designated as the "ex-dividend date" shall be the fourth business day preceding the record date if the record date falls on a business day, or the fifth business day preceding the record date if the record date falls on a day designated by the Committee as a non-delivery date.
(2) In respect to cash dividends or distributions, stock dividends and/or splits, and the distribution of warrants, which are 25% or greater of the value of the subject security, the ex-dividend date shall be the first business day following the payable date.
(3) In respect to stock dividends and/or splits relating to American Depository Receipts (ADR's) and foreign securities, the ex-dividend or ex-warrants date shall be designated by the Committee.

Late information re ex-dividend, ex-warrants dates

(c)[(2)] If definitive information is not received sufficiently in advance of the record date to permit designation of an ex-dividend or ex-warrants date in accordance with paragraph (b)(1) hereof, the date designated shall be the first business day which, in the opinion of the Committee, shall be practical having regard to the circumstances pertaining.

Normal ex-rights dates

(d)[(c)](1) In respect to transferable rights subscription offerings, if definitive information is received sufficiently in advance of the effective date of the registration statement, the date designated as the ex-rights date shall be the first business day after the effective date of the registration statement.

Late information re ex-rights dates

(2) If definitive information is not received sufficiently in advance of the effective date of the registration statement to permit designation of an ex-rights date in accordance with the paragraph (d)[(c)](1) hereof, the date designated shall be the first business day which in the opinion of the Committee shall be practical having regard to the circumstances pertaining.

[Normal ex-warrants dates

(d)(1) In respect to the issuance or distribution of warrants, if definitive information is received sufficiently in advance of the record date, the date designated as the ex-warrants date shall be the fourth business day preceding the record date if the record date falls on a business day, or the fifth business day preceding the record date if the record date falls on a day designated by the Committee as a non-delivery date.]

[Late information re ex-warrants dates

(2) If definitive information is not received sufficiently in advance of the record date to permit designation of an ex-warrants date in accordance with paragraph (d)(1) hereof, the date designated shall be the first business day which, in the opinion of the Committee, shall be practical having regard to the circumstances pertaining.]

Transactions "Ex-Interest" in Bonds Which Are Dealt in "Flat" Sec. 6

[Transactions except for cash] Normal ex-interest dates

(a) All transactions, except "cash" transactions, in bonds or similar evidences of indebtedness which are traded "flat" shall be "ex-interest" as prescribed by the following provisions:
(1) On the fourth business day preceding the record date if the record date falls on a business day.
(2) On the fifth business preceding the record date if the record date falls on a day other than a business day.
(3) On the fifth business day preceding the date on which an interest payment is to be made if no record date has been fixed.

Late information re ex-interest dates

(b)[(4)] If notice of payment of interest is not made public sufficiently in advance of the record date or the payment date, as the case may be, to permit the security to be dealt in "ex-interest" in accordance with [the foregoing provisions,] paragraph (a) hereof, such security shall be dealt in "ex-interest" on the first business day [following public notice of the record date or the payment date, as the case may be] which, in the opinion of the Committee, shall be practical having regard to the circumstances pertaining.

"Ex" Liquidating Payments Sec. 7.

All transactions except "cash" transactions in stocks, bonds or similar evidences of indebtedness shall be "ex" liquidating payments or payments on account of principal in accordance with the formula set forth in Sections 5 and 6 of this Code.

* * * * *

[Confirmations On "When, As And If Issued" and " When, As And If Distributed" Contracts]

Sec. 11. RESERVED

(The provisions in this section, including sample confirmations, have been moved to Section 4.)

Delivery of Securities [Time and Place] Dates of Delivery

Sec. 12.1

For "cash"

(a) In connection with a transaction for "cash," delivery shall be made at the office of the purchaser on the day of the transaction.

"Regular way"

(b) In connection with a transaction "regular way," delivery shall be made at the office of the purchaser on, but not before, the fifth business day following the date of the transaction.

"Seller's option"

(c) In connection with a transaction "seller's option," delivery shall be made at the office of the purchaser on the date on which the option expires; except that delivery may be made by the seller on any business day after the fifth business day following the date of transaction and prior to the expiration of the option, provided the seller delivers at the office of the purchaser, on a business day preceding the day of delivery, written notice of intention to deliver,

"Buyer's option"

(d) In connection with a transaction "buyer's option," delivery shall be made at the office of the purchaser on the date on which the option expires.

Contracts due on holidays or Saturdays

(e) Contracts due on a day other than a business day shall mature on the next business day.

"Delayed-delivery"

(f) In connection with a transaction made for "delayed-delivery" delivery shall be at the office of the purchaser on the date agreed upon at the time of the transaction.

Prior to delivery date

(g) If in contracts executed pursuant to subsections (b), (d) and (h) of this rule, the seller tenders delivery before the stated time, acceptance shall be at the election of the purchaser, and rejection of such delivery by the purchaser shall be without prejudice to his rights.

Time and place of delivery

(h)[(a)] Delivery shall be made at the office of the purchaser between the hours established by rule or practice in the community where such office is located. If the purchaser maintains more than one office, delivery shall be made at the office with which the transaction was effected, unless delivery instructions are provided at the time of the transaction.

* * * * *

Delivery of Securities Called for Redemption or Which are Deemed Worthless

Sec. 27.

Securities called for redemption

(a) A certificate of stock or a bond shall cease to be a good delivery upon publication of notice of call for redemption, except when an entire issue is called for redemption and except against transactions in "called stock" or "called bonds" dealt in specifically as such.

Securities deemed worthless

(b)(1) In contracts for securities where a public announcement or publication of general circulation discloses that the securities have been deemed worthless, deliveries shall consist of (i) the worthless securities; or (ii) a Letter of Indemnity which shall grant the purchaser any rights and privileges which might accrue to the holders of the physical securities.
(2) Deliveries effected pursuant to subsection (b)(1) shall operate to close-out the contract and must be accompanied by documentation evidencing that the security was deemed worthless after the original execution date of the contracts. Such contracts shall be settled at the existing contract price.
(3) For purposes of this section, securities deemed worthless shall be those instruments which have no known market value.

* * * * *

Assignments and Powers of Substitution; Delivery of Registered Securities Sec. 29.

(a)-(d) No change.

* * * * *

Two or more names

(e) A certificate registered in the names of two or more individuals or firms shall be a good delivery only if signed by all the registered owners.

(Subsections (e) through (i) are renumbered (f) through (j), respectively.)

* * * * *

[Acknowledgements and Sample Forms] Certificate of Company Whose Transfer Books Are Closed2

Sec. 31.

General requirements

[(a) The assignment and each power of substitution pertaining to a certificate of a company whose transfer books are closed indefinitely for any reason shall be properly acknowledged before an officer having authority to take acknowledgements under the laws of the State in which such instruments are executed and shall bear the seal of the signing officer if required by statute. Any alternation or correction in an acknowledgement shall be properly noted by the signing officer.]
(a) A certificate of a company whose transfer books are closed indefinitely for any reason shall be a good delivery only if the required ownership transfer indemnification is affixed to or recorded upon the certificate. The indemnification acknowledges the assignor(s)' ultimate responsibility for the ownership of the certificate as of the date of the indemnification and shall be affixed or recorded only once during the lifetime of the certificate. Certificates delivered pursuant to this section must conform with all the applicable delivery requirements set forth in Section 29 of this Code.

[Executed by an individual

(b) In an acknowledgement of an assignment or power of substitution executed by an individual, the officer before whom the acknowledgement is executed shall certify that he knows the person signing to be the person named in the certificate or in the power of substitution, and that the signer acknowledged his signature.

Executed in name of firm

(c) In an acknowledgement of an assignment or a power of substitution executed in the name of a firm, the officer before whom the acknowledgement is executed shall certify that he knows the person executing the acknowledgement and knows him to be, or to have been on the date of execution of the assignment or power of substitution, a member of the firm, or authorized to sign for the firm under a power of attorney, and that he acknowledged that he executed the assignment or power of substitution as the act or deed of the firm.]

Sample Ownership Transfer

Indemnification Stamp.

Date: ...............

The undersigned owner of this certificate (number) representing ............... shares of ............................................. hereby certifies the transfer of all ownership therewith to the bearer hereby. We acknowledge that the transfer books of the herein named corporation are closed and agree to accept responsibility in accordance with the provisions of Section 31 of the NASD's Uniform Practice Code.

NAME OF MEMBER .............................................

AUTHORIZED SIGNATURE .............................................

Certificate in Name of Corporation, etc.3

Sec. 32.

Transfer books open.

(a) No change.

* * * * *

Transfer books closed

(b) Where a certificate, an assignment or a power of attorney is in the name of a corporation and the transfer books of the issuing company are closed indefinitely for any reason, the certificate shall [not] be a good delivery if [unless] the assignment or other instrument effecting transfer on the corporation's behalf is executed by an officer of such corporation, other than the secretary, and is accompanied by (1) a guarantee of such officer's signature executed by a person with the authority to make such a guarantee; [by a bank which is a member of the Federal Deposit Insurance Corporation, (2) an acknowledgement in proper form of such execution by such officer, (3)] (2) a copy of a corporate resolution and [in proper form authorizing such execution by such officer, certified by the secretary or other appropriate corporate officer to be in effect on the date of such execution, (4)] a completed and executed certificate of incumbency; [executed by the secretary or other appropriate corporate officer, certifying as to the office and signature of the executing officer as of the date of such execution, and (5) an acknowledgement in proper form of the certification of the resolution and the certificate of incumbency.] and (3) the ownership transfer indemnification, as provided in Section 31, affixed to or recorded on the certificate.

SAMPLE CERTIFICATE AND AUTHORIZING RESOLUTION/CERTIFICATE OF INCUMBENCY

I hereby certify that at a meeting of the Board of Directors of ............................................., a corporation organized under the laws of the State of ............................................., held the ............................................. day of ............................................., 19.........., at which a quorum was present and acting throughout, the following resolution was duly adopted and is now in full force and effect:

RESOLVED, that any one of the following officers of this Corporation, viz: the President, Vice President, Treasurer or Secretary, be and is hereby fully authorized and empowered to sell, assign, transfer and deliver any and all shares of stock, bonds, debentures, notes, evidences of indebtedness, or other securities now or hereafter standing in the name of or owned by this Corporation, and to make, execute, and deliver, any and all written instruments necessary or proper to effectuate the authority hereby conferred.

I further certify that the authority thereby conferred is not inconsistent with the Charter or By-Laws of this Corporation, and that the following is a true and correct list of the officers of this Corporation authorized to act.

Signing Officers:

In witness, whereof, I have hereunto set my hand and the seal of said Corporation this ............................................. day of ............................................., 19 ..........

(Affix Corporate Seal)

.............................................

Secretary

The foregoing certification and the assignment of the securities should be executed by different officers.

* * * * *

[Certificate in Name of Married Woman]

Sec. 35.RESERVED

(Entire section deleted)

Certificate in Name of Deceased Person, Trustee, etc.4

Sec. 36.

* * * * *

(a) No change.
(b) A certificate shall be a good delivery with an assignment or a power of substitution executed by a: (1) domestic individual executor(s) or administrator(s); (2) domestic individual trustee(s) under an inter vivos or testamentary trust; or (3) domestic guardian(s) including committees, conservators and curators. These exceptions to paragraph (a) above are to cover transfer that will be effected by transfer agents without additional documentation. This paragraph (b) shall apply only to securities of a domestic issuer (organized under the laws of any state in the United States or District of Columbia) which are registered in the names(s) of (1), (2) or (3) of this paragraph (b). Certificates delivered pursuant to this paragraph (b) must be properly assigned, and the signature(s) to the assignment must be guaranteed pursuant to section 29[(g)](h).

* * * * *

[Joint Tenants, etc.]

Sec. 37.RESERVED

(Entire section deleted)

[Two or More Names]

Sec. 38. — RESERVED

(Entire section deleted)

* * * * *

Irregular Delivery — Transfer Refused — Lost or Stolen or Confiscated Securities

Sec. 56.

* * * * *

Lost or stolen or confiscated securities

(c) Reclamation, by reason of the fact that a security is lost or stolen or confiscated shall be within 30 months after the settlement date of the contract.
(d) The running of the 30-month period described in Section 56 shall not be deemed to foreclose a member's rights to pursue its claim via other open avenues, including but not limited to the Association's arbitration procedure.

* * * * *

"Selling Out" Sec. 60.

Conditions permitting "sell-out"

(a) Upon failure of the buyer to accept delivery in accordance with the terms of the contract, and lacking a properly executed Uniform Reclamation [or Rejection] Form or the equivalent depository generated advice for depository eligible securities [(Form #801)] meeting the requirements prescribed in Section 52 [[ΒΆ 3552]] of this Code, the seller may, without notice, "sell-out" in the best available market and for the account and liability of the party in default all of any part of the securities due or deliverable under the contract.

Notice of "sell-out"

(b) The party executing a "sell-out" as prescribed above shall, as promptly as possible on the day of execution, but no later than the close of business, local time, where the buyer maintains his office, [via hand delivery, telegram, TWX, or other comparable written media,] notify the broker/dealer for whose account and risk such securities were sold of the quantity sold and the price received.[, and shall promptly mail or deliver] Such notification should be in written or electronic form having immediate receipt capabilities. A[a] formal confirmation of such sale[.] should be forwarded as promptly as possible after the execution of the "sell-out".

Sec. 61.

Rights and Warrants

* * * * *

Securities which have expired by their terms

(e)(1) In contracts for warrants, rights or other securities which have expired by their terms, deliveries effected more than thirty (30) days after expiration shall consist of (i) the expired securities; or (ii) a Letter of Indemnity in lieu of the expired instrument.
(2) In the case of units or other securities of which one or more of the integral parts of the instrument has expired by its terms, after expiration, the instrument shall cease to be a unit as originally contemplated in the contract. Deliveries effected after expiration shall consist of the unexpired security and (i) the expired instrument; or (ii) a Letter of Indemnity in lieu of the expired instrument.
(3) Deliveries effected pursuant to subsections (e)(1) and (2) of this section shall be settled at the existing contract price.

* * * * *

SAMPLE LETTER OF INDEMNITY

DATE _______________

TO: _____________________________________________

RE: (Quantity and Description) ______________________________

CUSIP #: _______________

For value received the undersigned hereby assigns, transfers and sets over to you all rights and privileges which may accrue on the above contract made on (Date of Contract) at (Contract Price) for settlement (Settlement Date).

Upon acceptance of this delivery in lieu of physical certificates, we agree, for ourselves, our successors, assigns, heirs, executors and administrators, to at all times indemnify and hold harmless ______________________________ from and against any and all claims, liabilities, damages, taxes, charges and expense sustained or incurred by reason of this action. Acceptance of this delivery shall operate to close-out the above stated contract in accordance with the provisions of the NASD's Uniform Practice Code.

.............................. (Member Firm)

.............................. (Official Signature)

at

If any questions, please contact _______________ (Telephone Number) _______________.


1 Subsections (a) through (d) have been relocated from Section 4. Subsections (e) through (g) are new provisions which incorporate portions of old Sections 4(b)-4(d).

2 The Sample Ownership Transfer Indemnification Stamp following this section replaces all of the Sample Notorial Acknowledgements in the NASD Manual following Sections 31, 32, 35, 36, and 37.

3 The Sample Notorial Acknowledgements, the Sample Certificate and Authorizing Resolution, and the Sample Certificate of Incumbency in the NASD Manual following Section 32 have been replaced with the Sample Ownership Transfer Indemnification Stamp following Section 31 and the Sample Certificate and Authorizing Resolution Certificate of Incumbency following this section.

4 The Sample otorial Acknowledgements in the NASD Manual following Section 36 have been replaced by the Sample Ownership Transfer Indemnification Stamp following Section 31.


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