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  • 11600. DELIVERY OF BONDS AND OTHER EVIDENCES OF INDEBTEDNESS

    • 11610. Liability for Expenses

      Failure of the seller to meet the requirements of good delivery relating to bonds and similar evidences of indebtedness, as set forth in paragraphs (a) through (h) of this Rule inclusive, shall make the seller liable for any expense incurred as a result of such failure.
      (a) Coupon Bonds
      A coupon bond shall have securely attached in the correct place proper coupons, warrants, etc., of the same serial number as the bond. Acceptance of cash or check in lieu of missing coupons shall be at the option of the purchaser.
      (b) Endorsed Bonds
      A coupon bond bearing an endorsement of a definite name of a person, firm, corporation, association, etc., in conjunction with words of condition, qualification, direction, or restriction, not properly pertaining thereto as a security, shall not be a good delivery unless sold specifically as an "endorsed bond." This shall also apply to bonds with coupons bearing such endorsements.
      (c) Interest in Default
      A bond upon which interest is in default shall carry all unpaid coupons.
      (d) Registerable as to Principal
      A coupon bond registerable as to principal shall be a good delivery only if registered to bearer.
      (e) Endorsements for Banking or Insurance Requirements
      A coupon bond bearing an endorsement indicating that the bond was deposited in accordance with a governmental requirement pertaining to banking institutions or insurance companies shall not be a good delivery. If released, with such release acknowledged before an officer authorized to take acknowledgments, it shall be a good delivery if sold specifically as a "released endorsed bond."
      (f) Coupon Detached Prior to Delivery
      (1) A bond dealt in "and interest," for delivery on or after the date on which interest is due and payable, shall be delivered without the coupon payable on such date.

      (2) Late delivery. In the settlement of contracts in bonds dealt in "and interest" where delivery is due prior to the interest payment date but is made on or after the interest payment date, bonds may be delivered without coupons payable on such date, and the seller may present such detached, unpaid coupons to the buyer for payment, the buyer bearing the risk of non-payment.

      (g) Stamped Bonds

      (1) If a plan of reorganization which has been declared operative, or an amendment or supplement to an indenture provides that the bonds covered thereby shall be stamped to reflect the adoption of such plan or the amendment or supplement to the indenture, bonds so stamped shall be a good delivery and bonds not so stamped shall not be a good delivery.

      (2) The fact that a bond has been stamped "Tax Paid" by any authority vested with the power to tax, if the stamp does not indicate ownership, shall not prevent such bond from being a good delivery.

      (h) Certificates of Deposit
      Certificates of deposit issued by committees or depositaries other than those specified at time of trade shall not be a good delivery.
      Amended by SR-FINRA-2010-030 eff. Dec. 15, 2010.

      Selected Notice: 10-49.

    • 11620. Computation of Interest

      (a) Interest to be Added to the Dollar Price
      In the settlement of contracts in interest-paying securities other than for "cash," there shall be added to the dollar price interest at the rate specified in the security, which shall be computed up to but not including the second business day following the date of the transaction. In transactions for "cash," interest shall be added to the dollar price at the rate specified in the security up to but not including the date of transaction.
      (b) Basis of Interest
      Interest shall be computed on the basis of a 360-day year, i.e., every calendar month shall be considered to be 1/12 of 360 days; every period from a date in one month to the same date in the following month shall be considered to be 30 days.
      Note: The number of elapsed days should be computed in accordance with the examples given in the following table:

      From 1st to 30th of the same month to be figured as 29 days;
      From 1st to 31st of the same month to be figured as 30 days;
      From 1st to 1st of the following month to be figured as 30 days;
      From 1st to 28th of February to be figured as 27 days;
      From the 23rd of February to the 3rd of March is to be figured as 10 days;
      From the 15th of May to the 6th of June is to be figured as 21 days.
      Where interest is payable on 30th or 31st of the month:

      From 30th or 31st to 1st of the following month to be figured as 1 day;
      From 30th or 31st to 30th of the following month to be figured as 30 days;
      From 30th or 31st to 31st of the following month to be figured as 30 days;
      From 30th or 31st to 1st of second following month to be figured as 1 month, 1 day.
      (c) Securities Traded "and interest"
      When delivery of a security traded "and interest" is made between the record date fixed for the purpose of determining the holder entitled to receive interest and the interest payment date, a deduction equivalent to the full amount of the interest to be paid shall be made on settlement.
      (d) Securities Traded "flat"
      When delivery of a security traded "flat" is made after the record date fixed for the purpose of determining the holder entitled to receive interest, in the settlement of a contract made prior to the date on which the security was traded "ex-interest," a due-bill check for the full amount of the interest to be paid shall accompany the delivery.
      (e) Income Bonds
      Income bonds shall be dealt in "flat" even though such bonds are paying interest, except that where a certain fixed rate is guaranteed in the indenture and provision is made for additional contingent payment, they shall be dealt in "and interest" at the fixed rate guaranteed in the indenture (so long as interest payments at such fixed rate are not in default and no announcement of intention to default has been made).
      (f) Fractions of a Cent
      In all transactions involving the payment of interest, fractions of a cent equalling or exceeding five mills shall be regarded as one cent; fractions of a cent less than five mills shall be disregarded.
      Amended by SR-FINRA-2016-047 eff. Sept. 5, 2017.
      Amended by SR-FINRA-2010-030 eff. Dec. 15, 2010.
      Amended by SR-NASD-94-56 eff. June 7, 1995.
      Amended eff. Jan. 2, 1968; Feb. 9, 1968; Feb. 21, 1969; Mar. 18, 1983.

      Selected Notices: 83-69, 95-36, 10-49, 17-19.

    • 11630. Due-Bills and Due-Bill Checks

      (a) Definition of Due-Bills
      The term "due-bill" as used in this Rule means an instrument employed for the purpose of evidencing the transfer of title to any security or rights pertaining to any security contracted for or evidencing the obligation of a seller to deliver such to a subsequent purchaser. A due-bill shall not be transferable or assignable by the purchaser.
      (b) Definition of Due-Bill Checks
      The term "due-bill checks" as used in this Rule means a due-bill in the form of a check payable on the date of payment of a cash dividend, interest on registered bonds or interest on unit investment trust securities, which prior to such date shall be considered as a due-bill, as defined in paragraph (a) of this Rule, for the amount of such dividend or interest.
      (c) Due-bills for Stock Dividends and Rights
      A security sold before it trades "ex-dividend" (for stock and scrip dividends) or "ex-rights" and delivered too late for transfer on or before the record date, shall be accompanied by a due-bill for the distribution to be made. When a due-bill accompanying a delivery evidences the obligation of the seller to deliver stock, the purchaser shall prorate the value of the contract, and shall make payment of the balance upon redemption of the due-bill. The requirement to pro-rate the value of the contract as described above shall not apply to stock dividends less than ten percent (10%) or to "spinoffs" or rights.
      (d) Due-bill Checks for Cash Distribution and Interest
      Due-bill checks for a cash distribution, interest on registered bonds or interest on unit investment trust securities shall accompany securities delivered too late for transfer on or before the record date.
      (e) Redemption of Due-Bills
      Due-bills for any security or rights pertaining to any security shall be redeemable on the date on which the security or rights are issued by the corporation or as soon thereafter as the signer or guarantor of the due-bill can obtain transfer of the security or rights into denominations necessary to effect the redemption of the due-bills.
      (f) Default Upon Redemption of Due-Bills
      A due-bill for any security or rights pertaining to any security issued pursuant to paragraph (c) of this Rule and presented for redemption pursuant to the terms of paragraph (e) of this Rule, and not honored by the seller may, at the option of the buyer, be treated as a "fail to receive" from the seller, and the distribution evidenced by such due-bill may be bought-in for the account and risk of the seller pursuant to the terms of Rule 11810. However, buy-ins executed in accordance with this paragraph (f) must be executed after the payable date of such securities as determined by the issuing corporation.

      • • • Supplementary Material: --------------

      .01 Sample Due-Bills Form.

      (a) Due-Bill for Stock Dividend or Stock Distribution
             For value received, the undersigned hereby assigns, transfers and sets over to __________________________________ the stock distribution of ______ ( ) shares of _____________________ stock of ______________________________ to be issued on ___________________ to the registered holder of ___________ ( ) shares of _________________ stock of ___________________ represented by certificate number ___________________ , to which the undersigned is entitled as a stock dividend, and hereby irrevocably constitutes and appoints __________________________________ attorney to transfer the shares representing said stock dividend on the books of said corporation, with full power of substitution in the premises.

      _________________________________
      (Date)
        _________________________________
      (Official Signature)

      (b) Due-Bill for Rights
             For value received, the undersigned hereby assigns, transfers, and sets over to _____________________________________________________ the warrant and/or fractional warrant to which the undersigned is entitled, evidencing the rights to subscribe for _____________________ _________________________ , which warrant and/or fractional warrant is to be issued to the holder of record at the close of business _________________________ of ______________ ( ) shares of ________________________ stock of _______________________ represented by certificate No. _________________

      _________________________________
      (Date)
        _________________________________
      (Official Signature)

      (c) Due-Bill for Interest on When Issued Contract
             This is to certify that, upon issuance of _______________________ in accordance with the plan approved by _________________________ , the undersigned will pay to ______________________________________ $ __________ representing (contingent)(income) interest for ___________ on $ _____ principal amount of said bonds sold to it when, as, and if issued on _____ 20 _____

          This due-bill shall become null and void if the contract for sale of said bonds can not be completed in accordance with the plan approved by ___ , on _______________________

      _________________________________
      (Date)
      _________________________________
      (Official Signature)

      (d) Due-Bill for Dividend on When Issued Contract
             This is to certify that, upon issuance of _____________________ in accordance with the plan approved by _________________________ , the undersigned will pay to _______________________ $ _____ , representing the dividend of $ _____ per share declared for the period ending 20 _____ , on _____________ shares of _______________________ stock of ____ sold to it when, as, and if issued on _______________________ 20 _____

          This due-bill shall become null and void if the contract for sale of said stock cannot be completed in accordance with the plan approved by ____ , on _________________________

      _________________________________
      (Date)
        _________________________________
      (Official Signature)

      (e) Due-Bill Check
      Consider this check as due-bill until payable date as shown below


      NEW YORK _________________ ,
              X Y Z BANK
      20 _____ No. 1999

      1-2
      ___
      210
      Pay To The Order Of__________________________________________________    


      $ __________________________________________________
         
      Dollars    


      In Payment of Dividend or Interest


      Dividend Account –

      Interest Account –

      On
      ____________________________________
      NOT PAYABLE
      BEFORE
      ____________________________________


      RECORD DATE__________________________________________

      Amended by SR-FINRA-2010-030 eff. Dec. 15, 2010.
      Amended eff. Feb. 21, 1969; Mar. 1, 1970; Nov. 1, 1971; Nov. 1, 1972; Mar. 18, 1983.

      Selected Notices: 83-69, 10-49.

    • 11640. Claims for Dividends, Rights, Interest, etc.

      (a) Dividends or Rights
      A buyer of stock who has the certificate in its possession in time to enable it to effect transfer prior to the closing of the books or to the record date shall have no claim upon the seller (unless the seller is the registered holder) for the dividend or rights pertaining to such certificate, but the seller, upon request of the buyer, shall use its best efforts to collect the same for the buyer.
      (b) Substantiating Claims
      When a buyer of stock who has failed to have said stock transferred in time requests the seller to collect the dividends or rights pertaining thereto, the seller may require from the buyer the presentation of the certificate or a letter from the transfer agent substantiating the claim, or the buyer's written statement that it or its customer was the holder on the record date, and a guarantee of indemnity for liability arising out of any further demand for said dividend or rights.
      (c) Interest or Rights
      The provisions of paragraphs (a) and (b) of this Rule shall be equally applicable to interest or rights pertaining to registered bonds and unit investment trust securities.
      Amended by SR-FINRA-2010-030 eff. Dec. 15, 2010.
      Amended eff. Mar. 18, 1983.

      Selected Notices: 83-69, 10-49.

    • 11650. Transfer Fees

      The party at whose instance a transfer of securities is made shall pay all service charges of the transfer agent.
      Amended by SR-FINRA-2010-030 eff. Dec. 15, 2010.

      Selected Notice: 10-49.