Rules 11410 Through 11900, Explained One Rule at a Time
This is Part 10, the final piece in FRC's FINRA Rules Quick Reference series. It closes out the Uniform Practice Code, covering delivery with restrictions, bond-specific delivery mechanics, reclamations, close-out procedures including buy-ins and sell-outs, and the clearly erroneous transactions framework that keeps today's electronic markets functioning during genuine pricing malfunctions.
FRC's SIE Exam Preparation course covers the foundational settlement material every entry-level candidate is tested on. The Series 7 Exam Preparation course goes further into the close-out and clearly erroneous transaction mechanics a fully licensed registered representative needs to understand.
Close-Out Procedures and Final Delivery Rules
More in This FINRA Rules Quick Reference Series
This guide is part of a ten-part series. The other nine parts are Part 1: Membership and Registration, Part 2: Duties and Conflicts, Part 3: Supervision and Financial Rules, Part 4: Securities Offerings and Market Reporting, Part 5: Trade Reporting and Investigations, Part 6: Sanctions and Disciplinary Procedure, Part 7: Hearings and Appeals, Part 8: Eligibility and Exemption Proceedings, and Part 9: Cease and Desist Orders and the Uniform Practice Code.
FINRA Rule 11410: Acceptance of Draft
Rule 11410 sets out the requirements for accepting a draft, a payment instrument attached to a securities delivery, closing out the delivery-with-draft-attached framework introduced under Rule 11400. It gives both parties a clear standard for when that draft-based delivery is actually considered complete.
FINRA Rule 11500: Delivery of Securities With Restrictions
Rule 11500 is the section heading introducing the largest subsection of the Uniform Practice Code by rule count, covering delivery of temporary certificates, mutilated securities, called or worthless securities, and securities subject to various registration and transfer restrictions. Every rule from 11510 through 11581 sits underneath this single heading.
FINRA Rule 11510: Delivery of Temporary Certificates
Rule 11510 sets out the standards for delivering a temporary certificate, issued before a security's permanent certificate is available, in settlement of a contract. It ensures a settlement isn't held up purely because the issuer hasn't yet produced final certificates.
FINRA Rule 11520: Delivery of Mutilated Securities
Rule 11520 sets out the standards for whether and how a physically damaged or mutilated security certificate can be delivered in settlement of a trade. It protects the buyer from receiving a certificate whose damage could complicate a future transfer or registration.
FINRA Rule 11530: Delivery of Securities Called for Redemption or Which Are Deemed Worthless
Rule 11530 sets out how delivery is handled when the underlying security has already been called for redemption by the issuer, or has been deemed worthless. It closes a gap that would otherwise leave ambiguity around delivering a security whose economic value has already effectively ended.
FINRA Rule 11540: Delivery Under Government Regulations
Rule 11540 sets out how delivery requirements interact with any applicable government regulations restricting the transfer of a specific security. It ensures the Uniform Practice Code's general delivery standards don't conflict with an overriding legal restriction on a particular instrument.
FINRA Rule 11550: Assignments and Powers of Substitution; Delivery of Registered Securities
Rule 11550 sets out the requirements for assignments and powers of substitution accompanying the delivery of registered securities, the paperwork needed to actually transfer legal ownership. It standardizes exactly what documentation a registered security delivery must carry.
FINRA Rule 11560: Certificate of Company Whose Transfer Books Are Closed
Rule 11560 sets out how delivery is handled when the issuing company's transfer books are temporarily closed, a period during which ownership changes cannot be formally recorded. It gives the settlement process a clear rule for this recurring, predictable interruption in the transfer process.
FINRA Rule 11570: Certificates in Various Names
Rule 11570 is the section heading introducing a cluster of rules addressing certificates registered in different kinds of names, corporations, firms, dissolved firms, and deceased persons or trustees. The specific rules that follow each handle one of these distinct registration scenarios.
FINRA Rule 11571: Certificate in Name of Corporation
Rule 11571 sets out the specific delivery requirements when a certificate is registered in the name of a corporation rather than an individual. It addresses the additional documentation a corporate registration typically requires to transfer cleanly.
FINRA Rule 11572: Certificate in Name of Firm
Rule 11572 sets out the specific delivery requirements when a certificate is registered in the name of a firm or partnership rather than an individual or a corporation. It gives this distinct registration type its own clear delivery standard.
FINRA Rule 11573: Certificate in Name of Dissolved Firm Succeeded by New Firm
Rule 11573 sets out the delivery requirements when a certificate is registered in the name of a firm that has since dissolved and been succeeded by a new firm. It addresses the specific documentation needed to bridge that change in legal entity.
FINRA Rule 11574: Certificate in Name of Deceased Person, Trustee, etc.
Rule 11574 sets out the delivery requirements when a certificate is registered in the name of a deceased person, a trustee, or a similar fiduciary capacity. It gives these estate and fiduciary-related registrations their own clear transfer standard.
FINRA Rule 11580: Transfer of Limited Partnership Securities
Rule 11580 sets out the requirements for transferring limited partnership securities, a structure with its own distinct legal formalities compared to ordinary corporate stock. It closes a genuine gap that the standard stock and bond delivery rules don't address.
FINRA Rule 11581: Limited Partnership Transfer Forms
Rule 11581 sets out the specific forms required to actually execute a limited partnership securities transfer under Rule 11580. It gives the substantive transfer requirement above a concrete, standardized paperwork mechanism.
FINRA Rule 11600: Delivery of Bonds and Other Evidences of Indebtedness
Rule 11600 is the section heading opening the rules governing bond-specific delivery mechanics, distinct from the general delivery rules covered earlier in this guide. Every rule from 11610 through 11650 addresses a specific aspect of bond settlement.
FINRA Rule 11610: Liability for Expenses
Rule 11610 requires a seller who fails to meet good-delivery requirements for a bond, such as missing coupons or improper endorsement, to bear any expense the buyer incurs as a result of that failure. It places the financial consequence of a defective bond delivery squarely on the party responsible for it.
FINRA Rule 11620: Computation of Interest
Rule 11620 requires accrued bond interest to be calculated using the 30/360 convention, treating every month as 30 days and the year as 360 days regardless of actual calendar length. This standardized convention is what lets buyers and sellers agree on an accrued-interest figure without independently recalculating it from actual calendar days.
FINRA Rule 11630: Due-Bills and Due-Bill Checks
Rule 11630 sets out the standards for due-bills and due-bill checks, non-transferable documents used to evidence an obligation to deliver a security or a payment still owed after a transaction has otherwise settled. It gives the settlement process a formal mechanism for handling an entitlement that couldn't be delivered alongside the main transaction.
FINRA Rule 11640: Claims for Dividends, Rights, Interest, etc.
Rule 11640 sets out how claims for dividends, rights, or interest are handled between a buyer and seller, generally holding that a buyer who receives a certificate in time to transfer it before the record date has no claim on the seller for that distribution. It resolves what would otherwise be a recurring source of dispute between trading counterparties over who is actually entitled to a pending corporate distribution.
FINRA Rule 11650: Transfer Fees
Rule 11650 sets out that any transfer fee due in connection with a securities transfer is the responsibility of the party at whose insistence the transfer is being made. It gives a clear, simple allocation rule for a cost that could otherwise become a point of friction between the parties.
FINRA Rule 11700: Reclamations and Rejections
Rule 11700 is the section heading introducing the rules governing reclamations, the process for reversing a settled delivery that turns out to have been defective, and rejections of improperly delivered securities. Every rule from 11710 through 11740 sits underneath this heading.
FINRA Rule 11710: General Provisions
Rule 11710 sets out the general standards governing the reclamation process, the baseline framework the more specific reclamation and rejection rules that follow operate within. It establishes the common ground rules before addressing particular reclamation scenarios individually.
FINRA Rule 11720: Irregular Delivery — Transfer Refused — Lost or Stolen Securities
Rule 11720 sets out how an irregular delivery is handled when a transfer is refused, or when the securities involved turn out to be lost or stolen. It gives the settlement process a clear path forward when a delivery goes wrong in one of these specific, serious ways.
FINRA Rule 11721: Obligations of Members Who Discover Securities in Their Possession to Which They Are Not Entitled
Rule 11721 requires a member firm that discovers it holds securities it is not actually entitled to, closely related to the lost-or-stolen scenario covered in Rule 11720, to take specific corrective action. It closes a gap that would otherwise let a firm simply hold onto securities it knows don't belong to it.
FINRA Rule 11730: Called Securities
Rule 11730 sets out how a delivery is handled when the underlying security has been called by the issuer during the settlement process, distinct from the already-called scenario addressed under Rule 11530. It addresses the specific timing problem created when a call happens after a trade has already been agreed but before it fully settles.
FINRA Rule 11740: Marking to the Market
Rule 11740 sets out the marking-to-market process for an open contract whose value has moved since the trade was originally agreed, requiring the party disadvantaged by that price movement to be compensated to reflect current market value. It keeps a delayed or disputed settlement from unfairly benefiting one party purely because of price movement while the delivery was pending.
FINRA Rule 11800: Close-Out Procedures
Rule 11800 is the section heading opening FINRA's close-out procedures, the mechanisms a firm uses when a counterparty fails to deliver securities or fails to pay for securities already delivered. Every rule from 11810 through 11894 sits underneath this heading, covering buy-ins, sell-outs, and the clearly erroneous transactions framework.
FINRA Rule 11810: Buy-In Procedures and Requirements
Rule 11810 sets out the buy-in procedure, letting a buyer who hasn't received securities they are owed purchase equivalent securities elsewhere in the market and hold the original seller financially responsible for any resulting cost difference. It is one of the most consequential rules in the entire Uniform Practice Code, since it is the actual enforcement mechanism behind every delivery obligation covered earlier in this guide.
FINRA Rule 11820: Selling-Out
Rule 11820 sets out the sell-out procedure, the mirror image of Rule 11810, letting a seller who hasn't received payment for securities already delivered sell those securities elsewhere in the market and hold the original buyer financially responsible for any shortfall. Together, Rules 11810 and 11820 give both sides of a failed transaction a real remedy rather than leaving the loss simply unresolved.
FINRA Rule 11830: Reserved
Rule 11830 is currently reserved and contains no substantive provisions, a placeholder within the numbering of the Uniform Practice Code's close-out procedures section. Rule numbers are sometimes held in reserve like this to preserve a series' internal numbering structure even when the specific provision has been retired or was never adopted.
FINRA Rule 11860: COD Orders
Rule 11860 sets out the standards for cash-on-delivery orders, where a customer's securities are delivered against payment through a separate agent bank or custodian rather than settling directly through the executing broker-dealer. It ties directly back to the confirmation requirements in Rules 11210(a) and 11220, which govern the accompanying documentation these transactions require.
FINRA Rule 11870: Customer Account Transfer Contracts
Rule 11870 sets out the requirements governing customer account transfer contracts, the mechanism used to move a customer's entire account, holdings included, from one firm to another. It is a foundational rule behind the account-transfer process that also appears in the customer-protection context of Rule 2140 covered earlier in this series.
FINRA Rule 11880: Settlement of Syndicate Accounts
Rule 11880 sets out the standards for settling a syndicate account, the shared account underwriters use to manage the proceeds and expenses of a joint securities offering. It closes out the settlement process for one of the more complex, multi-party transaction structures the Uniform Practice Code has to accommodate.
FINRA Rule 11890: Clearly Erroneous Transactions
Rule 11890 is the section heading introducing FINRA's clearly erroneous transactions framework, the mechanism used to review and potentially nullify trades executed at prices so far removed from fair value that they appear to reflect an error rather than genuine market activity. This framework is among the most actively used provisions in the entire rulebook, playing a critical market-integrity role during flash crashes, technological malfunctions, and periods of extreme volatility.
FINRA Rule 11891: General
Rule 11891 sets out the general standards and definitions underlying the clearly erroneous transactions framework, the foundation the more specific rules covering exchange-listed and OTC securities build on. It establishes the shared vocabulary and baseline principles for the entire 11890 series.
FINRA Rule 11892: Clearly Erroneous Transactions in Exchange-Listed Securities
Rule 11892 sets out the specific numerical guidelines and review process FINRA applies when evaluating a potentially clearly erroneous transaction in an exchange-listed security. A FINRA officer must act by the start of trading on the day following the transaction under review, reflecting how quickly this determination needs to be made to preserve market confidence.
FINRA Rule 11893: Clearly Erroneous Transactions in OTC Equity Securities
Rule 11893 applies a similar clearly erroneous transaction framework to OTC equity securities, structured similarly to Rule 11892's exchange-listed framework but with its own numerical guidelines. A FINRA officer must make this determination as soon as possible, but no later than 3:00pm Eastern Time on the trading day following the transaction at issue.
FINRA Rule 11894: Review by the Uniform Practice Code ("UPC") Committee
Rule 11894 sets out the appeal process for a party aggrieved by a FINRA officer's determination to declare a transaction clearly erroneous, requiring the appeal to be filed in writing within thirty minutes of notification. For exchange-listed securities, the UPC Committee generally renders its determination on review the same trading day as the transaction under review, reflecting how urgently this entire framework needs to operate.
FINRA Rule 11900: Clearance of Corporate Debt Securities
Rule 11900 requires a member firm or its agent that participates in a registered clearing agency for OTC securities clearing to use that registered clearing agency's facilities when clearing eligible corporate debt securities transactions between members. As the final rule in the Uniform Practice Code, it closes out this entire ten-part series exactly where it started: with a rule requiring firms to actually use the shared industry infrastructure the Code exists to standardize.
You Are Invited to Explore Our Products
Consider this an open invitation to explore what FRC has to offer.
