FINRA Rule 11330

FINRA Rule 11330 sits within the 11300 Delivery of Securities subsection of the 11000 Uniform Practice Code, immediately following FINRA Rule 11320's dates of delivery framework and immediately preceding FINRA Rule 11340's stamp taxes framework.

The Deliverer's Right to Specify Payment Form

FINRA Rule 11330's core structure vests a specific right in a specific party — the party making delivery shall have the right to require. This is framed as a right held by the delivering party, not as a default rule that applies absent contrary agreement, and not as an obligation imposed on the purchasing party independent of the delivering party's election. The delivering party — ordinarily the seller, tendering the securities that are the subject of the transaction — holds the right to dictate which of the four enumerated payment forms the purchaser must use when tendering the purchase money upon delivery.

This structure makes sense given the operational mechanics of a delivery-versus-payment transaction — at the moment of delivery, the delivering party is handing over the securities being purchased, and that party has a legitimate interest in ensuring that the payment received in exchange is in a form that provides immediate, reliable value rather than a form that might carry settlement risk, such as an uncertified personal check that could be returned for insufficient funds after the securities have already changed hands. By vesting the right to specify payment form in the delivering party — the party giving up the securities — FINRA Rule 11330 protects that party's interest in receiving payment in a form commensurate with the finality of the delivery being made.

The Four Enumerated Payment Forms

FINRA Rule 11330 enumerates exactly four acceptable payment forms that the delivering party may require — certified check, cashier's check, bank draft, or cash. Each of these four forms shares a common characteristic that distinguishes it from an ordinary uncertified personal or business check: each represents a payment instrument that has already been verified, guaranteed, or rendered immediately available by a financial institution or in the form of legal tender itself, eliminating the settlement risk that an uncertified check would carry.

A certified check is a personal or business check that the issuing bank has verified, marking the check to confirm that sufficient funds are present in the account and earmarking those funds for payment of the check — the bank's certification provides assurance that the check will not be returned for insufficient funds. 

A cashier's check is a check drawn by a bank on its own funds and signed by an authorized bank officer, representing the bank's own obligation to pay rather than the obligation of an individual account holder — cashier's checks are widely regarded as among the most secure forms of check payment precisely because the issuing bank itself is the obligor. A bank draft similarly represents an instrument drawn by or through a bank, providing comparable assurance of payment. And cash — physical legal tender — represents the most immediately final form of payment possible, with no intermediary verification process required at all since the value is inherent in the instrument itself.

By limiting the delivering party's specification right to these four enumerated forms — rather than, for example, allowing the delivering party to demand wire transfer confirmation before releasing securities, or some other electronic payment verification mechanism — FINRA Rule 11330 establishes a closed list reflecting the payment instruments that were standard in the securities settlement context at the time of the rule's formulation. The enumerated list does not include, for example, electronic funds transfers or wire transfers as forms the delivering party may require under this specific rule — though such mechanisms are, of course, widely used in modern securities settlement through other channels, including the book-entry settlement framework of FINRA Rule 11310, which operates largely independently of the physical-delivery-and-payment scenario that FINRA Rule 11330's enumerated forms most directly contemplate.

FINRA Rule 11330 in the Context of Physical Delivery

FINRA Rule 11330's framing — the purchase money to be paid upon delivery — most naturally describes a scenario involving the physical, in-person exchange of securities for payment, the kind of transaction contemplated by FINRA Rule 11320(h)'s time-and-place-of-delivery framework, where delivery occurs at the office of the purchaser. 

In such a scenario, the moment of delivery is a discrete, identifiable event — securities physically change hands — and FINRA Rule 11330 ensures that the payment tendered at that same moment is in one of the four enumerated forms that provides the delivering party with payment as final and reliable as the securities being surrendered.

This framing connects FINRA Rule 11330 to the broader pattern this dictionary has observed regarding the historical, paper-based origins of significant portions of the Uniform Practice Code — much as FINRA Rule 11210(c)'s Don't Know Notice procedure with its certified mail, messenger delivery, and multi-copy form requirements reflects an earlier operational era, FINRA Rule 11330's enumerated payment forms reflect a transactional context centered on physical exchange at the point of delivery, predating the predominance of electronic and book-entry settlement that FINRA Rule 11310 now establishes as the mandatory default for depository eligible securities.

That said, FINRA Rule 11330's continued presence in the current rulebook — amended as recently as the 2010 Consolidated Rulebook transfer, with no subsequent amendment — confirms that the rule retains operative significance for whatever category of transactions continue to involve the kind of physical delivery-against-payment scenario the rule contemplates, including transactions falling within FINRA Rule 11310(g)'s exclusion for securities not on deposit at a depository where the deliverer cannot meet applicable depository cut-offs — precisely the category of transaction where physical delivery, rather than book-entry settlement, remains the operative mechanism, and where FINRA Rule 11330's payment-form specification right correspondingly remains relevant.

The Brevity and Stability of FINRA Rule 11330

FINRA Rule 11330's single-sentence brevity, and its amendment history showing only the single 2010 Consolidated Rulebook transfer amendment with no prior or subsequent substantive amendments, places it among the more stable provisions examined in this dictionary's coverage of the FINRA Rule 11300 subsection. Unlike FINRA Rules 11140, 11150, 11210, and 11320 — all of which have been repeatedly amended to track the industry's progressive shortening of the standard settlement cycle — FINRA Rule 11330 addresses a question, the acceptable form of payment tendered at delivery, that does not depend on the settlement cycle's length and therefore has not required corresponding adjustment as the settlement cycle has shortened from T+3 through T+2 to the current T+1 standard.

This stability mirrors the observation this dictionary made regarding FINRA Rule 11170's part-redeemed bonds settlement price formula — like that rule, FINRA Rule 11330 addresses a substantive question whose answer is not mathematically tied to the settlement cycle's duration, and therefore has remained textually stable across the multiple settlement cycle transitions that have driven amendments to its neighboring rules within the FINRA Rule 11300 subsection.

Connection to FINRA Rules 11100, 11310, 11320, and 11340

FINRA Rule 11330 connects to FINRA Rule 11100(c) — whose non-cancellation principle for failed payment, directing the seller to FINRA Rule 11820's sell-out remedy when a buyer fails to pay for securities as delivered, presupposes the kind of delivery-versus-payment exchange that FINRA Rule 11330's payment-form specification right governs; a purchaser who fails to tender payment in one of FINRA Rule 11330's enumerated forms when the delivering party has required such a form could, depending on the circumstances, find itself in the failure-to-pay scenario that FINRA Rule 11100(c) and FINRA Rule 11820 address. It connects to FINRA Rule 11310 — whose book-entry settlement mandate represents the modern default mechanism that, for depository eligible securities, largely supersedes the physical delivery-against-payment scenario that FINRA Rule 11330 most directly contemplates, while FINRA Rule 11310(g)'s exclusions preserve the category of transactions where FINRA Rule 11330's payment-form framework retains direct relevance. It connects directly to FINRA Rule 11320 — whose dates-of-delivery framework establishes the timing at which the payment FINRA Rule 11330 governs must be tendered, with FINRA Rule 11320(h)'s time-and-place-of-delivery framework providing the operational context — the purchaser's office, during established hours — within which the upon delivery payment tender contemplated by FINRA Rule 11330 occurs. And it connects to FINRA Rule 11340 — the next rule in the FINRA Rule 11300 subsection, whose stamp taxes framework addresses a further dimension of the financial obligations surrounding delivery, complementing FINRA Rule 11330's treatment of the purchase money itself.

Payment Upon Delivery in Practice

FINRA Rule 11330 ties the payment to a particular moment. The purchase money is "to be paid upon delivery". Where the party making delivery has required one of the four forms, payment is due when the securities are delivered. The rule gives the purchaser no right to take the securities first and pay later.

Consider Alder Securities, which delivers bond certificates to Birch & Co. at Birch's office and requires a certified check. Birch takes the certificates and offers to send a check the next morning, once its back office has reviewed them. Alder is entitled to the certified check upon delivery, and a payment promised for the following day does not meet that requirement.

Which Party Holds the Right Along a Chain of Trades

The right belongs to "the party making delivery". That is a role in a particular delivery, not a label attached to a firm. A member that buys securities from one firm and sells the same securities to another is the purchaser on its purchase and the party making delivery on its sale.

Suppose Cedar Capital buys 500 shares of a stock that is not depository eligible from Delta Securities, and sells 500 shares of the same stock to Elm Brokerage. Both trades are settled directly between the firms. When Delta delivers to Cedar, Delta holds the right and Cedar is the purchaser who pays. When Cedar delivers to Elm, Cedar holds the right and may require Elm to pay by certified check, cashier's check, bank draft or cash.

Who Stands Behind Each Instrument

The four forms differ in who stands behind the payment. A certified check is the payer's own check, which the bank has marked to confirm that the funds are present and has earmarked those funds to pay it. A cashier's check is drawn by a bank on its own funds and signed by a bank officer, so the bank itself is the party obliged to pay, not the customer who bought the check. Cash is legal tender and needs nobody to stand behind it.

A purchaser's own business check can therefore be one of the permitted forms if its bank has certified it. The difference comes from the certification, not from whose account the check is drawn on. An uncertified business check is not among the four forms.

When FINRA Rule 11330 Governs the Payment and When It Does Not

FINRA Rule 11330 is part of the Uniform Practice Code. Under FINRA Rule 11100(a), the Code covers over-the-counter secondary market transactions in securities between members. A member's sale to a customer who is not a member is not a transaction between members, so FINRA Rule 11330 gives the member no right to require one of the four forms on that sale. Under FINRA Rule 11100(b), a rule of the Code may expand that scope only where the rule specifically provides for it, and FINRA Rule 11330 contains no such provision.

FINRA Rule 11100(a)(1) also excludes transactions between members that are compared, cleared or settled through the facilities of a registered clearing agency. The exception is where the clearing agency's own rules provide that rules of other organizations apply. Where the clearing agency's rules make no such provision, FINRA Rule 11330 does not govern the payment on those transactions.

Some exclusions carry an exception. FINRA Rule 11100(a)(4) excludes transactions in redeemable securities issued by registered investment companies. It then provides that the Code applies to secondary market transactions between members in unit investment trust securities. So on a trade between two members in unit investment trust units that are not depository eligible, settled directly between them, FINRA Rule 11330 applies in the ordinary way.

Within the Code, FINRA Rule 11310(a) requires a member to use the facilities of a securities depository for the book-entry settlement of all transactions in depository eligible securities with another member. FINRA Rule 11310(f) makes that requirement supersede any inconsistent requirement under other rules of the Code. A seller of depository eligible securities therefore cannot rely on FINRA Rule 11330 to insist on handing over certificates against a cashier's check in place of book-entry settlement.

FINRA Rule 11310(g) takes certain transactions out of that requirement. It does not apply where the securities are not on deposit at a securities depository and the deliverer cannot deposit them before the depository's cut-off date for that issue. For a same-day settlement, it also does not apply where the deliverer cannot deposit them before the depository's cut-off time for same-day crediting of deposited securities. Suppose Fir Securities sells certificates that are not on deposit to Grove Capital, and Fir cannot deposit them before the depository's cut-off date for the issue. The book-entry requirement does not apply to that trade. Fir may deliver the certificates at Grove's office and require payment by one of the four forms.

How FINRA Rule 11320 Fixes the Day and Place of Payment

FINRA Rule 11330 makes payment due upon delivery, and FINRA Rule 11320 fixes when and where delivery is made. On a transaction for "cash", delivery is made at the office of the purchaser on the day of the transaction. A delivering party that has required a cashier's check on a cash trade therefore collects it on the trade date itself.

Delivery is made at the office of the purchaser, between the hours established by rule or practice in the community where that office is located. If the purchaser has more than one office, delivery goes to the office with which the transaction was effected, unless delivery instructions were given at the time of the transaction. That office is where the delivering party presents the securities and collects the payment it has required.

A seller who comes too early cannot force the exchange. On a regular way contract, delivery is due on, but not before, the first business day after the trade. If the seller tenders delivery before that, acceptance is at the purchaser's election, and a purchaser who rejects the tender does not prejudice its rights. A seller who arrives on the trade date of a regular way trade and requires a cashier's check therefore cannot make the purchaser accept the securities that day.

Adjustments to the Purchase Money

Under FINRA Rule 11340(c), a buyer may want state transfer stamps beyond those required, and the seller's furnishing of them may be made part of the transaction. Suppose the buyer has requested the additional stamps and, at the time of delivery, the seller has neither furnished them nor made adequate provision for them. FINRA Rule 11340(d) then lets the buyer furnish and cancel the stamps itself and deduct their cost from the purchase price. For example, on a contract price of $48,000, a buyer that spends $120 on the stamps pays $47,880, by whichever of the four forms the seller has required.

For interest-paying securities, FINRA Rule 11620(a) adds interest to the price. In the settlement of contracts other than for "cash", interest at the rate specified in the security is added to the dollar price, computed up to but not including the first business day following the date of the transaction. On a regular way trade in such a bond, the sum settled on delivery is therefore the dollar price with that interest added.

When Payment Fails, and Payment After a Buy-In Notice

Under FINRA Rule 11100(c), in trades between members, a failure to pay for securities as delivered, on or after the settlement date, does not cancel the contract. The seller's remedy is provided by FINRA Rule 11820, unless the parties mutually consent to cancel the trade. A purchaser that does not pay has not ended the trade by failing to pay, and the seller cannot treat it as ended on its own.

A buy-in notice does not stop the seller from delivering and being paid. Under FINRA Rule 11810(d)(1)(A), the seller may notify the buyer, before the buy-in is executed, that some or all of the securities (not less than one trading unit) are in its physical possession and will be promptly delivered. The buy-in is then not executed for those securities, and the buyer "shall accept and pay for such securities, if delivered promptly". The seller is still the party making delivery, so it may require that payment by one of the four forms.

Why Settlement-Cycle Changes Left FINRA Rule 11330 Unchanged

FINRA Rule 11320's regular way provision counts days. Delivery is due "on, but not before, the first business day following the date of the transaction". A provision written that way has to be rewritten when the standard settlement cycle changes. FINRA Rule 11330 counts no days. It ties payment to delivery, whenever delivery falls. When the regular way delivery date moves, the payment moves with it, and FINRA Rule 11330's words need no change.

Income Bonds With a Guaranteed Fixed Rate

FINRA Rule 11620(e) decides how an income bond is dealt in. Income bonds are dealt in "flat" even though they are paying interest. The exception is an income bond whose indenture guarantees a certain fixed rate and makes provision for an additional contingent payment. Such a bond is dealt in "and interest" at the fixed rate guaranteed in the indenture, so long as interest payments at that fixed rate are not in default and no announcement of intention to default has been made.

In a transaction for "cash", FINRA Rule 11620(a) adds interest to the dollar price up to but not including the date of transaction. Suppose Nutmeg Securities sells such an income bond to Osprey Capital, another member, for cash. The bond is not depository eligible, the trade is settled directly between the two firms, and Nutmeg has required payment by cashier's check. No fixed-rate payment is in default and no intention to default has been announced. Interest at the guaranteed fixed rate, up to but not including the trade date, comes to $140.00. Because the bond is dealt in "and interest" at the fixed rate guaranteed in the indenture, the interest added to the price is computed at that fixed rate. On a dollar price of $8,600.00, Osprey's cashier's check is drawn for $8,740.00.

Fractions of a Cent in the Interest Settled

FINRA Rule 11620(f) deals with fractions of a cent. In all transactions involving the payment of interest, fractions of a cent equalling or exceeding five mills are regarded as one cent, and fractions of a cent less than five mills are disregarded.

Suppose Larch Securities sells a bond traded "and interest" to Maple Capital, another member, for cash. The bond is not depository eligible, the trade is settled directly between the firms, and Larch has required payment by certified check. Interest at the bond's rate, up to but not including the trade date, computes to $73.2049. The fraction beyond $73.20 is 0.49 of a cent, or 4.9 mills. That is less than five mills, so it is disregarded and the interest is $73.20. On a dollar price of $9,850.00, Maple's certified check is drawn for $9,923.20.

A Delivery Between the Record Date and the Interest Payment Date

FINRA Rule 11620(c) deals with a security traded "and interest" that is delivered 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 is made on settlement.

Suppose Hazel Securities sells such a bond to Ivy Capital, another member. The bond is not depository eligible, the trade is settled directly between the firms, and Hazel has required payment by certified check. Delivery is made after the record date and before the interest payment date. Before any deduction under paragraph (c), the amount due on settlement is $25,310.00, and the interest to be paid on the payment date is $750.00. The full $750.00 is deducted, so Ivy's certified check is drawn for $24,560.00.

A Due-Bill With the Delivery

FINRA Rule 11630(c) deals with 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. The delivery must 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 prorates the value of the contract and makes payment of the balance upon redemption of the due-bill. The requirement to prorate does not apply to stock dividends of less than ten percent, or to spinoffs or rights.

Suppose Kestrel Securities makes two such late deliveries of stock to Linden Capital, another member, and on each it has required a cashier's check. Each stock was sold before it traded ex-dividend for a stock dividend. One issuer declared a 10 percent stock dividend and the other an 8 percent stock dividend, and each delivery is accompanied by a due-bill for the dividend shares. On the first delivery, Linden prorates the value of the contract and pays the balance when the due-bill is redeemed, because a 10 percent stock dividend is not less than ten percent. On the second, the requirement to prorate does not apply.

FINRA Rule 11630(d) deals with cash distributions and interest. Due-bill checks for a cash distribution, interest on registered bonds or interest on unit investment trust securities accompany securities delivered too late for transfer on or before the record date. Under FINRA Rule 11630(b), a due-bill check is a due-bill in the form of a check payable on the date of payment of the cash dividend or interest, and before that date it is considered a due-bill for the amount of the dividend or interest. Paragraph (c)'s proration sentence speaks of a due-bill that evidences the obligation of the seller to deliver stock.

Paying for Part of the Securities After a Buy-In Notice

FINRA Rule 11810(d)(1)(A) lets a seller keep a buy-in from being executed for some or all of the securities. If the member issuing the buy-in notice is notified by the seller, before the buy-in is executed, that some or all of the securities (but not less than one trading unit) are in the seller's physical possession and will be promptly delivered, the buy-in is not executed with respect to those securities. The member that initiated the original order to buy-in shall accept and pay for them, if they are delivered promptly. If they are not promptly delivered, the seller that stated they would be is liable for any resulting damages.

Suppose Sorrel Capital bought 500 shares at $40 a share from Tamarack Securities, another member, and Tamarack has not delivered. Sorrel issues a buy-in notice. Before the buy-in is executed, Tamarack notifies Sorrel that 300 of the shares, at least one trading unit, are in its physical possession and will be promptly delivered, and it delivers them promptly. The buy-in is not executed for those 300 shares, and Sorrel must accept and pay for them: $12,000 at the contract price of $40 a share. Tamarack's notice did not cover the other 200 shares.

Certificates That Can Still Be Deposited in Time

FINRA Rule 11310(g) takes a transaction out of the book-entry requirement where the securities to be delivered are not on deposit at a securities depository and the deliverer is unable to deposit them in time: for a same-day settlement, before the depository's cut-off time for same-day crediting of deposited securities, or before the depository's cut-off date for that issue. Both conditions must be met: the securities are not on deposit, and the deliverer is unable to deposit them in time. Certificates that are not on deposit, but that the deliverer is able to deposit in time, do not take the transaction out.

Suppose Umber Securities sells depository eligible shares to Willow Capital, another member, regular way. Umber holds the shares in certificates that are not on deposit, but it is able to deposit them before the depository's cut-off date for the issue. FINRA Rule 11310(g) does not apply, so FINRA Rule 11310(a) requires the trade to be settled by book-entry using the facilities of a securities depository. Under FINRA Rule 11310(f), that requirement supersedes any inconsistent requirement under other rules of the Code. Umber therefore cannot rely on FINRA Rule 11330 to hand over the certificates at Willow's office against a cashier's check.

Newly Distributed Issues

Whether securities are depository eligible can turn on when trading begins on an exchange. Under FINRA Rule 11310(d)(2), a determination under the rules of a national securities exchange that a securities depository has included a security's CUSIP number in its file of eligible issues does not make the security depository eligible under the rule until a stated date. For a new issue distributed by an underwriting syndicate on or after the date a securities depository system for monitoring repurchases of distributed shares by the underwriting syndicate is available, that date is the date trading in the security commences on the exchange.

Suppose such a new issue has been distributed, the exchange has made that determination, and trading on the exchange has not yet commenced. Two members trade the shares with each other over the counter and settle the trade before trading on the exchange commences. On the settlement date FINRA Rule 11310(d)(2) does not yet render the shares depository eligible, so the book-entry requirement of FINRA Rule 11310(a) does not reach that settlement. If the two members settle by delivering certificates directly between them, the seller is the party making delivery under FINRA Rule 11330.

Early Delivery on a Seller's Option Contract

On a "seller's option" contract, FINRA Rule 11320(c) makes delivery due at the office of the purchaser on the date the option expires. It also lets the seller deliver earlier, on any business day after the first business day following the date of the transaction and before the option expires, 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. FINRA Rule 11320(g), which makes acceptance of an early tender a matter for the purchaser's election, is written for contracts executed under paragraphs (b), (d) and (h). It does not name paragraph (c).

Suppose Basil Securities sells bonds that are not depository eligible to Clover Capital, another member, on a Monday, on a seller's option expiring several weeks later. Tuesday, Wednesday and Thursday are business days. On Wednesday, Basil delivers at Clover's office written notice of its intention to deliver on Thursday. On Thursday it delivers the bonds at Clover's office and requires a certified check. Thursday is after Tuesday, the first business day following the trade, and before the option expires, and the notice was delivered on Wednesday, a business day before the delivery. So the Thursday delivery is one FINRA Rule 11320(c) permits, and paragraph (g), which names paragraphs (b), (d) and (h), does not name paragraph (c).

Restricted Securities Between Members

FINRA Rule 11100(a) brings within the Code, subject to the exceptions it lists, all over-the-counter secondary market transactions in securities between members, and it names restricted securities, as defined in Rule 144(a)(3) under the Securities Act, among them. Suppose Heron Securities sells restricted shares of an operating company's common stock to Ibis Capital, another member, in an over-the-counter secondary market transaction. The shares are not depository eligible, and the trade is settled directly between the two firms rather than through a registered clearing agency. The trade is within the Code, so Heron, as the party making delivery, may require payment by certified check, cashier's check, bank draft or cash.

Returning the Money After a Reclamation

FINRA Rule 11710(a) defines a reclamation as a claim for the right to return, or the right to demand the return of, a security which has been previously accepted. Under FINRA Rule 11710(c)(2), when a security is returned or reclaimed, the party who originally delivered it shall immediately give the party returning it either the security in proper form for delivery, in exchange for the security originally delivered, or the money amount of the contract. Where it gives the money amount, then unless otherwise agreed, the party to whom the security is returned is deemed to be failing to deliver the security until a proper delivery is made.

Under FINRA Rule 11100(c), in trades between members, failure to deliver the securities sold on or after the settlement date does not effect a cancellation of the contract.

Suppose Aspen Securities sells bonds that are not depository eligible to Bramble Capital, another member, and the trade is settled directly between the two firms. The contract amount is $30,000. Aspen delivers the certificates at Bramble's office, having required a cashier's check, and Bramble pays the $30,000 by cashier's check. Bramble later finds an irregularity in the certificates and, within the time the Code allows for reclaiming that irregularity, reclaims them with a properly executed Uniform Reclamation Form. Aspen has no certificates in proper form, so it gives Bramble the money amount of the contract, $30,000. The firms have agreed nothing else, so Aspen is deemed to be failing to deliver the bonds until a proper delivery is made, and that failure does not cancel the contract. When Aspen later delivers certificates in proper form at Bramble's office, it is again the party making delivery. Bramble has had its $30,000 back, so the purchase money is again paid upon that delivery, and Aspen, as the party making delivery, may require it to be paid by certified check, cashier's check, bank draft or cash.

A Transaction Declared Null and Void

Under FINRA Rule 11893(a), an Executive Vice President of FINRA's Market Regulation Department or Transparency Services Department, or any officer that Executive Vice President designates, may on his or her own motion review any transaction involving an OTC Equity Security arising out of or reported through a trade reporting system owned or operated by FINRA or FINRA Regulation and authorized by the Commission. The FINRA officer may declare the transaction null and void if the officer determines that it is clearly erroneous, or if that action is necessary for the maintenance of a fair and orderly market or the protection of investors and the public interest. The officer must act as soon as possible after becoming aware of the transaction, and in all cases no later than the start of trading on the day following the date of the transaction. Under FINRA Rule 11893(c), the term OTC Equity Security does not include any equity security that is traded on any national securities exchange.

Under FINRA Rule 11894(a), a member may appeal a FINRA officer's determination under FINRA Rule 11893 to declare a transaction null and void to the Uniform Practice Code Committee, unless the officer also determines that the number of the affected transactions is such that immediate finality is necessary. Under FINRA Rule 11894(c), a determination by a FINRA officer that is not appealed is final and binding upon all parties.

Suppose Cypress Securities sells 5,000 shares of an OTC Equity Security to Dune Capital, another member, regular way on a Monday, and the trade is reported through such a trade reporting system. The shares are not depository eligible, and the firms mean to settle the trade directly between them. That evening a FINRA officer declares the transaction null and void as clearly erroneous. Neither firm appeals, so the determination is final and binding upon both. On Tuesday, Cypress tenders the certificates at Dune's office and requires a certified check. The transaction has been declared null and void, so there is no delivery under it for which Dune owes purchase money, and Cypress cannot rely on FINRA Rule 11330 to require the certified check.

A Called Certificate Turned Away at Delivery

Under FINRA Rule 11530(a), a certificate of stock or a bond ceases 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. Under FINRA Rule 11710(a), securities which have been presented for delivery on a transaction and which for a valid reason have been refused are deemed a rejection for the purposes of FINRA Rules 11710 and 11720. FINRA Rule 11820(a) gives the seller its sell-out remedy upon failure of the buyer to accept delivery in accordance with the terms of the contract.

Suppose Holly Securities sells bonds that are not depository eligible to Iris Capital, another member, regular way, in an ordinary trade whose terms say nothing about any call, and the trade is settled directly between the firms. After the trade and before delivery, the issuer publishes notice calling part of the issue for redemption. On the delivery date Holly tenders, at Iris's office, a bond whose serial number is among those called, and requires a certified check. Iris refuses the bond. The bond ceased to be a good delivery when the notice was published, so Iris has refused it for a valid reason, and the refusal is a rejection. Holly has not tendered a delivery in accordance with the terms of the contract, so it cannot treat the refusal as a failure by Iris to accept delivery and sell the bond out under FINRA Rule 11820.

Missing Coupons and the Purchase Money

FINRA Rule 11610(a) requires a coupon bond to have securely attached in the correct place proper coupons of the same serial number as the bond, and it provides that acceptance of cash or check in lieu of missing coupons shall be at the option of the purchaser. Under FINRA Rule 11610's opening sentence, the seller's failure to meet that requirement makes the seller liable for any expense incurred as a result of the failure.

Suppose Jasmine Securities sells coupon bonds that are not depository eligible to Kelp Capital, another member, and the trade is settled directly between the firms. Jasmine delivers the bonds at Kelp's office and requires a cashier's check. One bond lacks a coupon that should be attached to it, and Jasmine offers its own check for the coupon's value in place of the coupon. Whether to accept that check in place of the coupon is at Kelp's option, not Jasmine's. FINRA Rule 11330 lets Jasmine, as the party making delivery, require the form in which Kelp pays the purchase money. It does not let Jasmine decide what Kelp accepts in place of a missing coupon.

Paying the Balance When a Due-Bill Is Redeemed

Under FINRA Rule 11630(c), when a due-bill accompanying a delivery evidences the obligation of the seller to deliver stock, the purchaser prorates the value of the contract and makes payment of the balance upon redemption of the due-bill; the requirement to prorate does not apply to stock dividends of less than ten percent, or to spinoffs or rights. Under FINRA Rule 11630(e), due-bills for any security are redeemable on the date on which the security is issued by the corporation, or as soon thereafter as the signer or guarantor of the due-bill can obtain transfer of the security into the denominations necessary to effect the redemption.

Suppose Lotus Securities sold stock to Marsh Capital, another member, before the stock traded ex-dividend for a 20 percent stock dividend, and delivered it too late for transfer on or before the record date, accompanied by Lotus's due-bill for the dividend shares. The stock is not depository eligible and the trade is settled directly between the firms. Lotus required a cashier's check, and Marsh prorated the value of the contract. The corporation issues the dividend shares on the 3rd of the month, and Lotus, which signed the due-bill, can obtain them in the denominations needed on the 8th. The due-bill is redeemable on the 8th, and Marsh pays the balance upon its redemption. In redeeming the due-bill Lotus delivers the dividend shares it was obliged to deliver, and as the party making that delivery it may require the balance to be paid by certified check, cashier's check, bank draft or cash.

Examination Relevance and Key Takeaways

FINRA Rule 11330 is tested on the Series 7 and Series 24 examinations as the form-of-payment rule for securities delivery — a brief, stable provision establishing the delivering party's right to specify acceptable payment instruments.

The key points to retain are these: FINRA Rule 11330 vests the party making delivery with the right to require the purchase money to be paid upon delivery by certified check, cashier's check, bank draft, or cash — a closed list of four enumerated payment forms, each representing an instrument verified, guaranteed, or immediately final in value; this right is held by the delivering party — typically the seller — reflecting that party's interest in receiving payment in a form commensurate with the finality of the securities being surrendered at the moment of delivery; the rule's framing most directly contemplates physical delivery-against-payment scenarios, consistent with FINRA Rule 11320(h)'s time-and-place-of-delivery framework, though the rule retains relevance for the category of transactions falling outside FINRA Rule 11310's book-entry settlement mandate, including those covered by FINRA Rule 11310(g)'s exclusions; FINRA Rule 11330's single-sentence text and stable amendment history — a single amendment in 2010 with no subsequent changes — distinguish it from the settlement-cycle-dependent provisions of FINRA Rules 11140, 11150, 11210, and 11320, since the form-of-payment question FINRA Rule 11330 addresses is not mathematically tied to the length of the standard settlement cycle; and the rule was amended December 15, 2010 through SR-FINRA-2010-030, with no prior amendment dates listed and one selected notice — 10-49.