FINRA Rule 11364

FINRA Rule 11364 sits within the 11300 Delivery of Securities subsection of the 11000 Uniform Practice Code as the fourth of the five security-type-specific units of delivery rules, immediately following FINRA Rule 11363's units of delivery framework for unit investment trust securities and immediately preceding FINRA Rule 11365's framework for securities traded as units or bonds with stock attached.

What Certificates of Deposit for Bonds Are

A certificate of deposit for bonds is an instrument representing a depositary interest in an underlying bond or bonds — rather than holding the bond itself, the holder of a certificate of deposit for bonds holds a certificate evidencing that the underlying bond has been deposited with some depositary arrangement, with the certificate representing the holder's interest in that deposited bond. 

This structure is conceptually analogous to other depositary-receipt arrangements found throughout the securities markets — an American Depositary Receipt, for example, represents an interest in an underlying foreign security held by a depositary bank, with the ADR itself being the instrument that trades and is delivered, while the underlying security remains held by the depositary.

Certificates of deposit for bonds historically arose in connection with bond reorganizations, exchange offers, and similar corporate actions where bondholders deposited their existing bonds with a depositary — often a bank or trust company acting pursuant to a deposit agreement — in exchange for certificates representing their deposited interest, pending the completion of whatever reorganization, exchange, or other corporate action the deposit arrangement was designed to facilitate. 

The certificate of deposit itself, during the period the underlying bonds remain on deposit, becomes the tradeable instrument — a holder wishing to transfer their interest in the underlying deposited bonds does so by transferring the certificate of deposit, rather than by attempting to transfer an interest in the underlying bonds directly while those bonds remain held by the depositary.

The Cross-Reference to FINRA Rule 11362: Treating the Certificate as the Underlying Bond for Delivery Purposes

FINRA Rule 11364's single operative provision — that units of delivery for certificates of deposit for bonds shall be the same as prescribed for bonds in Rule 11362 — establishes that, for purposes of the Uniform Practice Code's delivery framework, a certificate of deposit for bonds is treated identically to the underlying bond it represents with respect to delivery denominations. 

This means the complete FINRA Rule 11362 framework examined in this dictionary's immediately preceding entry — the $1,000/$100 denomination structure for coupon bonds under paragraph (a), the parallel $1,000/$100 structure with its $100,000 ceiling for registered bonds under paragraph (b), the either-form default for bonds issuable in both coupon and registered form under paragraph (c), and the by-agreement fallback for non-$100-multiple principal amounts under paragraph (d) — applies in full to certificates of deposit for bonds, exactly as it would apply to the underlying bonds themselves.

This cross-reference approach makes considerable sense given the relationship between a certificate of deposit and its underlying bond. A certificate of deposit for bonds is, from an economic and principal-amount perspective, simply a different documentary wrapper around the same underlying bond interest — the certificate represents a specific principal amount of the underlying bond, denominated in whatever increments the underlying bond itself was denominated in under FINRA Rule 11362's framework. 

There would be little sense in establishing an independent denomination framework for certificates of deposit that differed from the framework governing the underlying bonds those certificates represent — doing so would create an artificial mismatch between the certificate's delivery denominations and the underlying bond's own denomination structure, with no apparent benefit and considerable potential for confusion.

The Parallel to FINRA Rule 11160's Cross-Reference Structure

FINRA Rule 11364's pure cross-reference structure invites direct comparison to FINRA Rule 11160's ex liquidating payments framework, examined earlier in this dictionary's coverage of the 11100 subsection. FINRA Rule 11160, recall, establishes no independent ex-date formula of its own, instead incorporating the formulas FINRA Rules 11140 and 11150 establish for stocks and flat-traded bonds respectively, and applying whichever formula corresponds to the underlying security type for purposes of liquidating payments and principal payments.

FINRA Rule 11364 follows precisely the same drafting economy, but in the units-of-delivery context rather than the ex-date context — rather than restating FINRA Rule 11362's denomination framework, FINRA Rule 11364 simply incorporates it by reference for the specific category of certificates of deposit for bonds. And just as this dictionary observed that FINRA Rule 11160's pure cross-reference structure means it automatically incorporates any future amendments to FINRA Rules 11140 and 11150 without itself requiring amendment, the same automatic-incorporation effect applies to FINRA Rule 11364's relationship with FINRA Rule 11362 — any future amendment to FINRA Rule 11362's denomination framework would automatically carry forward into FINRA Rule 11364's application to certificates of deposit for bonds, without FINRA Rule 11364 itself needing to be separately amended.

This recurring pattern — a brief rule that incorporates by reference the framework of another, more elaborately developed rule, applying that framework to a related but distinct category — appears to be a recurring structural technique throughout the Uniform Practice Code wherever a category of security or transaction is sufficiently analogous to another, already-addressed category that an independent framework would be redundant. 

FINRA Rule 11364's relationship to FINRA Rule 11362 for certificates of deposit for bonds mirrors FINRA Rule 11160's relationship to FINRA Rules 11140 and 11150 for liquidating payments and principal payments — in both cases, the Code achieves coverage of the additional category through incorporation rather than restatement, maintaining permanent consistency between the incorporating and incorporated provisions without ongoing maintenance burden.

The Absence of a Separately Listed Addition Date

FINRA Rule 11364's amendment history — showing only Amended by SR-FINRA-2010-030 effective December 15, 2010, with no separate Added effective date as FINRA Rule 11363 shows for its March 18, 1983 origin — presents a point worth noting for completeness, though without overstating what can be concluded from it.

 FINRA Rule 11363's page explicitly distinguished between Added eff. Mar. 18, 1983 and the subsequent Amended by SR-FINRA-2010-030, confirming a two-stage history — original addition in 1983, followed by the 2010 Consolidated Rulebook transfer amendment. FINRA Rule 11364's page shows only the single Amended by SR-FINRA-2010-030 entry, without any corresponding Added designation or earlier effective date.

This could indicate either that FINRA Rule 11364 was itself added as part of the 2010 Consolidated Rulebook transfer — making the December 15, 2010 effective date simultaneously its addition date and its (only) amendment date — or that an earlier addition date exists but is not displayed on the current FINRA.org page for this particular rule. 

Without an explicit Added designation analogous to FINRA Rule 11363's, this dictionary does not assert a specific pre-2010 origin date for FINRA Rule 11364, noting instead that the confirmed amendment history shows only the single December 15, 2010 amendment through SR-FINRA-2010-030.

Connection to FINRA Rules 11160, 11350, 11360, 11362, 11363, and 11365

FINRA Rule 11364 connects directly and substantively to FINRA Rule 11362 — the bond units of delivery framework that FINRA Rule 11364 incorporates in its entirety for certificates of deposit for bonds, including FINRA Rule 11362's $1,000/$100 denomination structures for coupon and registered bonds, its either-form default for bonds issuable in both forms, and its by-agreement fallback for non-$100-multiple principal amounts. 

It connects to FINRA Rule 11160 as a structural parallel — both rules achieve coverage of an additional category through pure incorporation by reference of another rule's framework, with automatic future-amendment incorporation as a shared consequence of this drafting approach. 

It connects to FINRA Rule 11350's part-delivery framework, which would apply to certificates of deposit for bonds using the same odd-lot-equivalent considerations that FINRA Rule 11362's incorporated framework establishes for bonds generally — though bonds, as this dictionary's FINRA Rule 11362 entry discussed, address non-$100-multiple amounts through FINRA Rule 11362(d)'s by-agreement provision rather than a built-in odd-lot framework analogous to FINRA Rule 11361's treatment of stocks. It connects to FINRA Rule 11360 as its parent series marker within the units of delivery cluster. It connects to FINRA Rule 11363 as its immediately preceding rule within the cluster, the two rules' contrasting amendment-history presentations — FINRA Rule 11363's explicit Added designation versus FINRA Rule 11364's absence of one — illustrating the kind of textual variation across individual rule pages that this dictionary's research-first protocol is designed to capture accurately rather than assume away. And it connects to FINRA Rule 11365 — the final rule in the units of delivery cluster, addressing securities traded as units or bonds with stock attached, a category that, given its combination of bond and stock characteristics, may itself draw upon elements of both FINRA Rule 11361's stock framework and FINRA Rule 11362's bond framework that FINRA Rule 11364 incorporates for certificates of deposit.

Examination Relevance and Key Takeaways

FINRA Rule 11364 is tested on the Series 7 and Series 24 examinations as the units of delivery framework for certificates of deposit for bonds — a brief cross-reference provision that incorporates FINRA Rule 11362's bond denomination framework in its entirety.

The key points to retain are these: FINRA Rule 11364 provides that the units of delivery for certificates of deposit for bonds shall be the same as prescribed for bonds in FINRA Rule 11362 — meaning the complete FINRA Rule 11362 framework, including its $1,000/$100 denomination structures for coupon and registered bonds with the $100,000 ceiling on registered bond denominations, its either-form default for bonds issuable in both coupon and registered form, and its by-agreement fallback for non-$100-multiple principal amounts, applies in full to certificates of deposit for bonds.

A certificate of deposit for bonds represents a depositary interest in an underlying bond held by a depositary arrangement, historically arising in connection with bond reorganizations and exchange offers, with the certificate functioning as the tradeable instrument while the underlying bonds remain on deposit; FINRA Rule 11364's pure cross-reference structure parallels FINRA Rule 11160's incorporation of FINRA Rules 11140 and 11150 for ex liquidating payments — both rules achieve coverage of an additional category through incorporation by reference rather than independent restatement, with automatic incorporation of any future amendments to the referenced rule; and the rule's confirmed amendment history shows only Amended by SR-FINRA-2010-030 effective December 15, 2010, with no separately listed addition date, and one selected notice — 10-49.