A draft, in the commercial and banking sense the term carries here, involves three parties. What does the instrument do?

The drawer orders the drawee, typically a bank, to pay a specified sum to the payee

The drawer promises the payee that it will itself pay a specified sum at a stated future time

The payee authorises the drawee to collect a specified sum from the drawer's account

The drawee guarantees the drawer's obligation to the payee up to a specified sum

Securities are delivered with a draft attached through a bank acting as intermediary. On what does the release of the securities to the buyer depend?

On the settlement date arriving, the intermediary releasing them automatically on that day

On the buyer's acceptance or payment of the draft, which the intermediary presents

On the buyer confirming that the securities tendered conform to the terms of the contract

On the seller instructing the intermediary that it is satisfied to release the securities

FINRA Rule 11400 is titled Delivery of Securities with Draft Attached, paralleling FINRA Rule 11300's own title. What does that parallel confirm about the subsection?

That it applies to the same transactions as the general framework, at the parties' election

That it supersedes the general delivery framework wherever a draft is involved in a delivery

That it addresses a specialised variant of the general delivery framework, not a separate category

That it was adopted as a division of the general delivery subsection before being separated out

A delivering party requires that payment, when tendered, be made by bank draft. Is that the same thing as a delivery of securities with draft attached?

No, the first specifies the form payment takes while the second structures the delivery itself

Yes, though the second phrase is used only where the parties are in different locations

No, the first concerns deliveries between members and the second deliveries to customers

Yes, requiring a bank draft is what the phrase delivery with draft attached describes

A drawee has accepted a draft attached to a securities shipment, and the draft falls due for payment some weeks later. What distinguishes the acceptance it has given from payment of the draft?

Acceptance merely acknowledges that the draft has been received, and no obligation to pay arises until the day the draft falls due

Acceptance is the drawee's binding commitment to pay the draft according to its terms, and payment is a separate act that may come later

Acceptance fixes the amount and date of payment, but the drawee becomes bound to pay once it has checked the securities delivered

Acceptance is a provisional commitment to pay, which the drawee may withdraw by notice to the presenter at any time before the due date

Drafts are commonly divided into sight drafts and time drafts. What separates the two kinds?

Whom it pays: a sight draft pays the drawer itself, and a time draft a third-party payee named on its face

How it travels: a sight draft is presented in person by the seller, and a time draft through an intermediary

When payment falls due: a sight draft is payable on demand, and a time draft at some future date

Who is drawn on: a sight draft names a bank as drawee, and a time draft names the buyer of the securities

A drawee accepts a draft-attached shipment of securities containing an irregularity on 1 March. The draft falls due and is paid on 31 March. The drawee noticed a price discrepancy arising from the irregularity on 2 April and presents a claim over the price on 7 April. Under FINRA Rule 11410(f), is the claim in time?

No, because the ten-day period runs from acceptance of the shipment, and 7 April is more than a month after 1 March

No, because the ten-day period runs from delivery of the irregular shipment, which came no later than its acceptance on 1 March

Yes, because the ten-day period runs from the day the drawee noticed the discrepancy, 2 April, and not from any earlier event

Yes, because the ten-day period runs from payment of the draft, and 7 April falls within ten days of 31 March

In a delivery of securities with draft attached governed by FINRA Rule 11410, through whom does the draft reach the drawee for presentation?

The seller's bank or collecting agent, acting on the instructions the seller gives it

The seller itself, in person, at the purchaser's office where delivery of the securities is due

The drawee's own bank, acting on instructions the buyer gave it when the trade was made

The purchaser's broker, which receives the draft with the securities and passes it on to the drawee

A drawee fails to accept a draft that contains no irregularities and was duly presented on a business day on the settlement date. How does FINRA Rule 11410 divide the collection charge and the insurance on the shipment from the protest fee and the wire charge the delay then causes?

All four stay with the seller as expenses of the draft-attached shipment, the drawee being liable for interest but for none of those charges

The collection charge and insurance stay with the seller as shipment expenses, and the drawee is liable for the protest fee and wire charge

The protest fee and wire charge stay with the seller as its collection costs, and the drawee must repay the collection charge and insurance

All four fall on the drawee, because its failure to accept is what turned every one of them into a wasted cost for the seller

FINRA Rule 11410(a) makes special provision for drafts on a Saturday or half-holiday. A draft is received for presentation on a Saturday, held, and presented during business hours on the following Monday, a business day; the settlement date has passed and the draft has no irregularities. Which day decides whether that special provision applies?

The day the securities were shipped, so the treatment depends on when the shipment left the seller's office

The settlement date, so the treatment depends on whether the underlying contract itself fell due on a Saturday

The day of presentation, so this is a business-day presentation and refusing the proper draft exposes the drawee to liability

The day of receipt, so a draft that arrived on a Saturday keeps the Saturday treatment whenever it is later presented

The Note to FINRA Rule 11410(a) advises the seller about drafts received on a Saturday or half-holiday. A seller ignores that advice, and a draft is presented on a Saturday and refused. What is the seller's position?

It has breached the rule, the Note being a binding requirement, and it must also bear the whole expense of the refusal

It has breached nothing, and the drawee must bear the expense of the refusal as it would for any draft presented to it

It has breached the rule, and the breach entitles the drawee to recover from it the cost of handling the refused draft

It has breached nothing, the Note being advice for its own protection, but the drawee bears none of the expense of the refusal

Securities not issued under the jurisdiction of a foreign country are delivered between members on 1 March in a draft-attached shipment. The draft is accepted, and payment of it is made on 31 March. The purchaser then discovers, on 8 April, an irregularity going only to the currency of the security in the market, and seeks to reclaim that day. Is the reclamation in time?

No; the period for that irregularity runs 15 days from original delivery, and it had ended on 16 March

No; once the draft attached to the shipment has been paid, the purchaser can no longer reclaim the securities

Yes; the period for that irregularity runs 45 days from original delivery, which takes it to 15 April

Yes; the period for that irregularity runs 15 days from payment of the draft, so it stays open until 15 April

Two members trade for delayed delivery, agreeing at the time of the trade on delivery on 20 June. The draft attached to the shipment contains no irregularities and is presented during business hours on 17 June, a business day falling well after the trade date. The drawee declines it. Which date decides whether it could do so, and with what result?

The day the draft was presented, which serves as the settlement date of any draft-attached delivery, so the drawee is liable for declining

The 20 June delivery date agreed at the trade, which had not arrived, so declining the draft was within the drawee's option

The 20 June delivery date agreed at the trade, but the drawee had to accept on 17 June and could only defer payment until 20 June

The first business day after the trade date, which had passed, so declining the draft exposes the drawee to liability under paragraph (e)

On the settlement date, which is a business day, a draft free of irregularities is presented to the drawee in business hours, and the drawee accepts it immediately. The draft is payable 30 days later, and the drawee pays it on that day. Does FINRA Rule 11410(e) make the drawee liable for interest over those 30 days?

Yes; acceptance does not discharge paragraph (e) unless the drawee also pays the draft on the same day it accepts it

Yes; paragraph (e) interest runs on every draft from the moment it is presented until the date on which the draft is finally paid

No; paragraph (e)'s liability for interest follows a failure to accept, and this drawee accepted the draft when it was duly presented

No; but only because the seller agreed to that payment date in the contract, which waives the interest paragraph (e) would impose

A seller can deliver securities outright and leave the purchaser to remit payment separately, or it can ship them with a draft attached. What does the draft-attached arrangement spare the seller?

Liability for any loss of the securities in transit, which passes to the drawee once the draft has been presented to it

Exposure to the purchaser's payment risk over the interval between the delivery of the securities and payment for them

The duty to deliver on the contract's settlement date, the draft itself fixing a later date on which delivery falls due

Any need to confirm the trade, the attached draft standing in place of the confirmation the Code would otherwise require

Among the Uniform Practice Code's major subsections, FINRA Rule 11100 organises twelve rules, FINRA Rule 11200 two and FINRA Rule 11300 eleven, while FINRA Rule 11400 organises only FINRA Rule 11410. What does that contrast suggest about delivery with draft attached as a topic?

That it is broader than those subjects, one comprehensive rule being drafted to cover every form of delivery against payment

That it is a residual topic, its one rule applying only where none of the general delivery rules in FINRA Rule 11300 reaches

That it is distinct enough to need its own subsection yet narrow enough to be treated completely within one rule

That it is the most closely examined part of the Code, a topic confined to one rule being tested at greater depth

A draft attached to a securities shipment must be paid by the drawee as soon as it is presented. It has now been presented, and the drawee has not yet paid it. How is the draft classified?

As a time draft, because payment has not yet been made and so will fall at some date after the presentation

As an accepted draft, a third class that a draft enters on presentation and leaves only once it has been paid

As a sight draft only once it is paid, the draft being treated as a time draft for as long as payment is outstanding

As a sight draft, the class turning on when payment falls due and not on whether payment has yet been made

On 4 September a drawee accepts a draft, attached to a securities shipment, that is payable on 4 October. What is the drawee's position on 20 September?

It has paid nothing yet, but its acceptance has already bound it to pay the draft according to its terms

It has discharged the draft already, acceptance counting as payment and 4 October being merely the day the funds move

It has paid part, acceptance requiring a payment on account with the balance of the draft falling due on 4 October

It has paid nothing, and its acceptance lapses unless it is renewed on a second presentation of the draft on 4 October

Two members trade for cash. Later that day, during business hours, a draft free of irregularities is presented with the shipment, and the drawee declines it, relying on the option FINRA Rule 11410(b) gives for drafts presented before the settlement date. Is that ground open to the drawee?

Yes; the settlement date of a cash contract is the next business day, so a draft presented on the trade day comes early

No; delivery on a contract for cash is due on the day of the transaction, so the draft was not presented early

Yes; paragraph (b) lets a drawee decline any draft presented on the trade date itself, whatever the type of contract

No; the option in paragraph (b) reaches only a draft that is presented on a day that is not a business day

On a buyer's option contract between members, the option expires on a Monday that is a Federal holiday. A draft free of irregularities is presented with the shipment during business hours on the Tuesday, and the drawee declines it as presented before the settlement date. Is the drawee right?

No; a contract falling due on a holiday matures on the business day before it, so the settlement date was the preceding Friday

Yes; a contract falling due on a holiday matures on the second business day after the holiday, which here is the Wednesday

No; a contract due on a day that is not a business day matures on the next business day, which is the Tuesday

Yes; the option lapses on the holiday and the contract turns regular way, so it settles on the business day after the Tuesday

Outside the securities markets, which broader kind of commercial arrangement does a delivery of securities with draft attached most closely resemble?

Consignment, where goods are left with a dealer to sell on the owner's behalf and the proceeds are remitted later

A repurchase agreement, where securities are sold under an undertaking that the seller will buy them back at a set price

Factoring, where the seller sells its receivable from the buyer to a finance house at a discount for immediate cash

Documentary collection, where a seller ships goods together with documents through a bank for collection from the buyer

A drawee accepts a draft-attached shipment that contains an irregularity. What does that acceptance do to the claims that arise from the irregularity?

They survive acceptance and may still be presented, accepting the shipment giving up none of them

They survive for defects the drawee could not have found on examination, the ones it could have found being waived

They survive as claims for protest fees and wire charges, while any claim over the price is given up on acceptance

They survive but stay suspended, no claim being presentable until the seller delivers conforming securities

A member sells a depository eligible security to another member and proposes to ship a certificate to it with a draft attached, instead of settling the trade through a securities depository. May it do so?

Yes; FINRA Rule 11410 is the specific rule for draft-attached shipments, so it prevails over the general book-entry rule

No; FINRA Rule 11310 requires book-entry settlement here, and its requirements supersede inconsistent ones elsewhere in the Code

Yes; a member may choose any delivery method the Code recognises, provided the purchaser agrees when the trade is compared

No; a draft-attached delivery needs the purchaser's prior written consent, which the facts here do not show it gave

A member sells securities to a customer that is not a member and ships them with a draft attached. Does FINRA Rule 11410 govern the shipment?

Yes; FINRA Rule 11410 governs every draft-attached shipment a member makes, whoever the purchaser happens to be

Yes; the drawee's protections in FINRA Rule 11410 apply with most force where the drawee is a customer rather than a dealer

No; the Code reaches transactions between members, and the draft-acceptance rule has no provision widening that reach

No; FINRA Rule 11410 reaches a customer that is not a member only where the customer agrees in writing to the Code's terms

On a seller's option contract between members, the option runs out on a Friday, and the seller has not given any written notice of an intention to deliver. A draft free of irregularities is presented with the shipment during business hours on the Wednesday before, and the drawee declines it. Was declining it within the drawee's option?

No; a seller's option lets the seller deliver on any business day after the trade date, so the Wednesday was a good day

No; a seller's option contract settles on the first business day after the trade, the option only permitting later delivery

Yes; acceptance of any draft on an option contract is at the drawee's option, the expiry date being only an outer limit

Yes; with no written notice of intention to deliver, the delivery date stays the Friday, so the draft was presented early

A dealer in the East places a regular way bid with a dealer in the West, open until the Western dealer's business day closes. The Western dealer accepts it on a Monday, and word of that acceptance gets to the Eastern dealer on the Tuesday; the week has no holidays. A draft free of irregularities is presented with the shipment in business hours on the Tuesday, and the drawee fails to accept it. What follows?

The trade date is the Monday, when the Western dealer accepted, so the Tuesday is the settlement date and paragraph (e) applies

The trade date is the Tuesday, when the notice of acceptance arrived, so the draft came early and declining it was optional

The trade date is the Monday, but settlement waits a further business day for the originator, so declining it was optional

The trade date is the Tuesday, when the notice arrived, but paragraph (e) applies because the draft was presented on a business day

The settlement date of a contract between members is 2 March 2026. The shipment contains more securities than were contracted for, and the draft attached to it is paid on 2 June 2026. The purchaser first seeks to reclaim the excess in October 2028. Is that reclamation within FINRA Rule 11720(a)'s 30 months?

Yes; the 30 months run from payment of the draft, so they remain open until 2 December 2028

No; the 30 months run from the contract's settlement date, so they ended on 2 September 2028

Yes; the 30 months run from the day the purchaser discovered the over-delivery, which was in 2028

No; the 30 months run from the trade date, which came before 2 March 2026, so they ended earlier still

A member's period for reclaiming a security under FINRA Rule 11720 runs out before it has made any reclamation. Under paragraph (d) of that rule, what remains open to the member?

It may still pursue its claim, its one remaining route being a fresh reclamation once the deliverer consents to reopen the period

It may still pursue its claim in the courts, though the arbitration procedure closes to it once the period has run

It may still pursue its claim by other open avenues, the FINRA arbitration procedure among them

It may still pursue its claim, provided it first obtains from the Committee a further period in which to reclaim

On the settlement date, a business day, a draft free of irregularities is duly presented and the drawee fails to accept it. On a later presentation the drawee accepts the draft, and it pays the draft nine days after the first presentation. To what date does FINRA Rule 11410(e) make the drawee liable for interest?

To the date it accepted the draft on the later presentation, whatever the later date of payment

To the date the seller presents its claim for interest, the claim fixing the amount that is owed

To the settlement date alone, paragraph (e) interest being a charge for one day's delay

To the date the draft is paid, nine days after the presentation it failed to accept

FINRA Rule 11400 | Delivery of Securities with Draft

What Is FINRA Rule 11400? Delivery of Securities with Draft Attached

FINRA Rule 11400 is the series-level marker for the fourth major subsection of the Uniform Practice Code — and, uniquely among the subsections examined thus far in this dictionary's coverage, organizes only a single child rule, FINRA Rule 11410, Acceptance of Draft. Its title — Delivery of Securities with Draft Attached — identifies a specialized delivery mechanism distinct from the book-entry settlement, dates of delivery, payment, stamp tax, part delivery, and units of delivery framework that the immediately preceding FINRA Rule 11300 subsection addresses in detail.

FINRA Rule 11400 has no operative text. Its FINRA.org page returns no rule text under The Rule tab, shows no amendment history, and lists no selected notices — only its single child rule, FINRA Rule 11410.

FINRA Rule 11400 sits within the 11000 Uniform Practice Code as the fourth major subsection, positioned between FINRA Rule 11365 — the final rule of the FINRA Rule 11300 Delivery of Securities subsection — and FINRA Rule 11410, the sole substantive rule of the FINRA Rule 11400 subsection itself.

What "Delivery with Draft Attached" Refers To

A draft, in the commercial and banking context FINRA Rule 11400's title invokes, is a financial instrument by which one party — the drawer — orders another party — the drawee, typically a bank — to pay a specified sum to a third party — the payee — either on demand or at a specified future time. A delivery of securities with draft attached refers to a specific delivery mechanism in which the securities being delivered are physically accompanied by a draft — an instrument representing the seller's claim to payment — with the delivery and the draft functioning together as a coordinated payment-collection mechanism.

This delivery-with-draft-attached mechanism historically served an important function in securities transactions, particularly those involving parties in different geographic locations or those where the selling party wished to ensure that payment was secured concurrently with, or as a direct precondition to, the delivery of the securities themselves.

Rather than delivering securities outright and trusting the purchaser to remit payment separately — an arrangement that would expose the seller to the purchaser's payment risk during whatever interval elapsed between delivery and payment — the draft-attached mechanism ties the securities' delivery directly to a financial instrument that operationalizes the seller's right to payment, with a bank or other intermediary typically serving as the mechanism through which the draft is presented and the securities are released only against the draft's acceptance or payment.

This mechanism bears a family resemblance to the broader category of documentary collection arrangements used in commercial transactions more generally — arrangements in which a seller ships goods (or, in this context, delivers securities) together with documents (here, a draft) through a bank, with the bank releasing the goods or documents to the buyer only upon the buyer's acceptance or payment of the draft. The mechanism provides the seller with a degree of payment security that a simple physical delivery, unaccompanied by any such instrument, would not provide.

FINRA Rule 11400's Position Within the Uniform Practice Code's Delivery Framework

FINRA Rule 11400's position immediately following the FINRA Rule 11300 subsection — and its title's explicit framing as Delivery of Securities, paralleling FINRA Rule 11300's own title — confirms that FINRA Rule 11400 addresses a specialized variant of the general delivery framework FINRA Rule 11300 establishes, rather than an entirely separate transactional category.

Where FINRA Rule 11300 addressed the general mechanics of delivery — book-entry settlement under FINRA Rule 11310, timing under FINRA Rule 11320, payment form under FINRA Rule 11330, stamp taxes under FINRA Rule 11340, part delivery under FINRA Rule 11350, and units of delivery under FINRA Rules 11360 through 11365 — FINRA Rule 11400 addresses the specific case where delivery occurs with a draft attached, a mechanism that interacts with several of these general delivery provisions in ways that FINRA Rule 11410, examined in this dictionary's next entry, will presumably address.

The relationship between FINRA Rule 11330's payment framework — examined earlier in this dictionary's coverage, establishing the delivering party's right to require payment by certified check, cashier's check, bank draft, or cash — and FINRA Rule 11400's draft-attached delivery mechanism deserves particular note.

FINRA Rule 11330 enumerates bank draft as one of the four payment forms a delivering party may require. FINRA Rule 11400's draft-attached delivery mechanism represents a related but procedurally distinct concept — rather than simply specifying that payment, when tendered, must be in the form of (among other options) a bank draft, the draft-attached mechanism structures the delivery itself around the draft, with the draft physically or procedurally accompanying the securities through whatever collection process the mechanism employs.

The Single-Rule Subsection: A Structural Outlier

FINRA Rule 11400's organization of only a single child rule — FINRA Rule 11410 — makes it a structural outlier among the major subsections of the 11000 Uniform Practice Code examined in this dictionary's coverage thus far. FINRA Rule 11100 organized twelve rules across the foundational scope, governance, definitions, and ex-date framework. FINRA Rule 11200 organized two rules addressing comparisons, confirmations, and Don't Know Notices. FINRA Rule 11300 organized eleven rules spanning book-entry settlement through the units of delivery cluster. FINRA Rule 11400, by contrast, organizes exactly one rule.

This single-rule structure suggests that delivery of securities with draft attached, while sufficiently distinct from the general delivery framework of FINRA Rule 11300 to warrant its own subsection-level organizational marker, nonetheless represents a narrower and more self-contained topic than the subjects addressed by the preceding subsections — a topic whose complete treatment can be accomplished within a single rule, FINRA Rule 11410, rather than requiring the kind of multi-rule elaboration that book-entry settlement, dates of delivery, payment, stamp taxes, part delivery, and units of delivery collectively required within FINRA Rule 11300.

Anticipating FINRA Rule 11410: Acceptance of Draft

FINRA Rule 11410's title — Acceptance of Draft — provides a preliminary indication of what this dictionary's next entry will address. In the context of documentary collection arrangements generally, acceptance of a draft refers to the drawee's (typically a bank's) formal acknowledgment of its obligation to pay the draft according to its terms — an acceptance that, once given, represents the drawee's binding commitment to pay, distinct from actual payment itself, which may occur at a later time depending on whether the draft is payable on demand (a sight draft) or at some future date (a time draft).

FINRA Rule 11410's focus on acceptance — rather than, for example, presentation of the draft, or payment of the draft, or some other stage in the documentary collection process — suggests that the rule addresses the specific procedural step at which the drawee's acceptance of the draft becomes operative for purposes of the securities delivery the draft accompanies, potentially addressing questions such as what constitutes acceptance, what consequences flow from acceptance for purposes of the underlying securities transaction, and how the timing of acceptance relates to the delivery and settlement framework that FINRA Rule 11300's various provisions — particularly FINRA Rule 11320's dates of delivery and FINRA Rule 11330's payment framework — establish for transactions generally.

This dictionary will examine FINRA Rule 11410 directly in its next entry, at which point the specific operative content of the draft-attached delivery mechanism — and FINRA Rule 11400's role as the organizational marker for that mechanism — will be confirmed in full.

Connection to FINRA Rules 11300, 11320, 11330, and 11410

FINRA Rule 11400 connects to FINRA Rule 11300 as the immediately preceding major subsection, whose general delivery framework — encompassing book-entry settlement, dates of delivery, payment, stamp taxes, part delivery, and units of delivery — provides the broader context within which FINRA Rule 11400's specialized draft-attached delivery mechanism operates as a variant or special case. It connects to FINRA Rule 11320's dates of delivery framework, since a draft-attached delivery's timing — when the securities are delivered, and how that timing relates to the draft's acceptance and payment — must be reconciled with FINRA Rule 11320's general delivery timing provisions for whichever contract type (regular way, seller's option, buyer's option, and so forth) the draft-attached transaction otherwise falls under.

It connects to FINRA Rule 11330's payment framework, given bank draft's status as one of FINRA Rule 11330's four enumerated acceptable payment forms, and the conceptual relationship between that payment-form specification and FINRA Rule 11400's draft-attached delivery mechanism as two related but procedurally distinct aspects of how drafts function in settlement. And it connects directly and exclusively to FINRA Rule 11410 — its sole child rule, which this dictionary will examine next to complete coverage of the FINRA Rule 11400 subsection in its entirety.

Acceptance and Payment: Two Separate Events

FINRA Rule 11410 treats the acceptance of a draft and the payment of a draft as two different events. Paragraph (e) makes a drawee that fails to accept a proper draft liable for interest "to the date the draft is paid". Paragraph (f) measures its claims period from payment, "not later than ten days after payment", and not from acceptance.

Acceptance of a draft is the drawee's formal acknowledgment of its obligation to pay the draft according to its terms. Once given, it is the drawee's binding commitment to pay. It is not payment itself, which may come later. Suppose a drawee accepts, on 3 May, a draft payable on 2 June. On 3 May the drawee has bound itself to pay the draft. Nothing has yet been paid, and payment falls due on 2 June.

Whether payment follows at once depends on the kind of draft. A draft payable on demand is a sight draft. A draft payable at some future date is a time draft. A draft that the drawee must pay as soon as it is presented is a sight draft, even if the drawee has not yet paid it when the question is asked.

The difference matters for the claims period in paragraph (f). Suppose a drawee accepts a draft shipment containing an irregularity on 1 March, and the draft, a time draft, is paid on 31 March. A claim over the price arising from that acceptance must be presented not later than ten days after payment. A claim presented on 7 April is therefore in time, although it comes more than a month after the acceptance.

Who Does What in a Draft-Attached Shipment

FINRA Rule 11410 speaks of "Drafts accompanying the shipment of securities" and of a drawee to whom a draft is presented. The Note to paragraph (a) shows who presents it. The seller is advised to instruct "its bank or collecting agent" about when the draft need be presented to the drawee. The draft therefore reaches the drawee through the seller's bank or collecting agent, acting on the seller's instructions.

The costs of the mechanism are divided by what causes them. Under paragraph (d), the expenses of shipment, including insurance, postage, draft and collection charges, are paid by the seller. Under paragraph (e), a drawee that fails to accept a draft in which no irregularities exist, duly presented on a business day, is liable for interest to the date the draft is paid and for other incidental expenses incurred because of the delay, including protest fees, if any, and wire charges.

Suppose a draft with no irregularities is duly presented on a business day, on the settlement date, and the drawee fails to accept it. The seller's collecting agent has charged a collection fee, and the shipment was insured. Because of the delay, the seller then pays a protest fee and a wire charge. The collection fee and the insurance remain the seller's expenses of shipment under paragraph (d). The protest fee and the wire charge were incurred because of the delay, so paragraph (e) makes the drawee liable for them.

Working Out Whether a Draft Is Presented Before the Settlement Date

Paragraph (b) of FINRA Rule 11410 makes the acceptance of a draft prior to the settlement date the drawee's option. The Code uses "delivery date" interchangeably with "settlement date" for the date designated for the delivery of securities, and FINRA Rule 11320 fixes that date for each kind of contract. So whether a presentation is early depends on the contract.

On a regular way contract, delivery is made on, but not before, the first business day following the date of the transaction. Suppose a regular way trade is made on a Monday in a week with no holidays, and the seller's collecting agent presents the draft that Monday afternoon. The settlement date is the Tuesday. The draft was presented before the settlement date, so its acceptance is at the drawee's option.

On a contract for cash, delivery is made on the day of the transaction. A draft presented during business hours on the day of a cash trade is therefore not presented before the settlement date, and paragraph (b) gives the drawee no option to decline it on that ground. If the draft contains no irregularities and the drawee fails to accept it, paragraph (e) applies.

A contract due on a day other than a business day matures on the next business day. Suppose the option on a buyer's option contract expires on a Monday that is a Federal holiday. The contract matures on the Tuesday, and a draft presented on the Tuesday is not presented before the settlement date.

Weekend Receipt and Weekend Presentation

The protection that paragraph (a) gives a drawee on a Saturday or half-holiday turns on the day the draft is presented, not the day it reaches the seller's bank. Suppose the seller's collecting agent receives a draft on a Saturday and, as the Note advises, holds it and presents it to the drawee on the Monday, a business day, during business hours. If the draft contains no irregularities and the settlement date has arrived, the Monday presentation is a presentation on a business day. A drawee that fails to accept it is liable under paragraph (e).

A presentation on a day that is not a business day stands differently. Paragraph (a) requires acceptance only on a business day, and paragraph (e) attaches liability to a failure to accept a draft "duly presented on a business day". A drawee that declines a draft presented on a Sunday is therefore not liable under paragraph (e).

The drawee may still choose to accept at such a time. Acceptance at other times is at the drawee's option, so a drawee that accepts a draft presented on a Saturday has made an acceptance the rule permits.

The Note is advice to the seller, introduced by the words "For its own protection". A seller that gives its collecting agent no such instruction does not breach the rule. It runs the risk that a draft presented on a Saturday or half-holiday is refused, with the drawee bearing none of the expense of the refusal.

Claims After Accepting an Irregular Shipment

A drawee is not obliged to accept a draft that contains irregularities, but it may. Accepting does not give up the claims that arise from the irregularity. Paragraph (f) provides for claims about items such as price, interest, protest fees or wire charges "arising from the acceptance of draft shipments in which irregularities exist", and requires them to be presented not later than ten days after payment.

That period does not govern matters covered under "Reclamations" in FINRA Rules 11710 to 11730. Under FINRA Rule 11730, reclamation because a security was delivered after publication of notice of call for its redemption may be made without limit of time. That rule does not apply when an entire issue is called for redemption or when the security was dealt in specifically as a "called" security.

Suppose a drawee accepts a draft shipment of bonds, pays the draft, and three months later finds that some of the bonds were delivered after publication of a notice calling them for redemption. Only part of the issue was called, and the trade was not made in the bonds as called securities. The reclamation is not late. It falls under FINRA Rule 11730, which sets no time limit, and not under the ten-day period in paragraph (f).

When a Draft-Attached Delivery Is Available

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 those requirements supersede any inconsistent requirements under other rules of the Code. A member that sells a depository eligible security to another member therefore settles by book-entry. It cannot choose instead to ship a certificate with a draft attached for its own payment security.

The book-entry requirement does not reach every transaction. FINRA Rule 11310(g) excludes transactions where the securities to be delivered are not on deposit at a securities depository and the deliverer is unable to deposit them before the depository's cut-off time or cut-off date. FINRA Rule 11310(e) excludes transactions settled outside the United States. In those cases FINRA Rule 11310 does not require book-entry settlement, so a delivery with draft attached remains open to the parties.

The Uniform Practice Code reaches over-the-counter secondary market transactions in securities between members. A rule of the Code expands or limits that scope only where it specifically so provides, and FINRA Rule 11410 contains no such provision. A member that ships securities with a draft attached to a customer who is not a member is outside the Code's scope, and FINRA Rule 11410 does not govern that shipment.

Fixing the Settlement Date for Paragraph (b)

Paragraph (b) of FINRA Rule 11410 turns on the settlement date, and FINRA Rule 11120(c) makes the settlement date the date designated for the delivery of securities. For a contract made for delayed delivery, FINRA Rule 11320(f) designates the date agreed upon at the time of the transaction. Suppose two members agree, when they trade, on delivery on 20 June, and the draft attached to the shipment is presented during business hours on 17 June, a business day. The draft is presented before the settlement date, so its acceptance is at the drawee's option, even though it is presented on a business day and contains no irregularities.

On a seller's option contract, FINRA Rule 11320(c) requires delivery on the date on which the option expires. The seller may deliver earlier, on any business day after the first business day following the date of the transaction and before the option expires, only if it delivers at the office of the purchaser, on a business day preceding the day of delivery, written notice of intention to deliver. Suppose the option on a seller's option contract expires on a Friday, and the seller has given no written notice of intention to deliver. The draft attached to the shipment is presented on the Wednesday before. Without the notice, the date for delivery under the contract remains the Friday, so the draft is presented before the settlement date and its acceptance is at the drawee's option.

The settlement date also depends on the trade date. Under FINRA Rule 11120(g), 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 is the day on which the dealer in the later time zone accepts the trade. Suppose an Eastern dealer leaves a regular way bid with a Western dealer, good until the close of the Western dealer's business day. The Western dealer accepts on a Monday, and its notice of acceptance reaches the Eastern dealer on the Tuesday. The week has no holidays. The trade date is the Monday, so under FINRA Rule 11320(b) the settlement date is the Tuesday. A draft attached to the shipment and presented during business hours on the Tuesday is not presented before the settlement date. If it contains no irregularities and the drawee fails to accept it, paragraph (e) applies.

Presentation Hours and the Purchaser's Office Hours

FINRA Rule 11410(a) and FINRA Rule 11320(h) both refer to the hours established by rule or practice in a community, but they identify the community differently. Under FINRA Rule 11320(h), 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. Under FINRA Rule 11410(a), a draft need be accepted only on a business day between the hours established by rule or practice in the community where the draft is presented, and acceptance at other times is at the drawee's option.

Suppose the purchaser's office is in one city and the draft is presented to the drawee in another, on a business day, after the hours established in the city of presentation have ended but while those in the purchaser's city continue. The draft need not be accepted at that time, and acceptance then is at the drawee's option. The hours in the purchaser's city govern delivery at the purchaser's office under FINRA Rule 11320(h); they are not the hours to which FINRA Rule 11410(a) looks for the acceptance of the draft.

Refusing a Draft That Contains Irregularities

Paragraph (e) of FINRA Rule 11410 attaches liability to a failure to accept "a draft in which no irregularities exist". Paragraph (c) makes the acceptance of a draft which contains irregularities the drawee's option. Suppose a draft containing an irregularity is duly presented on a business day, on the settlement date, and the drawee declines it. The seller then pays a protest fee and a wire charge. Paragraph (e) does not make the drawee liable for them, because the draft was not one in which no irregularities exist.

Reclamation Periods After a Draft Is Paid

The ten days after payment in paragraph (f) do not apply to matters covered under "Reclamations" in FINRA Rules 11710 to 11730. FINRA Rules 11710 and 11720 set their own periods. Under FINRA Rule 11710(d), reclamation for an irregularity which affects only the currency of the security in the market must be made within 15 days from the day of original delivery, or within 45 days if the security is issued under the jurisdiction of a foreign country.

Suppose securities not issued under the jurisdiction of a foreign country are delivered on 1 March in a draft-attached shipment. The draft is accepted, and it is paid on 31 March. On 8 April the purchaser finds an irregularity that affects only the currency of the security in the market and seeks to reclaim. The reclamation is governed by FINRA Rule 11710(d), not by the ten days after payment in paragraph (f). The 15 days from the day of original delivery ended on 16 March, so the reclamation is out of time, although 8 April is within ten days of payment.

FINRA Rule 11720(a) counts from yet another date. Reclamation by reason of an irregularity in the delivery of a security, which includes wrong, duplicate, misdirected or over-deliveries, shall be within 30 months after the settlement date of the contract. Suppose the settlement date of a contract is 2 March 2026, the shipment carries more securities than the contract called for, and the time draft attached to it is paid on 2 June 2026. The 30 months run from 2 March 2026 and end on 2 September 2028, not three months later. A reclamation of the over-delivery first made in October 2028 is outside the 30-month period, although it is within 30 months of payment. Under FINRA Rule 11720(d), the running of that period does not foreclose the member's rights to pursue its claim via other open avenues, including the FINRA arbitration procedure.

Municipal Securities Shipped with a Draft Attached

FINRA Rule 11100(a) subjects over-the-counter secondary market transactions in securities between members to the Code, except for the transactions it lists. One exception is transactions in municipal securities as defined in Section 3(a)(29) of the Exchange Act. A rule of the Code may expand or limit that scope only if specifically provided therein, and FINRA Rule 11410 makes no such provision. Suppose one member sells municipal securities to another in the over-the-counter secondary market and ships them with a draft attached. The transaction is excepted from the Code, so FINRA Rule 11410 does not govern that shipment.

Accepting a Proper Draft That Is Paid Later

Paragraph (e) of FINRA Rule 11410 attaches liability to a failure to accept. The failure to accept a draft in which no irregularities exist, when duly presented on a business day, makes the drawee liable for the payment of interest to the date the draft is paid and for other incidental expenses incurred because of the delay.

Suppose a draft in which no irregularities exist is presented to the drawee during business hours on the settlement date, a business day. The drawee accepts it at once. The draft is payable 30 days later, and the drawee pays it on that day. The drawee did not fail to accept the draft, so paragraph (e) does not make it liable for interest for the 30 days between its acceptance and its payment of the draft.

Paragraph (e) Claims and the Ten Days in Paragraph (f)

Paragraph (f) of FINRA Rule 11410 sets a limit for one class of claims. Claims with respect to such items as price, interest, protest fees or wire charges and items of similar nature, arising from the acceptance of draft shipments in which irregularities exist, shall be presented not later than ten days after payment.

Suppose a draft in which no irregularities exist is duly presented on 2 June, a business day and the settlement date, and the drawee fails to accept it. The draft is presented again, and the drawee accepts and pays it on 8 June. On 30 June the seller presents its claim for interest under paragraph (e). Interest is one of the items paragraph (f) names. But this claim does not arise from the acceptance of a draft shipment in which irregularities exist. It arises from the failure to accept a draft in which none existed. The ten days after payment in paragraph (f) therefore do not govern it.

Examination Relevance and Key Takeaways

FINRA Rule 11400 is tested on the Series 7 and Series 24 examinations as the series-level marker for the delivery of securities with draft attached — one of the two smallest major subsections of the Uniform Practice Code, organizing a single rule addressing a specialized delivery mechanism in which securities are delivered together with a draft representing the seller's claim to payment.

The key points to retain are these: FINRA Rule 11400 has no operative text, no amendment history, and no selected notices of its own — it serves purely as the organizational marker for FINRA Rule 11410, Acceptance of Draft, its sole child rule; delivery of securities with draft attached is a specialized mechanism, related to documentary collection arrangements more broadly, in which securities are delivered together with a draft — an instrument representing the seller's claim to payment — typically through a bank or other intermediary that releases the securities only against the draft's acceptance or payment, providing the seller payment security that an unaccompanied physical delivery would not; FINRA Rule 11400's position immediately following the FINRA Rule 11300 Delivery of Securities subsection, and its parallel title framing, confirms it addresses a specialized variant of the general delivery framework rather than an unrelated transactional category, with particular conceptual proximity to FINRA Rule 11330's enumeration of bank draft as one of four acceptable payment forms; and FINRA Rule 11400's single-rule structure makes it a structural outlier among the 11000 series' major subsections, suggesting a narrower and more self-contained topic than its multi-rule neighbors.