FINRA Rule 11571

FINRA Rule 11571 sits within the 11500 Delivery of Securities with Restrictions subsection of the 11000 Uniform Practice Code, as the first rule of the FINRA Rule 11570 Certificates in Various Names cluster, immediately following FINRA Rule 11570's series marker and immediately preceding FINRA Rule 11572's certificate in name of firm framework.

FINRA Rule 11571(a): The "Proper Papers for Transfer Filed by Assignor" Statement for Transfer Books Open

FINRA Rule 11571(a) addresses the ordinary case — where the issuing corporation's transfer books remain open and operational, FINRA Rule 11550's general assignment framework applies, but with an additional certification specific to corporate, institutional, or officially-designated registrations: a certificate in the name of a corporation or an institution, or in a name with official designation shall be a good delivery only if the statement "Proper papers for transfer filed by assignor" is placed on the assignment and signed by the transfer agent.

This statement requirement addresses a specific gap in FINRA Rule 11550's general framework as applied to corporate or institutional registrations. FINRA Rule 11550(c)'s technically correct signature standard requires that a signature correspond with the registered name on the certificate — but a corporation cannot itself physically sign anything; some natural person must sign on the corporation's behalf, and that person's authority to do so is not something the certificate itself, or a bare signature, can establish. The transfer agent — who, in the transfer-books-open scenario, is actively processing the transfer and has access to whatever documentation the corporation has filed establishing who is authorized to act on its behalf — is in the position to verify that proper papers establishing this authority have, in fact, been filed by the assignor.

The "Proper papers for transfer filed by assignor" statement, placed on the assignment and signed by the transfer agent, functions as the transfer agent's certification of precisely this point — that whatever documentation is required to establish the assignor's authority to act on the corporation's, institution's, or officially-designated entity's behalf has been filed and verified by the transfer agent. For a certificate to constitute good delivery, this certification must appear on the assignment, signed by the transfer agent — without it, a receiving party would have no assurance that the person who signed the assignment on the corporation's behalf actually had authority to do so, even if that signature was otherwise technically correct in the FINRA Rule 11550(c) sense.

The in a name with official designation language extends paragraph (a)'s scope beyond corporations and institutions narrowly defined — any registration name carrying some form of official designation (a title, office, or capacity, as distinguished from a natural person's personal name) falls within paragraph (a)'s scope, reflecting that the underlying concern — verifying the authority of whoever signs on behalf of a non-natural-person or officially-designated registrant — applies across this broader category, not merely to corporations and institutions in the narrowest sense.

FINRA Rule 11571(b): The Transfer Books Closed Scenario and Its Three-Part Documentation Package

FINRA Rule 11571(b) addresses the scenario this dictionary anticipated in connection with FINRA Rule 11560 — where a certificate registered in the name of a corporation cannot rely on the transfer-books-open mechanism (and correspondingly cannot rely on a transfer agent's "Proper papers for transfer filed by assignor" certification under paragraph (a)), because the issuing company's transfer books are closed indefinitely for any reason.

For this scenario, paragraph (b) establishes that the certificate is good delivery if the transfer instrument — the assignment or other instrument effecting transfer on the corporation's behalf — satisfies two conditions: it must be executed by an officer of such corporation, other than the secretary, and it must be accompanied by three additional items.

The other than the secretary qualifier is notable — it specifically excludes the corporate secretary from the category of officers whose execution of the transfer instrument satisfies paragraph (b)'s first condition. This exclusion likely relates to the corporate secretary's typical role in corporate governance — the secretary is often the officer responsible for maintaining corporate records, including the very kind of corporate resolutions and certificates of incumbency that the second of paragraph (b)'s three accompanying items requires, and may also be the officer who would, in the ordinary (transfer-books-open) course, certify matters to the transfer agent. Requiring that the transfer instrument be executed by an officer other than the secretary may reflect a separation-of-functions principle — the officer executing the transfer should be distinct from the officer who might otherwise be positioned to both execute the transfer and certify the corporate authorization for it, providing an additional check given the absence of the transfer-books-open scenario's transfer-agent verification.

The three accompanying items paragraph (b) requires are: first, a guarantee of such officer's signature executed by a person with the authority to make such a guarantee — paralleling FINRA Rule 11550(h)'s guarantee requirement, but specifically directed at the executing officer's signature in this transfer-books-closed context; second, a copy of a corporate resolution and a completed and executed certificate of incumbency — documentary evidence, from the corporation's own governance records, both that the corporation has authorized the relevant officers to act in this capacity (the resolution) and that the specific individual executing the transfer instrument currently holds the office the resolution authorizes (the certificate of incumbency); and third, the ownership transfer indemnification, as provided in Rule 11560, affixed to or recorded on the certificate — directly incorporating FINRA Rule 11560's mechanism, examined in this dictionary's preceding entry, into the corporate-certificate-transfer-books-closed scenario.

This three-part package — signature guarantee, corporate resolution and certificate of incumbency, and FINRA Rule 11560 ownership transfer indemnification — together substitute for the transfer-agent verification that paragraph (a)'s transfer-books-open scenario relies upon. Where no transfer agent is available to certify that proper papers for transfer have been filed, paragraph (b) requires the transferring party to assemble and provide, directly, the documentary package that establishes both the executing officer's identity and signature (via the guarantee), the corporation's authorization of that officer (via the resolution and certificate of incumbency), and the FINRA Rule 11560 substitute-transfer mechanism (via the ownership transfer indemnification) that this dictionary's preceding entry examined.

FINRA Rule 11571(c): The Foreign Internal Securities Deference

FINRA Rule 11571(c) establishes a deference provision paralleling FINRA Rule 11550(i)'s foreign internal securities carve-out examined in this dictionary's earlier entry — the foregoing requirements shall not apply to foreign internal securities when the requirements do not correspond to the laws or customs of the country concerned; but instead such laws and customs shall govern such securities.

This provision's structure differs subtly from FINRA Rule 11550(i)'s — FINRA Rule 11550(i) categorically exempted most Foreign Internal Securities (with enumerated exceptions for Canadian Securities, ADRs, American Shares, New York Shares, and similar securities) from paragraphs (b) through (g) and FINRA Rule 11572. FINRA Rule 11571(c), by contrast, frames its exemption conditionally — the foregoing requirements (paragraphs (a) and (b)) do not apply to foreign internal securities specifically when those requirements do not correspond to the laws or customs of the country concerned. This when formulation suggests a case-by-case inquiry — for a given foreign internal security, paragraph (a) or (b)'s requirements would not apply if and to the extent those requirements are incompatible with the relevant foreign country's own laws and customs, with that foreign country's laws and customs governing in lieu of the incompatible FINRA requirements.

This conditional framing makes sense given paragraph (a) and (b)'s subject matter — the "Proper papers for transfer filed by assignor" certification (paragraph (a)) and the corporate-officer-execution-with-guarantee-resolution-and-incumbency-certificate package (paragraph (b)) are documentary mechanisms developed around U.S. corporate governance and transfer agent conventions. A foreign jurisdiction's own corporate governance and securities transfer conventions may or may not map onto these specific mechanisms — paragraph (c) ensures that where they do not correspond, the foreign jurisdiction's own laws and customs govern rather than forcing an incompatible U.S.-developed framework onto a foreign internal security.

Supplementary Material .01: The Sample Certificate and Authorizing Resolution/Certificate of Incumbency

Supplementary Material .01 sets forth the Sample Certificate and Authorizing Resolution/Certificate of Incumbency corresponding to the resolution and certificate of incumbency required by paragraph (b)(2). The sample's structure, confirmed from the FINRA.org page, includes: a certification that a meeting of the corporation's Board of Directors was held, with a quorum present, at which the following resolution was duly adopted and remains in full force and effect; the resolution itself, authorizing any one of the President, Vice President, Treasurer, or Secretary to sell, assign, transfer, and deliver any securities standing in the corporation's name and to execute any instruments necessary to effectuate this authority; a further certification that this authority is not inconsistent with the corporation's Charter or By-Laws, together with a true and correct list of the officers authorized to act; signature lines for execution under the corporate seal; and a notation that the foregoing certification and the assignment of the securities should be executed by different officers.

This final notation — the foregoing certification and the assignment of the securities should be executed by different officers — directly reinforces paragraph (b)'s other than the secretary requirement and the broader separation-of-functions principle this dictionary identified above. The sample form's own guidance confirms that the officer certifying the corporate resolution and incumbency (typically the secretary, given the secretary's customary role in maintaining and certifying corporate records) should be different from the officer executing the actual assignment of the securities — meaning that even though paragraph (b) excludes the secretary specifically from executing the transfer instrument, the secretary's typical role in certifying the resolution and incumbency under Supplementary Material .01 remains intact, with the should be executed by different officers guidance ensuring these two functions (certifying authority, and exercising that authority to transfer securities) are performed by different individuals.

The resolution's enumerated officers — President, Vice President, Treasurer, or Secretary — interestingly include the Secretary among those the resolution authorizes to transfer securities generally, even though paragraph (b) excludes the secretary specifically from executing the transfer instrument in the transfer-books-closed scenario. This apparent tension resolves once the should be executed by different officers guidance and the broader separation-of-functions rationale are considered together — the resolution authorizes a category of officers broadly (for general corporate purposes, the secretary among them), while paragraph (b)'s specific transfer-books-closed scenario imposes the additional other than the secretary constraint specifically for that scenario's transfer instrument execution, given the secretary's typical role in the certification side of the paragraph (b) documentation package.

The 1991 Amendments in Context

FINRA Rule 11571's amendment history — effective September 11, 1991, SR-NASD-91-13 effective November 1, 1991, and SR-FINRA-2010-030 effective December 15, 2010 — places two amendments within a span of less than two months in 1991, in addition to the 2010 Consolidated Rulebook transfer. The September 11, 1991 amendment, preceding SR-NASD-91-13's November 1, 1991 effective date by approximately seven weeks, may represent a closely related but procedurally distinct amendment within the same broader early-1990s Uniform Practice Code modernization wave this dictionary has now encountered across FINRA Rules 11120, 11320, 11530, and 11560 — though without additional confirmed detail specifically distinguishing the substantive content of the September 11, 1991 amendment from the SR-NASD-91-13 amendment, this dictionary notes both as confirmed amendment dates without further speculation as to their respective specific content.

Connection to FINRA Rules 11550, 11560, 11570, and 11572 Through 11574

FINRA Rule 11571 connects directly and substantively to FINRA Rule 11550 — whose general assignment, signature, and guarantee framework FINRA Rule 11571(a) and (b) both build upon, with paragraph (a)'s "Proper papers for transfer filed by assignor" statement supplementing FINRA Rule 11550's framework for the transfer-books-open scenario, and paragraph (b)'s guarantee-resolution-incumbency-indemnification package substituting for transfer-agent verification in the transfer-books-closed scenario. It connects directly and by explicit cross-reference to FINRA Rule 11560 — whose ownership transfer indemnification mechanism, examined in this dictionary's immediately preceding entry, FINRA Rule 11571(b)(3) incorporates as one of the three required items for corporate certificates where transfer books are closed. It connects to FINRA Rule 11570 as its parent series marker, the first of the four rules that cluster organizes. And it connects to FINRA Rules 11572 through 11574 — the remaining rules in the FINRA Rule 11570 cluster, which address their respective registration-name categories — firms, dissolved firms succeeded by new firms, and deceased persons, trustees, and similar categories — without repeating the transfer-books-open and transfer-books-closed structure or the foreign internal securities provision that FINRA Rule 11571 establishes for corporations; Rule 11574 instead applies FINRA Rule 11571(a) to trustees acting in the capacity of a board of directors of a corporation or association.

Which Paragraph Applies: Registration Name and the State of the Transfer Books

Two facts decide how FINRA Rule 11571 applies to a delivery: the name in which the certificate is registered and whether the issuing company's transfer books are open. Paragraph (a) covers a certificate in the name of a corporation, in the name of an institution, or in a name with official designation. Registration in the name of an institution is enough by itself. A certificate registered to a hospital or a school is within paragraph (a) as an institution, and nobody first has to establish whether that body is incorporated.

Paragraph (b) is narrower in two ways. It applies only where the certificate, the assignment or the power of attorney is in the name of a corporation. It also applies only where the transfer books of the issuing company are closed indefinitely. Books that close for a stated period and then reopen on a known date are not closed indefinitely, and paragraph (b) does not describe them. When the books are closed indefinitely, the reason does not matter. An issuer that has stopped maintaining its books and an issuer whose books have been closed in a liquidation are both within the words "for any reason".

Paragraph (a) in Practice: Placing and Signing the Statement

Paragraph (a) sets two conditions on the statement "Proper papers for transfer filed by assignor". It must be placed on the assignment, and it must be signed by the transfer agent. Good delivery depends on both. Suppose the corporation's own secretary writes the statement on the assignment and signs it. The words are right, but the signer is not the transfer agent, so the certificate is not a good delivery under paragraph (a).

Now suppose the transfer agent does confirm that proper papers have been filed, but does so in a separate letter sent to the delivering member. The assignment itself does not carry the statement. Paragraph (a) requires the statement on the assignment, so a separate letter does not meet it, even though the transfer agent wrote it.

Where a corporation delivers several certificates and executes the assignments on separate paper rather than on the certificates, FINRA Rule 11550(b) requires a separate assignment for each certificate. Paragraph (a) places the statement on the assignment, so each of those separate assignments must carry its own statement signed by the transfer agent.

Paragraph (a) Alongside the General Assignment Requirements of FINRA Rule 11550

FINRA Rule 11550(a) requires any registered security, to be a good delivery, to be accompanied by an assignment conforming to the requirements set forth in Rules 11550 to 11574, inclusive. FINRA Rule 11571 is one of those rules. Its requirements therefore apply on top of the general ones and do not replace them. A corporate certificate must meet both.

Two consequences follow. First, FINRA Rule 11550(h) requires each assignment to bear a guarantee acceptable to the transfer agent or registrar. The transfer agent's statement under paragraph (a) does not take the place of that guarantee. The assignment needs both. Second, FINRA Rule 11550(c) requires the signature to correspond with the name as written on the certificate in every particular. The only exceptions are that "and" or "&", and "Company" or "Co.", may be written either way. Take a certificate registered to "Alder Holdings Company" with an assignment executed as "Alder Holdings Corporation". That assignment is not technically correct, and the transfer agent's statement on it does not cure the defect.

Worked Scenario: Assembling the Paragraph (b) Package

Alder Holdings, Inc. holds a certificate of Birch Mining Corporation registered in Alder's name. Birch Mining's transfer books are closed indefinitely. Alder sells the shares, and the certificate must be delivered. Paragraph (b) makes the certificate a good delivery if the assignment is executed by an officer of Alder other than the secretary and is accompanied by the three listed items.

The executing officer must be an officer "of such corporation", that is, of Alder, the corporation in whose name the certificate stands. Suppose Alder is a subsidiary and the chief financial officer of its parent company signs the assignment. That person is not an officer of Alder, so the execution does not meet paragraph (b), whatever position the signer holds at the parent.

Suppose instead that Alder's vice president signs. The first accompanying item is a guarantee of the vice president's signature. It must be executed by a person with the authority to make such a guarantee. A written note from a fellow officer confirming that the signature is genuine is not enough if that officer has no authority to make signature guarantees.

The second item is "a copy of a corporate resolution and a completed and executed certificate of incumbency". The rule asks for a copy of the resolution, so the original board minutes need not be delivered. The certificate of incumbency is held to a stricter standard. It must be completed and executed, so a blank form, or one that has been filled in but not signed, does not satisfy paragraph (b)(2).

The third item is the ownership transfer indemnification as provided in FINRA Rule 11560. It must be affixed to or recorded on the certificate. An indemnification that travels with the certificate as a separate letter, neither attached to the certificate nor recorded on it, does not meet paragraph (b)(3).

Paragraph (b) Alongside FINRA Rule 11560

FINRA Rule 11560 applies to a certificate of any company whose transfer books are closed indefinitely for any reason. Such a certificate is a good delivery only if the required ownership transfer indemnification is affixed to or recorded upon it. That requirement does not depend on the name in which the certificate is registered. A certificate registered to a public office, or to a person, still needs the indemnification when the issuer's books are closed indefinitely, even though paragraph (b) of FINRA Rule 11571 speaks only of corporations.

For a certificate in a corporation's name, the indemnification is necessary but not sufficient. Paragraph (b) adds execution by an officer other than the secretary, the signature guarantee, and the resolution with the certificate of incumbency. Suppose Alder's treasurer signs the assignment and the indemnification is affixed, but nothing else is supplied. The certificate meets the indemnification requirement and still fails paragraph (b).

FINRA Rule 11560 also says the indemnification is affixed or recorded only once during the lifetime of the certificate. Suppose Alder acquired the Birch Mining certificate from an earlier holder who had already affixed the indemnification when the books were closed. When Alder delivers the certificate onward, a second indemnification is not affixed.

Common Errors Under FINRA Rule 11571

Using the wrong paragraph for the state of the books. While the issuer's transfer books are open, paragraph (a) makes a corporate certificate a good delivery "only if" the transfer agent's statement appears on the assignment. Supplying the paragraph (b) package instead does not meet that condition. A signature guarantee, a copy of the resolution, a certificate of incumbency and an indemnification together still leave the certificate short of good delivery if the statement is missing.

Substituting another statement for the transfer agent's. FINRA Rule 11573 uses a different statement, "Execution Guaranteed", signed by a successor firm, for certificates whose assignment was executed in the name of a firm that has since dissolved. That statement does its work under FINRA Rule 11573. On a certificate in a corporation's name with the books open, an "Execution Guaranteed" statement signed by some firm is not the statement paragraph (a) requires, which is "Proper papers for transfer filed by assignor" signed by the transfer agent.

Letting the secretary sign when the books are closed. The existing sections explain this exclusion. It is an error even where the corporation's own resolution names the secretary among the authorised officers.

Using the Sample Resolution and Certificate of Incumbency

The sample resolution in Supplementary Material .01 authorises "any one of" the named officers to sell, assign, transfer and deliver the corporation's securities. On the resolution's terms, a single named officer may act alone. It does not require two officers to sign together. Under the sample, Alder's treasurer acting alone has the authority the resolution confers.

The sample resolution reaches securities "now or hereafter standing in the name of or owned by this Corporation". A resolution adopted before the corporation acquired a particular certificate therefore still covers that certificate. The authority also goes beyond the sale itself. It extends to making, executing and delivering "any and all written instruments necessary or proper" to carry out the transfer.

The certificate of incumbency certifies "a true and correct list of the officers of this Corporation authorized to act", set out under "Signing Officers". Suppose a vice president signs the assignment, but that vice president is not on the list in the certificate of incumbency delivered with it. The certificate of incumbency then does not show that the person who signed holds an authorised office.

The sample form notes that "the foregoing certification and the assignment of the securities should be executed by different officers." Suppose Alder's vice president signs the assignment and also signs the certification of the resolution. The vice president is not the secretary, so the execution itself is not barred by paragraph (b). The package still departs from the form's guidance, because one officer has done both.

Foreign Internal Securities: Paragraph (c) and FINRA Rule 11550(i)

Paragraph (c) is about the security, not the holder. It reaches "foreign internal securities". A United States issuer's shares registered in the name of a foreign corporation are not foreign internal securities just because the holder is foreign. Paragraph (c) does not take them outside paragraphs (a) and (b).

FINRA Rule 11550(i) has its own foreign carve-out. For Foreign Internal Securities in registered form, other than Canadian Securities, American Depositary Receipts, American Shares, New York Shares and similar securities, it disapplies paragraphs (b) through (g) of FINRA Rule 11550 and FINRA Rule 11572. FINRA Rule 11571 is not on that list. So FINRA Rule 11550(i) does not remove the corporate requirements from a foreign internal security registered in a corporation's name. Whether they apply is decided by FINRA Rule 11571's own paragraph (c).

How FINRA Rule 11571 Works With FINRA Rules 11572 Through 11574

FINRA Rule 11572 decides whether a business-name registration counts as corporate at all. Unless the endorsement specifies otherwise, stock registered in a firm or business name is presumed to be registered in the name of a partnership and not a corporation. A certificate registered to "Marlow Trading" is therefore handled as a certificate in a corporation's name only where the endorsement specifies that Marlow Trading is a corporation. Otherwise the presumption treats it as a partnership's.

FINRA Rule 11574 sends one group of executions back to this rule. Its paragraph (a) says a certificate is not a good delivery with an assignment executed by a trustee or trustees. It makes an exception for trustees acting in the capacity of a board of directors of a corporation or association, and in that case FINRA Rule 11571(a) applies. Take a certificate registered to a cemetery association whose trustees act as its board, delivered while the books are open. The trustees' execution does not fall under the trustee disqualification. Paragraph (a) of this rule governs it instead.

Who Bears the Cost of a Defective Delivery

FINRA Rule 11550(a) provides that any expense incurred through failure of a seller to meet the requirements of Rules 11550 to 11574 shall be paid by the seller. FINRA Rule 11571 is within that range. Suppose a seller delivers a corporate certificate, with the books open, without the transfer agent's statement on the assignment, and the delivery causes expense. The seller pays that expense.

Examination Relevance and Key Takeaways

FINRA Rule 11571 is tested on the Series 7 and Series 24 examinations as the certificate-in-name-of-corporation rule — establishing the documentation requirements for corporate, institutional, and officially-designated registered certificates across transfer-books-open and transfer-books-closed scenarios.

The key points to retain are these: FINRA Rule 11571(a) requires, for the transfer-books-open scenario, that the assignment bear the statement "Proper papers for transfer filed by assignor" signed by the transfer agent — the transfer agent's certification that documentation establishing the assignor's authority to act on the corporation's, institution's, or officially-designated entity's behalf has been filed; FINRA Rule 11571(b) addresses the transfer-books-closed scenario — paralleling FINRA Rule 11560 — requiring that the transfer instrument be executed by a corporate officer other than the secretary, accompanied by a signature guarantee, a copy of a corporate resolution and completed certificate of incumbency, and the FINRA Rule 11560 ownership transfer indemnification affixed to or recorded on the certificate; FINRA Rule 11571(c) defers to the laws and customs of the relevant foreign country for foreign internal securities when paragraphs (a) and (b)'s requirements do not correspond to those laws and customs; Supplementary Material .01's Sample Certificate and Authorizing Resolution/Certificate of Incumbency authorizes the President, Vice President, Treasurer, or Secretary to transfer corporate securities, with an explicit notation that the certification and the assignment should be executed by different officers — reinforcing paragraph (b)'s other-than-the-secretary execution requirement through a separation-of-functions principle; and the rule was amended December 15, 2010 through SR-FINRA-2010-030, by SR-NASD-91-13 effective November 1, 1991, and effective September 11, 1991, with one selected notice — 10-49.