Table of Contents
SERIES 7 | SERIES 24 | FINANCIAL REGULATION COURSES
FINRA Rule 11574 is the final rule of the Certificates in Various Names cluster — and, as this dictionary's FINRA Rule 11570 entry anticipated, the most fact-dependent and legally complex of the four, establishing a categorical disqualification for ten enumerated categories of executing party, three categorical exceptions that restore good delivery for domestic individual fiduciaries acting without additional documentation, and a carve-out for Statutory Gifts to Minors Act registrations.
The rule operates through three lettered paragraphs.
Paragraph (a) establishes that a certificate shall not be a good delivery with an assignment or power of substitution executed by any of ten enumerated categories: a person since deceased; a trustee or trustees (except as paragraph (b) provides, or except for trustees acting as a corporation's or association's board of directors, in which case FINRA Rule 11571(a) applies); a guardian (except as paragraph (b) provides); an infant; an executor (except as paragraph (b) provides); an administrator (except as paragraph (b) provides); a receiver in bankruptcy; an agent; an attorney; or with a qualification, restriction, or special designation.
Paragraph (b) establishes the restorative exception — a certificate shall be good delivery with an assignment or power of substitution executed by domestic individual executors or administrators, domestic individual trustees under an inter vivos or testamentary trust, or domestic guardians including committees, conservators, and curators — covering transfers transfer agents will effect without additional documentation, applying only to domestic issuer securities registered in these capacities, and requiring proper assignment with FINRA Rule 11550(h) signature guarantees.
Paragraph (c) excludes Statutory Gifts to Minors Act registrations from the rule entirely. Supplementary Material .01 sets forth the Sample Limited Partnership Change of Trustee Form. FINRA Rule 11574 was amended by SR-FINRA-2010-060 and SR-FINRA-2010-030, both effective December 15, 2010, by SR-NASD-91-13 effective November 1, 1991, and effective July 1, 1974. One selected notice is associated — Regulatory Notice 10-49.
FINRA Rule 11574 sits within the 11500 Delivery of Securities with Restrictions subsection of the 11000 Uniform Practice Code, as the fourth and final rule of the FINRA Rule 11570 Certificates in Various Names cluster, immediately following FINRA Rule 11573's certificate in name of dissolved firm succeeded by new firm framework and immediately preceding FINRA Rule 11580's transfer of limited partnership securities framework.
FINRA Rule 11574(a) establishes a sweeping default rule — a certificate shall not be a good delivery where the assignment or power of substitution was executed by any of ten enumerated categories of party. This default disqualification reflects a unifying concern running through all ten categories: each describes a party whose authority to execute an assignment or power of substitution on behalf of the registered owner is not self-evident from the execution itself, and ordinarily requires some form of additional verification before a receiving party can be assured the execution is effective.
The ten categories fall into several conceptual groupings. The first — person since deceased — addresses the most fundamental case: an execution purportedly made by the registered owner, where that owner has since died. Such an execution, on its face, cannot establish current authority over the certificate, since the person who executed it (assuming the execution genuinely predates death) may no longer hold whatever interest the certificate represents, or (if the execution postdates death) could not have been validly made by the named person at all.
The second grouping — trustee or trustees; guardian; executor; administrator — encompasses the major categories of fiduciary who might hold or deal with securities on behalf of another's interest: a trustee administering a trust, a guardian managing a ward's affairs, an executor administering a deceased person's estate under a will, or an administrator administering an intestate estate. Each of these fiduciary categories carries its own specific source of authority (a trust instrument, a guardianship order, a will and letters testamentary, or letters of administration) that an execution alone does not establish.
The third grouping — infant; receiver in bankruptcy; agent; attorney — addresses further categories presenting their own authority questions: an infant (a minor, who may lack legal capacity to execute a binding assignment), a receiver in bankruptcy (whose authority derives from a bankruptcy proceeding), an agent (whose authority derives from an agency relationship with the principal), and an attorney (here likely referring to an attorney-in-fact under a power of attorney, whose authority derives from that power of attorney instrument — connecting to the attorney and power of substitution concepts this dictionary examined in FINRA Rule 11550(d) and (g)).
The tenth category — or with a qualification, restriction or special designation — functions as a catch-all, sweeping in any execution bearing some qualification, restriction, or special designation not specifically enumerated in the preceding nine categories, but presenting the same underlying concern — an execution whose face does not establish straightforward, unqualified authority over the certificate.
Within the trustee or trustees category, paragraph (a)(2) includes a specific cross-reference — except for trustees acting in the capacity of a board of directors of a corporation or association, in which case Rule 11571(a) shall apply. This carve-out addresses a specific scenario where the title trustee might be used not in the conventional fiduciary-trust sense, but to describe individuals serving in a board-of-directors-equivalent governance capacity for certain types of organizations (certain associations, for example, may use the term trustees for what would, in a corporation, be called directors).
For this specific scenario — trustees functioning as a board of directors — paragraph (a)(2) directs that FINRA Rule 11571(a) shall apply instead of paragraph (a)'s general disqualification. Recall that FINRA Rule 11571(a) addresses the transfer-books-open scenario for certificates in the name of a corporation or an institution, or in a name with official designation, requiring the "Proper papers for transfer filed by assignor" statement signed by the transfer agent. By directing trustees-acting-as-a-board-of-directors to FINRA Rule 11571(a)'s framework, paragraph (a)(2) recognizes that, despite the trustee label, the underlying entity and governance structure is functionally corporate or institutional in character, and the corporation-and-institution-oriented framework of FINRA Rule 11571(a) — rather than the fiduciary-trustee framework this rule's paragraph (b) will establish — is the appropriate one.
FINRA Rule 11574(b) restores good delivery for a specifically defined subset of paragraph (a)'s disqualified categories — domestic individual executor(s) or administrator(s); domestic individual trustee(s) under an inter vivos or testamentary trust; or domestic guardian(s) including committees, conservators and curators.
Three qualifiers within this restorative exception deserve attention. First, domestic — paragraph (b) applies only where the relevant fiduciary capacity arises under domestic (U.S.) law, a qualifier reinforced by paragraph (b)'s further limitation discussed below. Second, individual — paragraph (b) restores good delivery specifically for individual executors, administrators, trustees, and guardians, as distinguished from institutional or corporate fiduciaries (a bank or trust company serving as corporate trustee, for example, would not fall within this individual-specific restoration, and would presumably remain subject to paragraph (a)'s general disqualification absent some other applicable exception). Third, the specific fiduciary capacities named — executors or administrators (estate administration), trustees under an inter vivos or testamentary trust (lifetime or will-created trusts), and guardians including committees, conservators and curators (the various titles different jurisdictions use for individuals appointed to manage another person's affairs due to incapacity or minority).
The second sentence explains the rationale for this restoration — these exceptions to paragraph (a) of this Rule are to cover transfers that will be effected by transfer agents without additional documentation. This confirms that paragraph (b)'s restoration is calibrated to actual transfer agent practice — for these specific categories (domestic individual executors, administrators, trustees under inter vivos or testamentary trusts, and guardians/committees/conservators/curators), transfer agents will, as a matter of established practice, process the transfer without requiring the kind of additional documentation (court orders, letters testamentary, trust instruments, and so forth) that might otherwise seem necessary to verify the fiduciary's authority. Paragraph (b) aligns FINRA Rule 11574's good delivery standard with this transfer agent practice — where transfer agents will process the transfer without additional documentation, the Uniform Practice Code does not impose a more demanding good delivery standard than transfer agents themselves apply.
The third sentence establishes the domestic issuer limitation — this paragraph (b) shall apply only to securities of a domestic issuer (organized under the laws of any state in the United States or District of Columbia) which are registered in the name(s) of (1), (2) or (3) of this paragraph (b). This confirms that paragraph (b)'s restoration operates only where both the fiduciary (domestic individual) and the issuer (domestic, organized under U.S. state or D.C. law) are domestic — a foreign issuer's securities, even if registered in the name of a domestic individual executor, administrator, trustee, or guardian, would fall outside paragraph (b)'s restoration.
The fourth sentence establishes a continuing documentation requirement notwithstanding the additional documentation language of the second sentence — certificates delivered pursuant to this paragraph (b) must be properly assigned, and the signature(s) to the assignment be guaranteed pursuant to Rule 11550(h). This directly incorporates FINRA Rule 11550(h)'s guarantee requirement, examined in this dictionary's earlier entry — even though paragraph (b)'s restoration means transfer agents will process these transfers without the additional documentation that might otherwise be associated with fiduciary capacities (such as letters testamentary or trust instruments), the underlying FINRA Rule 11550 framework's signature guarantee requirement remains fully applicable.
FINRA Rule 11574(c) establishes a complete carve-out — this Rule does not apply to certificates registered under a Statutory Gifts to Minors Act.
This carve-out removes an entire category of registration from FINRA Rule 11574's framework altogether — Uniform Gifts to Minors Act and Uniform Transfers to Minors Act registrations (the various state statutory frameworks under which custodial accounts for minors are established, with a custodian holding securities for a minor's benefit) are not subject to paragraph (a)'s disqualification, paragraph (b)'s restorative exception, or any other provision of FINRA Rule 11574. This makes considerable sense given the connection between FINRA Rule 11574(a)'s infant category — one of the ten disqualified categories — and the Statutory Gifts to Minors Act framework: a custodial account under such an Act exists precisely to allow an adult custodian to deal with securities on a minor's behalf, without the minor (an infant in paragraph (a)(4)'s terms) needing to execute anything personally. Rather than attempting to fit Statutory Gifts to Minors Act custodial arrangements into paragraph (a)'s disqualification-with-paragraph-(b)-exceptions framework — which is calibrated to estate, trust, and guardianship fiduciary capacities rather than custodial-account capacities — paragraph (c) simply removes such registrations from FINRA Rule 11574's scope entirely, presumably leaving whatever governs custodial-account transfers under the applicable Statutory Gifts to Minors Act framework to operate on its own terms.
Supplementary Material .01 sets forth the Sample Limited Partnership Change of Trustee Form — and its presence here, within FINRA Rule 11574's entry, is significant for what it foreshadows about FINRA Rules 11580 and 11581, the limited partnership transfer rules this dictionary anticipates examining next.
The form's structure, confirmed from the FINRA.org page, includes: fields for the investor's name (FBO — for the benefit of), the partnership name, the assignor's (present trustee's) name and address, the customer's account number with the assignor, and language constituting and appointing the partnership to transfer the interests on the partnership's books with full power of substitution; an assignment of 100% of the assignor's right, title, and interest in the limited partnership(s) described; an Assignor's Release section with signature and date; fields for the designee (new trustee's) name and address, the customer's account number with the assignee, the assignee's tax ID number, new trustee's instructions, and partnership information; an Assignee's Acceptance section with signature and date; and instructions directing the assignee, upon receipt, to forward the form and original certificate (if available) to the General Partner for re-registration.
This form's appearance as Supplementary Material to FINRA Rule 11574 — a rule otherwise focused on certificates in the name of deceased persons, trustees, and similar individual fiduciary capacities — reflects the change of trustee scenario as a specific application of FINRA Rule 11574's trustee-related provisions to the limited partnership context specifically. A change of trustee for a limited partnership interest held FBO an investor under a trust arrangement presents precisely the kind of trustee or trustees execution that paragraph (a)(2) addresses — and, where the change of trustee involves domestic individual trustees under an inter vivos or testamentary trust, paragraph (b)(2)'s restoration (with its FINRA Rule 11550(h) guarantee requirement) would presumably govern, with this Sample Limited Partnership Change of Trustee Form providing the standardized documentary vehicle for effecting such a change of trustee specifically with respect to limited partnership interests.
The forward this form and the original certificate (if available) to the General Partner for re-registration instruction is particularly notable — it confirms that, for limited partnership interests, re-registration occurs through the General Partner (rather than a conventional transfer agent), foreshadowing the distinctive transfer mechanics that FINRA Rules 11580 and 11581 — addressing limited partnership securities transfer specifically, and representing, per this dictionary's FINRA Rule 11500 entry, the operative expansion of FINRA Rule 11100(a)(5)'s Direct Participation Program exclusion — will presumably elaborate in detail.
FINRA Rule 11574's amendment history — effective July 1, 1974, SR-NASD-91-13 effective November 1, 1991, and both SR-FINRA-2010-030 and SR-FINRA-2010-060 effective December 15, 2010 — places its origins in the mid-1970s, situates it within the same 1991 modernization wave this dictionary has now encountered repeatedly (FINRA Rules 11120, 11320, 11530, 11560, and 11571), and shares the dual 2010 amendment pattern this dictionary observed for FINRA Rules 11100 and 11560.
FINRA Rule 11574 connects to FINRA Rule 11100(a)(5) — through its Supplementary Material .01's Limited Partnership Change of Trustee Form, which foreshadows the operative expansion of the Direct Participation Program exclusion that FINRA Rules 11580 and 11581 represent. It connects directly and by explicit cross-reference to FINRA Rule 11550(h) — whose signature guarantee requirement paragraph (b)'s fourth sentence incorporates for all certificates delivered under paragraph (b)'s restorative exception. It connects to FINRA Rule 11570 as its parent series marker, the fourth and final rule of the cluster. It connects directly and by explicit cross-reference to FINRA Rule 11571(a) — which paragraph (a)(2) directs to govern trustees acting in the capacity of a board of directors of a corporation or association, in lieu of this rule's general disqualification. It connects to FINRA Rule 11573 — both rules address scenarios where the originally-registered or originally-executing party can no longer act in the same capacity (a dissolved firm for FINRA Rule 11573; a deceased person or various fiduciary categories for FINRA Rule 11574), with each rule establishing its own mechanism (the "Execution Guaranteed" successor-firm statement for FINRA Rule 11573; the paragraph (b) restorative categories with FINRA Rule 11550(h) guarantees for FINRA Rule 11574) for restoring good delivery despite this complication. And it connects directly to FINRA Rules 11580 and 11581 — the next rules in the FINRA Rule 11500 subsection, addressing limited partnership securities transfer, for which Supplementary Material .01's Sample Limited Partnership Change of Trustee Form provides a direct documentary bridge.
FINRA Rule 11574 is tested on the Series 7 and Series 24 examinations as the framework for certificates with assignments or powers of substitution executed by deceased persons, trustees, and other fiduciary or special-status categories — the final and most complex rule of the FINRA Rule 11570 cluster.
The key points to retain are these: FINRA Rule 11574(a) establishes that a certificate is not good delivery where the assignment or power of substitution was executed by any of ten enumerated categories — a person since deceased, a trustee or trustees (with FINRA Rule 11571(a) applying instead where the trustees act as a corporation's or association's board of directors), a guardian, an infant, an executor, an administrator, a receiver in bankruptcy, an agent, an attorney, or any execution bearing a qualification, restriction, or special designation; FINRA Rule 11574(b) restores good delivery for domestic individual executors or administrators, domestic individual trustees under an inter vivos or testamentary trust, and domestic guardians including committees, conservators, and curators — covering transfers transfer agents will effect without additional documentation, applying only to domestic issuer securities registered in these capacities, and still requiring proper assignment with FINRA Rule 11550(h) signature guarantees; FINRA Rule 11574(c) excludes Statutory Gifts to Minors Act registrations from the rule entirely; Supplementary Material .01's Sample Limited Partnership Change of Trustee Form applies FINRA Rule 11574's trustee provisions to the limited partnership context, with re-registration occurring through the General Partner — foreshadowing FINRA Rules 11580 and 11581's limited partnership transfer framework; and the rule was amended by SR-FINRA-2010-060 and SR-FINRA-2010-030, both effective December 15, 2010, by SR-NASD-91-13 effective November 1, 1991, and effective July 1, 1974, with one selected notice — 10-49.
