Table of Contents
SERIES 7 | SERIES 24 | FINANCIAL REGULATION COURSES
FINRA Rule 11580 is the rule this dictionary has anticipated since its FINRA Rule 11100 entry — the provision that operationalizes FINRA Rule 11100(a)(5)'s except as otherwise provided in this Code language, bringing Direct Participation Program limited partnership securities, as defined in FINRA Rule 2310, back within the Uniform Practice Code's coverage for transfer purposes, while simultaneously excluding the categories of limited partnership securities that have become sufficiently liquid or depository-integrated that the Code's general delivery framework already adequately addresses them.
The rule operates through two lettered paragraphs. Paragraph (a) establishes the core mandate — each member that participates in the transfer of limited partnership securities, as defined in FINRA Rule 2310, shall use standard transfer forms in the same form as set forth in FINRA Rule 11581 — and then establishes two categorical exclusions from this mandate: limited partnership securities traded on a national securities exchange, and limited partnership securities on deposit in a registered securities depository that settle regular way.
Paragraph (b) establishes an exemptive pathway through the Corporate Financing Department, permitting a member to modify the standard transfer forms upon a written request showing good cause, where modification is necessary to meet other legal or regulatory requirements or to otherwise facilitate the transfer of the securities. FINRA Rule 11580 was adopted by SR-NASD-95-53 effective January 29, 1996, and subsequently amended by SR-NASD-96-42 effective January 24, 1997, SR-NASD-97-05 effective May 8, 1997, SR-NASD-2005-087 effective August 1, 2006, and both SR-FINRA-2010-060 and SR-FINRA-2010-030 effective December 15, 2010. Two selected notices are associated — 96-14 and 10-49.
FINRA Rule 11580 sits within the 11500 Delivery of Securities with Restrictions subsection of the 11000 Uniform Practice Code — notably, as confirmed by its breadcrumb trail, positioned directly beneath FINRA Rule 11500 rather than within the FINRA Rule 11570 cluster, confirming this dictionary's earlier characterization of FINRA Rules 11580 and 11581 as a distinct pair of rules rather than members of the Certificates in Various Names cluster. FINRA Rule 11580 immediately follows FINRA Rule 11574 — the final rule of the FINRA Rule 11570 cluster — and immediately precedes FINRA Rule 11581's limited partnership transfer forms framework, the final rule of the entire FINRA Rule 11500 subsection.
FINRA Rule 11580(a)'s first sentence establishes its core mandate in direct terms — each member that participates in the transfer of limited partnership securities, as defined in Rule 2310, shall use standard transfer forms in the same form as set forth in Rule 11581.
The as defined in Rule 2310 cross-reference is the textual confirmation of the connection this dictionary has anticipated since its FINRA Rule 11100 entry. FINRA Rule 2310 — examined in an earlier session of this project, addressing Direct Participation Programs — provides the definitional framework for what constitutes a Direct Participation Program for purposes of FINRA Rule 11100(a)(5)'s exclusion. FINRA Rule 11580(a) now confirms that, for limited partnership securities falling within that FINRA Rule 2310 definitional framework, the Uniform Practice Code does apply — specifically, for purposes of the transfer mandate this rule establishes — notwithstanding FINRA Rule 11100(a)(5)'s general exclusion of Direct Participation Program securities from the Code's coverage. This is the except as otherwise provided in this Code language given concrete operative effect: FINRA Rule 11580 is itself the otherwise provided provision FINRA Rule 11100(a)(5) contemplates.
The mandate's content — use standard transfer forms in the same form as set forth in Rule 11581 — establishes a standardization requirement paralleling, in structure if not in specific subject matter, the Uniform Comparison, Uniform Delivery Ticket, and Uniform Transfer Instruction Form requirements this dictionary examined in connection with FINRA Rules 11210, 11360, and 11550 respectively. Just as those rules established standardized forms for confirmation, delivery, and registered-securities transfer generally, FINRA Rule 11580(a) establishes that limited partnership securities transfers specifically must use the standard transfer forms FINRA Rule 11581 will set forth — forms whose general character this dictionary's examination of FINRA Rule 11574's Supplementary Material .01 Sample Limited Partnership Change of Trustee Form has already previewed, including that form's distinctive forward this form and the original certificate (if available) to the General Partner for re-registration instruction.
FINRA Rule 11580(a)'s second sentence establishes that this Rule shall not apply to limited partnership securities that are traded on a national securities exchange, or are on deposit in a registered securities depository and settle regular way.
These two exclusions identify categories of limited partnership securities for which the standard transfer forms mandate is unnecessary — because the securities in question are already integrated into mechanisms that the broader Uniform Practice Code framework, examined throughout this dictionary's coverage, already adequately addresses.
The first exclusion — limited partnership securities traded on a national securities exchange — addresses limited partnership interests that have achieved sufficient liquidity and standardization to be listed and traded on a national securities exchange, much like ordinary equity securities. For such exchange-traded limited partnership interests, the general delivery and transfer framework applicable to exchange-traded securities generally — including, where applicable, FINRA Rule 11310's book-entry settlement mandate for depository eligible securities — already provides an adequate transfer mechanism, without need for FINRA Rule 11581's standard transfer forms specifically designed for the more typical illiquid, non-exchange-traded limited partnership interest.
The second exclusion — limited partnership securities on deposit in a registered securities depository and settle regular way — addresses limited partnership interests that, while perhaps not exchange-traded, have nonetheless become sufficiently integrated into the depository system that they are on deposit at a registered securities depository (the same Exchange Act Section 17A-registered depositories FINRA Rule 11310(c) defines) and settle regular way (the FINRA Rule 11320(b) regular way settlement timing this dictionary examined earlier). For such depository-integrated, regular-way-settling limited partnership interests, FINRA Rule 11310's book-entry settlement framework already provides the operative transfer mechanism, again without need for FINRA Rule 11581's standard forms.
Together, these two exclusions confirm that FINRA Rule 11580's standard transfer forms mandate is calibrated specifically to the category of limited partnership securities that remain outside both exchange-trading and depository-book-entry integration — the genuinely illiquid, non-standardized limited partnership interests for which no other Uniform Practice Code mechanism (exchange-trading conventions, or FINRA Rule 11310's book-entry framework) already provides an adequate transfer mechanism. For this residual category — which, given the historical character of Direct Participation Programs discussed in connection with FINRA Rule 2310, likely represents the most common case for limited partnership securities — FINRA Rule 11580(a)'s standard transfer forms mandate fills the gap.
FINRA Rule 11580(b) establishes an exemptive pathway distinct from the general FINRA Rule 9600 Series exemptive framework this dictionary has encountered in connection with other rules — the Corporate Financing Department may, pursuant to a written request for good cause shown, grant an exemption from the requirements of paragraph (a) to permit a member to modify the standard transfer forms for the transfer of limited partnership securities where necessary to meet other legal or regulatory requirements or to otherwise facilitate the transfer of the securities.
This provision identifies a specific FINRA department — the Corporate Financing Department — as the body with authority to grant this particular exemption, rather than the more general FINRA Rule 9600 Series framework. The Corporate Financing Department's specific identification here is notable — this department's role elsewhere in FINRA's regulatory framework relates to the review of underwriting compensation and corporate financing arrangements (recall this dictionary's earlier discussion of FINRA Rule 2310(b)(4)(D)'s reference to the Corporate Financing Department's determination role regarding dual-employee compensation in direct participation program offerings). The Corporate Financing Department's identification as the body with authority over FINRA Rule 11580(b) exemptions suggests an institutional alignment — the same department that reviews direct participation program offerings at the underwriting stage also has authority over exemptions from the standard transfer forms mandate that applies to the resulting limited partnership securities at the secondary transfer stage.
The good cause shown standard, and the two enumerated grounds for modification — necessary to meet other legal or regulatory requirements, or to otherwise facilitate the transfer of the securities — establish the substantive criteria for this exemption. The other legal or regulatory requirements ground addresses the scenario where some legal or regulatory requirement outside the Uniform Practice Code itself — perhaps a requirement imposed by the limited partnership's own governing documents, by state partnership law, or by some other regulatory framework applicable to the specific limited partnership — necessitates a transfer form that departs from FINRA Rule 11581's standard form in some respect, with FINRA Rule 11580(b) providing the mechanism for the Corporate Financing Department to permit such a departure where necessary for compliance with that other requirement. The to otherwise facilitate the transfer ground is broader, allowing modification where doing so would simply facilitate the transfer process generally, without necessarily being driven by some specific external legal or regulatory requirement.
FINRA Rule 11580's amendment history — Adopted by SR-NASD-95-53 effective January 29, 1996, followed by SR-NASD-96-42 effective January 24, 1997, SR-NASD-97-05 effective May 8, 1997, SR-NASD-2005-087 effective August 1, 2006, and both SR-FINRA-2010-060 and SR-FINRA-2010-030 effective December 15, 2010 — reveals a rule with a notably more recent origin than many of the other FINRA Rule 11500 subsection provisions this dictionary has examined, most of which trace to 1968-1991 origins. FINRA Rule 11580's 1996 adoption date situates it within a different regulatory era — one in which the specific question of standardizing limited partnership securities transfers had become sufficiently significant to warrant a dedicated new rule, likely reflecting the substantial growth of the direct participation program industry through the 1980s and the corresponding need for standardized secondary-market transfer mechanisms for the resulting limited partnership interests.
The two closely-spaced 1996-1997 amendments — SR-NASD-96-42 effective January 24, 1997 and SR-NASD-97-05 effective May 8, 1997, following the original January 29, 1996 adoption — suggest a period of active refinement shortly after the rule's initial adoption, consistent with the kind of iterative adjustment that often follows a new rule's initial implementation as practical experience reveals refinements needed. SR-NASD-2005-087 effective August 1, 2006 — the same SR-NASD-2005-087 this dictionary encountered in connection with FINRA Rule 11310's amendment history — situates FINRA Rule 11580 within that broader 2005-2006 amendment wave as well. And the dual December 15, 2010 amendments through SR-FINRA-2010-060 and SR-FINRA-2010-030 represent the Consolidated FINRA Rulebook transfer, consistent with the pattern this dictionary has observed for FINRA Rules 11100, 11560, and 11574.
The two selected notices — 96-14 and 10-49 — correspond respectively to the rule's 1996 adoption (Notice 96-14, which this dictionary has separately encountered in connection with FINRA Rule 11100's amendment history, suggesting Notice 96-14 addressed a package of Uniform Practice Code amendments including both FINRA Rule 11100 refinements and FINRA Rule 11580's original adoption) and the 2010 Consolidated Rulebook transfer.
FINRA Rule 11580 connects directly and by explicit cross-reference to FINRA Rule 2310 — whose Direct Participation Program definition FINRA Rule 11580(a) incorporates to identify the limited partnership securities subject to its standard transfer forms mandate, and whose Corporate Financing Department dual-employee compensation determination role under paragraph (b)(4)(D) suggests an institutional alignment with FINRA Rule 11580(b)'s exemptive authority. It connects directly to FINRA Rule 11100(a)(5) — as the rule that operationalizes that provision's except as otherwise provided in this Code language, bringing Direct Participation Program limited partnership securities back within Uniform Practice Code coverage for transfer purposes. It connects to FINRA Rule 11210, FINRA Rule 11360, and FINRA Rule 11550 — as structural parallels for the standardized-form approach, each establishing a Uniform Form (Comparison, Delivery Ticket, and Transfer Instruction respectively) for its own context, with FINRA Rule 11580 and FINRA Rule 11581 establishing the analogous standard transfer forms specifically for limited partnership securities. It connects to FINRA Rule 11310(c) and FINRA Rule 11320(b) — whose registered securities depository definition and regular way settlement timing respectively define the second of FINRA Rule 11580(a)'s two categorical exclusions. It connects to FINRA Rule 11574 — the immediately preceding rule, whose Supplementary Material .01 Sample Limited Partnership Change of Trustee Form previewed the kind of standardized limited-partnership-specific transfer documentation that FINRA Rule 11580(a) now mandates more generally, with that form's General Partner re-registration instruction reflecting the same limited-partnership-specific transfer mechanics FINRA Rule 11580 and FINRA Rule 11581 address. And it connects directly to FINRA Rule 11581 — the final rule of the FINRA Rule 11500 subsection, which this dictionary anticipates will set forth the actual standard transfer forms FINRA Rule 11580(a) mandates.
FINRA Rule 11580 is tested on the Series 7 and Series 24 examinations as the rule mandating standard transfer forms for limited partnership securities — the operative provision bringing Direct Participation Program limited partnership securities back within Uniform Practice Code coverage under FINRA Rule 11100(a)(5)'s except as otherwise provided language.
The key points to retain are these: FINRA Rule 11580(a) requires each member participating in the transfer of limited partnership securities, as defined in FINRA Rule 2310, to use the standard transfer forms set forth in FINRA Rule 11581; this mandate excludes two categories — limited partnership securities traded on a national securities exchange, and limited partnership securities on deposit in a registered securities depository that settle regular way — both categories for which other Uniform Practice Code mechanisms (exchange-trading conventions, or FINRA Rule 11310's book-entry framework) already provide adequate transfer mechanisms; FINRA Rule 11580(b) establishes an exemptive pathway through the Corporate Financing Department — rather than the general FINRA Rule 9600 Series framework — permitting form modification upon a written request showing good cause, where necessary to meet other legal or regulatory requirements or to otherwise facilitate the transfer; FINRA Rule 11580's 1996 origin (Adopted by SR-NASD-95-53 effective January 29, 1996) is notably more recent than most other FINRA Rule 11500 subsection provisions, reflecting the growth of the direct participation program industry and the corresponding need for standardized secondary-market transfer mechanisms; and the rule was subsequently amended by SR-NASD-96-42 effective January 24, 1997, SR-NASD-97-05 effective May 8, 1997, SR-NASD-2005-087 effective August 1, 2006, and both SR-FINRA-2010-060 and SR-FINRA-2010-030 effective December 15, 2010, with two selected notices — 96-14 and 10-49.
