FINRA Rule 11650

FINRA Rule 11650 sits within the 11600 Delivery of Bonds and Other Evidences of Indebtedness subsection of the 11000 Uniform Practice Code as its fifth and final rule, immediately following FINRA Rule 11640's claims for dividends, rights, interest, etc. framework and immediately preceding FINRA Rule 11700, the series-level marker for the Reclamations and Rejections subsection.

The "At Whose Instance" Allocation Principle

FINRA Rule 11650's allocation principle — the party at whose instance a transfer of securities is made shall pay all service charges of the transfer agent — assigns responsibility for transfer agent service charges based on causation rather than on the fixed buyer/seller roles this dictionary has observed govern most other cost-allocation provisions throughout the Uniform Practice Code. Where FINRA Rule 11340(b) places stamp tax responsibility on the seller as a categorical matter, and FINRA Rule 11410(d) places shipment expenses on the seller as a categorical matter, FINRA Rule 11650 instead asks a factual question — at whose instance was this particular transfer made? — and assigns the resulting service charges to whichever party that inquiry identifies.

This causation-based approach makes sense given the variety of circumstances under which a registered security's transfer might be instigated. A transfer might be instigated by the seller, fulfilling a delivery obligation under FINRA Rule 11550's general assignment framework. It might be instigated by the buyer, seeking re-registration into the buyer's own name after receiving a certificate. It might be instigated in connection with one of the FINRA Rule 11570 cluster's specialized scenarios — a change of trustee under FINRA Rule 11574's Sample Limited Partnership Change of Trustee Form, for instance, where neither an ordinary buyer nor seller in the FINRA Rule 11550 sense is necessarily the relevant party, but rather the assignor or assignee in the trustee-change transaction — although, because that form sends the interests to the General Partner for re-registration rather than to a transfer agent, and transactions in Direct Participation Program securities are outside the Uniform Practice Code except as otherwise provided in it, the rule's own text does not reach that case. FINRA Rule 11650's at whose instance formulation accommodates this variety by tying the service-charge obligation to whichever party's request or action actually caused the transfer agent to perform the transfer, rather than assuming any single party (buyer or seller) is always the responsible one.

The Connection to FINRA Rule 11362(c)'s Interchange Charge

This dictionary's earlier entry on FINRA Rule 11362(c) — the either-form default for bonds issuable in both coupon and registered form — noted that contracts settled by delivery in either form remain valid notwithstanding that there may be a charge for interchanging one form with the other, and identified this notwithstanding clause as a direct foreshadowing of FINRA Rule 11650's transfer fees framework.

FINRA Rule 11650 now confirms and resolves that foreshadowed question. Where a bond issuable in either coupon or registered form is delivered in a form requiring interchange — for example, where the delivering party holds the bond in coupon form but the contract, as specified at the time of execution, calls for registered form — the resulting interchange charge is a service charge of the transfer agent (the entity that would process such an interchange), and FINRA Rule 11650 assigns responsibility for that charge to the party at whose instance the interchange-requiring transfer was made. If the delivering party chose to deliver in a form requiring interchange (rather than delivering in the form the bond was already held in), that delivering party's choice would be the instance prompting the interchange, and FINRA Rule 11650 would place the resulting service charge on that party.

FINRA Rule 11650's Relationship to the FINRA Rule 11570 Cluster and FINRA Rule 11580

FINRA Rule 11650's general transfer agent service charge framework also operates as the cost-allocation backdrop for the various transfer scenarios this dictionary examined throughout the FINRA Rule 11570 cluster and FINRA Rules 11580 and 11581. A transfer effected under FINRA Rule 11571(a)'s "Proper papers for transfer filed by assignor" framework, a change of trustee effected under FINRA Rule 11574's Sample Limited Partnership Change of Trustee Form, or a limited partnership transfer effected under FINRA Rule 11580's standard transfer forms — each of these scenarios involves a transfer agent (or, in the limited partnership context, the General Partner performing an analogous re-registration function, as FINRA Rule 11574's Supplementary Material .01 confirmed) performing a service in connection with the transfer. FINRA Rule 11650 establishes that whatever service charges the transfer agent imposes for performing that service fall on the party at whose instance the transfer was made — a general principle that applies wherever a transfer agent performs the transfer, (though not to the limited partnership cases, where the General Partner rather than a transfer agent re-registers the interests and transactions in Direct Participation Program securities are outside the Uniform Practice Code except as otherwise provided in it) without FINRA Rule 11650 itself needing to enumerate each one specifically, consistent with the kind of general-principle-applicable-across-specific-scenarios drafting this dictionary has observed elsewhere in the Uniform Practice Code.

FINRA Rule 11650 as the Capstone of the FINRA Rule 11600 Subsection

FINRA Rule 11650's position as the final rule of the FINRA Rule 11600 subsection — following FINRA Rule 11610's comprehensive bond good delivery framework, FINRA Rule 11620's interest computation mechanics, FINRA Rule 11630's due-bill framework, and FINRA Rule 11640's claims framework — provides a brief but fitting conclusion to the subsection's progression. Where FINRA Rules 11620 through 11640 addressed the substantive mechanics of interest, distributions, and claims arising around record dates, FINRA Rule 11650 addresses the simpler, more general question of who pays for the transfer agent's service in processing a registered security's transfer — a question that, unlike the record-date-timing questions FINRA Rules 11620 through 11640 address, does not depend on ex-dividend dates, due-bills, or claims procedures, but simply on which party's instance caused the transfer to occur.

Connection to FINRA Rules 11340, 11362, 11410, 11550, 11570 Through 11574, 11580, and 11600

FINRA Rule 11650 connects to FINRA Rule 11340(b) and FINRA Rule 11410(d) as points of structural contrast — both of those rules establish categorical (seller-borne) cost allocations, while FINRA Rule 11650 establishes a causation-based (at whose instance) allocation instead. It connects directly to FINRA Rule 11362(c) — whose interchange charge notwithstanding clause this entry has confirmed is resolved by FINRA Rule 11650's general transfer agent service charge framework. It connects to FINRA Rule 11550 and the FINRA Rule 11570 cluster (FINRA Rules 11571 through 11574) — whose various transfer-processing scenarios FINRA Rule 11650's general principle applies to as the cost-allocation backdrop. It connects to FINRA Rule 11580 — whose limited partnership transfer framework, processed through the General Partner per FINRA Rule 11574's Supplementary Material .01, stands outside FINRA Rule 11650's transfer agent service charge framework, the General Partner not being a transfer agent and transactions in Direct Participation Program securities being outside the Uniform Practice Code except as otherwise provided in it. And it connects to FINRA Rule 11600 as its parent series marker, the final rule completing that five-rule subsection.

Applying the Rule's Words: All Charges, and Whose Request

FINRA Rule 11650 requires the party at whose instance a transfer of securities is made to pay "all service charges of the transfer agent". The charges are therefore not divided by type. Suppose a buying member asks the transfer agent to register shares it has received into its own name and to issue the holding in three certificates of different sizes, and the transfer agent bills a transfer fee and a separate charge for issuing the additional certificates. Both are service charges of the transfer agent on a transfer made at the buying member's instance. The buying member pays both.

The rule asks at whose instance the transfer is made, not who handles the papers. Suppose the buying member asks the selling member to present the certificate to the transfer agent for registration in the buying member's name, and the selling member does so as a courtesy. The selling member has carried the papers, but the transfer is made at the buying member's request. The buying member is the party at whose instance it is made, and it pays the transfer agent's charges.

The rule allocates charges transfer by transfer, not trade by trade. Suppose a member holds bonds of an issue available in coupon or registered form. As the delivering party, it chooses to have them interchanged into registered form before delivering them. After delivery, the buying member asks the transfer agent to register the bonds in its own name. Two transfers have been made, each at a different party's instance. The delivering member pays the charge for the interchange it chose, and the buying member pays the charge for the registration it asked for.

Interchange Under FINRA Rule 11362(c) in Practice

Under FINRA Rule 11362(c), unless otherwise specified at the time of execution, contracts in bonds that are issuable in either coupon or registered form are settled by delivery of bonds in either form, notwithstanding that there may be a charge for interchanging one form with the other. Suppose two members trade such bonds without specifying a form, and the seller delivers coupon bonds in proper denominations. That delivery settles the contract. If the buying member then wants the bonds in registered form and asks for them to be interchanged, the interchange is made at its instance, and it pays the transfer agent's charge for it.

The position is different where a form was specified at the time of execution. Suppose the members agreed when they executed the trade that registered bonds would be delivered. The either-form default in FINRA Rule 11362(c) then does not apply, because it operates only "unless otherwise specified at the time of execution". The seller is bound to deliver registered bonds and cannot settle by delivering coupon bonds.

The confirmation is where a specified form is recorded. FINRA Rule 11220 requires confirmations or comparisons to include an adequate description of the security, the price, and any other information deemed necessary to ensure that the buyer and seller agree as to details of the transaction. That other information should include, if applicable, such phrases as "registered". Where the members have specified registered bonds, their confirmations should therefore carry the phrase "registered".

Transfers a Seller Needs Before It Can Deliver

FINRA Rule 11362(b) requires each delivery of fully registered bonds to be made in denominations of $1,000 or multiples of $1,000, or in amounts of $100 or multiples aggregating $1,000, "but in no event in denominations larger than $100,000". Suppose a seller of $500,000 principal amount of registered bonds holds the whole position in one $500,000 certificate. It cannot deliver that certificate. If it asks the transfer agent to replace it with five $100,000 certificates so that it can deliver, that transfer is made at the seller's instance, and the seller pays the transfer agent's charge.

FINRA Rule 11574(a) provides that a certificate is not a good delivery with an assignment executed by a person since deceased, or by an executor except as paragraph (b) provides. Paragraph (b) restores good delivery for an assignment by a domestic individual executor. It applies only to securities of a domestic issuer that are registered in the name of that executor, and the signature to the assignment must be guaranteed. Suppose a member's customer dies holding shares of a domestic issuer registered in the customer's own name, and the customer's domestic individual executor signs the assignment. The certificate is not a good delivery, because the shares are not registered in the executor's name. Once the shares have been re-registered in the executor's name, a properly guaranteed assignment by the executor makes the certificate a good delivery. A selling member that asks the transfer agent for that re-registration so that it can deliver is the party at whose instance the transfer is made.

A seller's defective paperwork carries its own cost rule. FINRA Rule 11550(c) requires the signature to an assignment to correspond with the name as written on the certificate in every particular, without alteration or enlargement or any change whatever. FINRA Rule 11550(a) provides that "Any expense incurred through failure of a seller to meet these requirements shall be paid by the seller." Suppose a certificate registered to "Jane A. Marsh" is delivered with the assignment signed "Jane Marsh". The buying member presents it for transfer into its own name and incurs expense because the assignment does not conform. That expense is the seller's to pay under FINRA Rule 11550(a), even though the transfer was one the buying member asked for.

Presenting a Certificate for Transfer

A transfer is requested on a standard form. FINRA Rule 11550(j) requires a properly executed Uniform Transfer Instruction Form to accompany securities presented for transfer. The form is addressed to the transfer agent, asks it to transfer the attached securities, and states the name in which they are to be registered. FINRA Rule 11100(d) requires the CUSIP number to be used on that form. So when a buying member asks the transfer agent to register shares in its own name, the request goes with a properly executed Uniform Transfer Instruction Form that carries the CUSIP number.

The assignment the transfer agent acts on must carry a guarantee that the transfer agent will accept. FINRA Rule 11550(h) requires each assignment, endorsement, alteration and erasure to bear a guarantee acceptable to the transfer agent or registrar. It states that it does not intend a "New York", national securities exchange member or other specific guarantee to be required. Suppose the signature guarantor on an assignment is not a member of any national securities exchange. That fact alone does not make the guarantee deficient. The test is whether the guarantee is acceptable to the transfer agent.

A Transfer Made Around a Record Date

Whether a buyer transfers a registered bond in time can affect the interest. FINRA Rule 11640(a), which paragraph (c) makes equally applicable to interest on registered bonds, deals with a buyer that has the certificate in its possession in time to effect transfer before the closing of the books or the record date. Such a buyer has no claim on the seller for the interest, unless the seller is the registered holder. On the buyer's request, however, the seller must use its best efforts to collect the interest for the buyer. Suppose a buying member receives a registered bond, registered in the name of an earlier owner and not the seller, three weeks before the record date, and decides not to send it for transfer until after the interest is paid. It has no claim on the seller for that interest. It may ask the seller to use its best efforts to collect it.

A late delivery is dealt with differently. Under FINRA Rule 11630(d), due-bill checks for a cash distribution, interest on registered bonds or interest on unit investment trust securities shall accompany securities delivered too late for transfer on or before the record date. Suppose a member buys stock before its ex-dividend date for a cash dividend, and the seller's certificate reaches it after the record date. A due-bill check for the dividend must accompany that delivery.

A transfer can also be needed to honour a due-bill. Under FINRA Rule 11630(e), due-bills are redeemable on the date on which the security or rights are issued by the corporation, or as soon thereafter as the signer or guarantor of the due-bill can obtain transfer of the security or rights into denominations necessary to effect the redemption. Suppose a selling member signed a due-bill for stock dividend shares and asks the transfer agent to issue the shares in the denominations it needs to redeem the due-bill. That transfer is made at the instance of the selling member, the signer.

When a Transfer Is Refused or the Certificate Is in the Wrong Form

A transfer the buyer asks for can bring a defect to light. Under FINRA Rule 11720(b), reclamation because a specific certificate tendered in settlement of a contract has been presented for transfer and transfer has been refused by the transfer agent "shall be within 30 months after the settlement date of the contract". Suppose a contract settled on 1 March 2024, and the buying member first presents the certificate for transfer on 1 May 2026, when the transfer agent refuses it. That is 26 months after the settlement date, so the buying member is within the period and may reclaim.

Suppose instead that the buying member first presents the certificate 32 months after the settlement date and transfer is refused. The 30-month period for reclamation under FINRA Rule 11720(b) has run. Under paragraph (d), the running of that period "shall not be deemed to foreclose a member's rights to pursue its claim via other open avenues, including but not limited to the FINRA arbitration procedure."

A different, shorter period applies to a certificate in the wrong form. Under FINRA Rule 11710(e), reclamation because a form of certificate was delivered which was not a good delivery, but which is exchangeable without charge for a certificate which is a good delivery, shall be made within 15 days from the day of original delivery. A buyer that receives such a certificate must therefore reclaim it within 15 days of the original delivery, not within the 30 months that FINRA Rule 11720 allows for a refused transfer.

Which Trades the Rule Reaches: Parties and Settlement Route

FINRA Rule 11650 contains no scope provision of its own. It therefore has the scope that FINRA Rule 11100(a) gives the Uniform Practice Code: over-the-counter secondary market transactions in securities between members, subject to the exceptions that paragraph lists. FINRA Rule 11100(b) allows a rule of the Code to expand or limit that scope only "if specifically provided therein".

Suppose a member sells registered shares to its own retail customer, who is not a member, and the customer asks for the shares to be registered in the customer's name. The sale is not a transaction between members. FINRA Rule 11650 therefore does not decide who pays the transfer agent as between the member and its customer.

Suppose two members compare, clear and settle a trade through the facilities of a registered clearing agency whose rules do not provide that the rules of other organizations shall apply. The transaction falls within the exception in FINRA Rule 11100(a)(1), so FINRA Rule 11650 does not allocate the transfer agent's charges between the two members.

Which Trades the Rule Reaches: The Kind of Security

FINRA Rule 11100(a) expressly includes restricted securities, as defined in Rule 144(a)(3) under the Securities Act. Suppose two members trade restricted shares over the counter and settle directly with each other, and the buying member then asks the transfer agent to register the shares in its own name. FINRA Rule 11650 applies, and the buying member, at whose instance the transfer is made, pays the transfer agent's charges.

By contrast, FINRA Rule 11100(a)(3) excepts transactions in municipal securities as defined in Section 3(a)(29) of the Exchange Act. Suppose two members trade a registered bond that is a municipal security within that definition. The trade is outside the Code, so FINRA Rule 11650 does not allocate the transfer agent's charges between them.

FINRA Rule 11100(a)(5) excepts transactions in Direct Participation Program securities as defined in FINRA Rule 2310, "except as otherwise provided in this Code". Under FINRA Rule 2310, a limited partnership is a direct participation program organized as a limited partnership. FINRA Rule 11580 provides otherwise for one purpose: it requires members that participate in the transfer of limited partnership securities to use the standard transfer forms. FINRA Rule 11650 makes no such provision. Its text speaks of the service charges of the transfer agent, while a limited partnership interest transferred on the Sample Limited Partnership Change of Trustee Form is sent to the General Partner for re-registration. FINRA Rule 11650's text therefore does not reach the charges on such a transfer.

Other Costs Around a Transfer

Stamp taxes are dealt with by FINRA Rule 11340, not by FINRA Rule 11650. Under FINRA Rule 11340(c), if the buyer desires stamps in addition to those required, the seller's furnishing of them may be made a part of the transaction. Under paragraph (d), if the buyer has requested the additional state stamps and at the time of delivery the seller does not furnish them or has not made adequate provision for them, the buyer may furnish and cancel them itself and deduct their cost from the purchase price. Suppose a buying member that intends to have the shares transferred asks for additional state stamps, and the seller agrees. At delivery the seller has neither furnished them nor made adequate provision for them. The buying member may furnish and cancel the stamps and deduct their cost from the purchase price.

Shipment costs are dealt with by FINRA Rule 11410(d): "Expenses of shipment, including insurance, postage, draft, and collection charges, shall be paid by the seller." Suppose a seller ships certificates to the buying member with a draft attached, and on receiving them the buying member asks the transfer agent to register them in its own name. The seller pays the insurance, postage, draft and collection charges of the shipment. The buying member pays the transfer agent's charges for the transfer it asked for.

A Seller Whose Certificates Are Still With the Transfer Agent

A seller may need the transfer agent to re-register or re-issue its certificates before it can deliver, and that transfer may not be finished by the settlement date. Under FINRA Rule 11100(c), in trades between members, a failure to deliver the securities sold on or after the settlement date does not effect a cancellation of the contract. The buyer's remedy is provided for by FINRA Rule 11810, unless the parties mutually consent to cancel the trade.

FINRA Rule 11810(a) provides that a securities contract that the seller has not completed according to its terms may be closed by the buyer not sooner than the third business day following the date delivery was due. Suppose delivery on a contract between two members was due on Monday 11 May 2026. The seller's certificates are still with the transfer agent, which is issuing them in the denominations the seller asked for, and no holiday falls in that week. The third business day following Monday 11 May is Thursday 14 May. The buyer may close the contract by buy-in on Thursday 14 May or later, but not sooner.

FINRA Rule 11810(g) deals with securities that are in transfer. If, before the closing of a contract on which a buy-in notice has been given, the buyer receives from the seller written or comparable electronic notice stating that the securities are in transfer, and giving their certificate numbers, the buyer must extend the execution date of the buy-in for seven calendar days from the date delivery was due under the buy-in. Suppose a contract originally fell due on Friday 8 May 2026, and the buyer's notice of buy-in makes delivery due under the buy-in on Thursday 21 May. On Tuesday 19 May the seller gives written notice that the securities are in transfer, with their certificate numbers. The buyer must extend the execution date to Thursday 28 May, seven calendar days after 21 May. The period is not counted from the date the contract originally fell due, and not from the date of the seller's notice.

The time of day for delivering against a buy-in notice can also be varied. FINRA Rule 11810(d)(1)(A) requires a seller that has received a buy-in notice, and has not rejected or stayed it, to deliver the securities to the party issuing the notice at or before 3:00 p.m. ET on the effective date of the notice "unless otherwise agreed to by the issuing party". Suppose the transfer agent returns the seller's certificates late on the effective date, and the buyer that issued the notice agrees to take delivery at 4:30 p.m. that day. Because the 3:00 p.m. time applies unless the issuing party agrees otherwise, the seller may deliver at 4:30 p.m. as agreed.

Delivering Against a Buy-In Notice

A seller can also hold off the buy-in for securities that have come back to it. Under FINRA Rule 11810(d)(1)(A), if, before the buy-in is executed, the seller notifies the party that issued the notice that some or all of the securities (but not less than one trading unit) are in the seller's physical possession and will be promptly delivered, the order to buy-in shall not be executed with respect to those securities. Suppose the transfer agent has returned to the seller certificates for a quantity smaller than one trading unit, and the seller notifies the buyer that it holds them and will deliver them promptly. That notice covers less than one trading unit, so it does not bring this provision into play. The provision reaches only a notice for not less than one trading unit.

The buyer must take a delivery tendered after a buy-in notice and before the buy-in, with one exception. FINRA Rule 11810(f) requires the buyer, before the closing of a contract on which a buy-in notice has been given, to accept delivery of the securities called for by the contract. In the case of a partial delivery, this applies only if the portion remaining undelivered at the time the buyer proposes to execute the buy-in is not an amount which includes an odd-lot which was not part of the original transaction. Suppose the buyer has given a buy-in notice on a contract for 300 shares of a stock that trades in units of 100 shares, and before the buy-in the seller tenders 250 shares, the other 50 still being in transfer. The 50 shares that would remain undelivered are an odd lot, and the 300-share contract included none, so FINRA Rule 11810(f) does not require the buyer to accept the 250 shares. Had the seller tendered 200 shares and left 100 undelivered, the buyer would have had to accept them.

A delivery made after the notice is received counts as a delivery under the notice. FINRA Rule 11810(d)(1)(B) provides that securities delivered to the buyer by the seller after it receives the buy-in notice shall be considered as delivered pursuant to the buy-in notice. So if the transfer agent returns the seller's certificates two days after the seller receives the notice, and the seller then delivers them before the buy-in is executed, that delivery is treated as made under the notice.

A Chain of Members Waiting on One Transfer

A transfer at one member's instance can hold up several trades. A member that receives a buy-in notice may itself be owed the same securities by another member. FINRA Rule 11810(b)(5) requires the receiving party to redeliver the notice immediately, as a re-transmitted notice, to the parties from which the securities are due. The time specified for delivery in it shall not be prior to the time specified in the original notice. Suppose Birch's notice of buy-in requires Alder to deliver by 3:00 p.m. ET on Thursday 4 June 2026. Alder is owed the shares by Cedar, whose certificates are with the transfer agent. Alder re-transmits the notice to Cedar. Its notice may not call for delivery earlier than 3:00 p.m. ET on Thursday 4 June.

Delivery under the original notice, or execution of the buy-in, closes the contracts covered by the re-transmitted notices. FINRA Rule 11810(d)(1)(B) also deals with a re-transmitted notice that arrives too late. If a member sends a re-transmitted notice before the delivery of the requisite number of shares stated in the buy-in notice, or before the execution of the buy-in, but the recipient does not receive it until after that delivery or execution, the member that sent the notice may, unless otherwise agreed, promptly re-establish, by a new sale, the contract with respect to which the notice was sent. Suppose Birch executes its buy-in against Alder on 4 June, and Alder's re-transmitted notice, sent the day before, reaches Cedar only after the execution. Alder may, unless otherwise agreed, promptly re-establish by a new sale its contract with Cedar to which that notice related.

A Buyer That Turns Away a Good Delivery

A buyer may want its shares in denominations other than those the seller delivers. FINRA Rule 11361(a)(2) provides that stock certificates delivered in settlement of a contract for more than 100 shares and a multiple of 100 shall be in the exact amount of the contract, or in multiples of 100 shares, or in amounts from which units of 100 shares can be made, or a combination of these equaling the amount of the contract. Suppose the seller on a 300-share contract tenders one certificate for exactly 300 shares, properly assigned and in every other respect a good delivery. The buying member refuses it because it wants three certificates of 100 shares each. The certificate is in the exact amount of the contract, which paragraph (a)(2) allows, and nothing in FINRA Rule 11361(a)(2) lets the buyer require one of the permitted forms rather than another.

FINRA Rule 11820(a) deals with a failure by the buyer to accept delivery in accordance with the terms of the contract. Upon such a failure, and lacking a properly executed Uniform Reclamation Form or the equivalent depository generated advice, the seller may, without notice, sell out in the best available market, for the account and liability of the party in default, all or any part of the securities due under the contract. Read with FINRA Rule 11361(a)(2), the refusal of a delivery in a form that paragraph allows is such a failure. If the buying member has no properly executed Uniform Reclamation Form or equivalent depository generated advice, the seller may sell out the 300 shares without notice, for the buying member's account and liability.

Getting the Assignment Right Before It Goes to the Transfer Agent

The transfer agent acts on the assignment that comes with the certificate, and FINRA Rule 11550(a) makes a registered security a good delivery only if the assignment conforms to FINRA Rules 11550 to 11574. A correction made to an assignment after it is signed has two requirements. FINRA Rule 11550(f) requires any alteration or correction in an assignment to be accompanied by an explanation on the original instrument signed by the person or firm executing the same. FINRA Rule 11550(h) requires each assignment, endorsement, alteration and erasure to bear a guarantee acceptable to the transfer agent or registrar. Suppose a registered owner signs an assignment and then alters it to correct the number of shares written in it. For the certificate to be a good delivery, the original assignment must carry an explanation of the correction signed by the owner, and the alteration itself must bear a guarantee acceptable to the transfer agent or registrar.

An assignment on a separate paper covers one certificate only and must describe it fully. FINRA Rule 11550(b) allows an assignment to be executed on the certificate itself or on a separate paper, and in the second case requires a separate assignment for each certificate. FINRA Rule 11550(d) requires a separate (detached) assignment to contain provision for the irrevocable appointment of an attorney, with power of substitution, and a full description of the security, including name of issuer, issue, certificate number, and amount, expressed in words and numerals. Suppose a seller delivers three certificates of one issue and uses detached assignments rather than assigning on the certificates. It needs three detached assignments, one for each certificate. Each must give that certificate's number and its amount in both words and numerals, as well as the issuer, the issue and the appointment of an attorney with power of substitution.

A signature that was good when given can stop being enough. FINRA Rule 11550(e) provides that a certificate registered in the names of two or more individuals or firms shall be a good delivery only if signed by all the registered owners. FINRA Rule 11574(a)(1) provides that a certificate shall not be a good delivery with an assignment executed by a person since deceased. Suppose a certificate registered in the names of two individuals is assigned by both of them, and one of them dies before the certificate is delivered. All the registered owners have signed, but one of the signatures is now that of a person since deceased. The certificate is not a good delivery with that assignment.

When the Transfer Agent Issues Too Many Shares

A transfer can put securities in a member's hands that are not its own. FINRA Rule 11721 requires any member that discovers securities in its possession to which it is not entitled to make reasonable attempts to ascertain and to promptly notify the true owner of those securities, and to take affirmative steps to correct the situation. Failure to abide by this requirement may result in a violation of FINRA Rule 2010. Suppose a buying member presents a certificate for the 500 shares it bought and asks the transfer agent to register them in its own name, and the transfer agent issues it certificates for 600 shares. The member is entitled to the 500 shares it bought, not to the other 100. When it discovers the difference, it must make reasonable attempts to ascertain and promptly notify the true owner of the 100 shares, and take affirmative steps to correct the situation.

When an In-Transfer Notice Comes Too Late or by Telephone

FINRA Rule 11810(g) lets a seller whose securities are in transfer hold off a buy-in, but only on its own terms. If, prior to the closing of a contract on which a buy-in notice has been given, the buyer receives from the seller written or comparable electronic notice stating that the securities are in transfer, in transit, being shipped that day or due from a depository, and giving the certificate numbers of the securities, the buyer must extend the execution date of the buy-in for seven calendar days from the date delivery was due under the buy-in.

The notice has to arrive before the contract is closed. Suppose a buyer's notice of buy-in makes delivery due under the buy-in on Tuesday 9 June 2026. The seller's certificates are still with the transfer agent, the seller neither delivers nor obtains a stay, and later that day, after the seller's time to deliver under the buy-in notice has passed, the buyer closes the contract by buying in all the securities. On Wednesday 10 June the seller sends written notice that the securities are in transfer, giving their certificate numbers. The notice did not reach the buyer prior to the closing of the contract, so FINRA Rule 11810(g) does not require the buyer to extend the execution date of a buy-in it has already executed.

The notice also has to be written or in comparable electronic form. Suppose that on Monday 15 June 2026, the day before delivery is due under a buy-in, the seller telephones the buyer to say that the securities are in transfer and reads out their certificate numbers, and sends nothing in writing or electronically. The buyer has not received written or comparable electronic notice, so FINRA Rule 11810(g) does not require it to extend the execution date. FINRA Rule 11810 treats the telephone as something other than written media elsewhere too: under paragraph (h), the telephone is used to report an executed buy-in only if written media is not available.

The seven days are calendar days. Suppose delivery is due under a buy-in on Friday 22 May 2026, and before the closing the seller gives written notice that the securities are in transfer, with their certificate numbers. Suppose also that Monday 25 May is a holiday. The buyer must extend the execution date to Friday 29 May, seven calendar days from 22 May. Because the period is counted in calendar days, the holiday does not lengthen it.

What an In-Transfer Notice Must Say and Who Must Send It

The notice need not say that the securities are in transfer. FINRA Rule 11810(g) names four states: in transfer, in transit, being shipped that day, and due from a depository. Suppose the transfer agent returns a seller's certificates on Wednesday 10 June 2026, the day before delivery is due under the buyer's buy-in, and that day the seller sends the buyer written notice that the securities are being shipped that day, giving their certificate numbers. That is a notice FINRA Rule 11810(g) names, so the buyer must extend the execution date of the buy-in for seven calendar days from the date delivery was due under the buy-in.

The notice must come from the seller. Suppose a buyer that has given a buy-in notice telephones the transfer agent itself, and the transfer agent emails the buyer that the seller's certificates are being re-registered and gives their numbers. The seller sends the buyer nothing. The buyer has not received notice from the seller, so FINRA Rule 11810(g) does not require it to extend the execution date.

A seller whose certificates are still at the transfer agent cannot use the provision for securities in its physical possession. Under FINRA Rule 11810(d)(1)(A), if the issuing party is notified by a seller, before the buy-in is executed, that securities are in the seller's physical possession and will be promptly delivered, the order to buy in is not executed with respect to those securities. Suppose the seller sends written notice, before the closing, that the securities are in transfer, its certificates being at the transfer agent for re-registration, giving their certificate numbers, and that it will deliver them promptly once they come back. The securities are not in the seller's physical possession, so paragraph (d)(1)(A) does not stop the buy-in for them. The notice does state that the securities are in transfer and gives their certificate numbers, so under paragraph (g) the buyer must extend the execution date for seven calendar days from the date delivery was due under the buy-in.

Exercising Warrants That Are Still in Transfer

A buyer of warrants may want to exercise them while the seller's certificates are still with the transfer agent. FINRA Rule 11810(j)(1)(B) deals with a contract for a deliverable instrument with an exercise provision, where the exercise may be accomplished on a daily basis and the settlement date of the contract to purchase the instrument is on or before the requested exercise date. The receiving member may deliver a Liability Notice to the delivering member no later than 11:00 a.m. ET on the day the exercise is to be effected. The notice may be redelivered immediately to another member, but no later than noon ET on the same day.

Birch, Alder and Cedar are all members. Suppose Birch buys 4,000 warrants from Alder for settlement on Tuesday 9 June 2026. The warrants may be exercised on any business day. Alder's warrant certificates are with the transfer agent, and Alder has not delivered. Birch wants to exercise on Thursday 11 June. Birch may deliver a Liability Notice to Alder no later than 11:00 a.m. ET on Thursday 11 June. Alder is itself owed the same warrants by Cedar. Alder may redeliver the notice to Cedar immediately, but no later than noon ET on Thursday 11 June.

The provision depends on the settlement date. Had Birch's contract been for settlement on Friday 12 June, after the requested exercise date of Thursday 11 June, the settlement date would not have been on or before the requested exercise date, so the condition in paragraph (j)(1)(B) would not have been met, and that paragraph would not have permitted Birch to deliver a Liability Notice for the exercise.

A Record Date for the Underlying Stock

FINRA Rule 11810(j)(1)(A) offers a Liability Notice, as an alternative to the close-out procedures set out in paragraphs (b) through (h), on a contract for warrants, rights, convertible securities or other securities that have been called for redemption, are due to expire by their terms, are the subject of a tender or exchange offer, or are subject to other expiring events such as a record date for the underlying security, where the last day on which the securities must be delivered or surrendered, the expiration date, is the settlement date of the contract or later.

Suppose a member buys convertible bonds from another member, and the seller's bond certificates are with the transfer agent. The issuer of the underlying stock has fixed a record date, and the last day on which the bonds must be surrendered for conversion in time for it falls after the contract's settlement date. The bonds are subject to an expiring event, a record date for the underlying security, and the expiration date is later than the settlement date, so the buying member may deliver a Liability Notice to the seller as an alternative to the close-out procedures in paragraphs (b) through (h).

How the notice is sent depends on the parties. Where both are participants in a registered clearing agency that has an automated service for notifying a failing party of the liability that will be attendant to a failure to deliver, the Liability Notice must be transmitted through that service. Where they are not both participants, it must be issued using written or comparable electronic media having immediate receipt capabilities, and sent as soon as practicable but not later than two hours prior to the cutoff time set forth in the instructions on a specific offer or other event, in order to obtain the protection the rule provides. So if both members in the convertible bond example participate in such a clearing agency, the buying member must send its Liability Notice through the agency's automated service.

Examination Relevance and Key Takeaways

FINRA Rule 11650 is tested on the Series 7 and Series 24 examinations as the transfer agent service charge allocation rule — the final rule of the FINRA Rule 11600 subsection, resolving the interchange charge question FINRA Rule 11362(c) foreshadowed.

The key points to retain are these: FINRA Rule 11650 provides that the party at whose instance a transfer of securities is made shall pay all service charges of the transfer agent — a causation-based allocation, distinguishing it from the categorical seller-borne allocations of FINRA Rule 11340(b) and FINRA Rule 11410(d); this framework resolves the interchange charge question FINRA Rule 11362(c)'s notwithstanding clause raised for bonds issuable in both coupon and registered form, placing such charges on whichever party's instance prompted the form-changing transfer; FINRA Rule 11650's general principle applies as the cost-allocation backdrop for the various transfer scenarios addressed throughout FINRA Rule 11550 and the FINRA Rule 11570 cluster, though not FINRA Rule 11580's limited partnership transfer framework processed through the General Partner; and the rule was amended December 15, 2010 through SR-FINRA-2010-030 — no prior amendment date listed — with one selected notice, 10-49.