Reclamation under FINRA Rule 11730 may be made without limit of time. What accounts for the absence of any deadline?

The delivering party is presumed to have known of the call, so it cannot complain of a late claim

A called security remains called indefinitely, so the defect does not become less reclaimable with time

The reclaiming party may not learn of the call until the redemption proceeds fail to arrive

The redemption process itself has no fixed duration, so no deadline could be measured against it

A called security passes through several members after publication of the call notice before anyone reclaims it. To whom is it returned under FINRA Rule 11730?

To the party who held it at the time the call notice was published, whatever happened after

To the member immediately preceding the reclaiming party in whatever chain of transactions has since occurred

To the issuer, which must then account to whichever party is ultimately found entitled

To each member in the chain in turn, unwinding the transactions one by one in the order they occurred

FINRA Rule 11730 does not apply where an entire issue has been called for redemption. Why not?

Because the security ceases to be transferable at all once the whole of the issue has been called for redemption

Because every certificate is then a called certificate, so nothing was delivered that the contract did not contemplate

Because the issuer becomes responsible for collecting every certificate directly from its holders

Because reclamation would leave the reclaiming party holding a certificate it could not itself deliver on

Two members transact specifically in a security as a called security, that status being an acknowledged term of their trade. The buyer later seeks to reclaim on the ground that the security was called. What follows under FINRA Rule 11730?

The reclamation succeeds only where the buyer can show it was unaware the call had already been published

The reclamation succeeds, the rule's protection not being capable of waiver by agreement between members

The reclamation fails, the buyer having contracted for a called security and received exactly that

The reclamation fails unless the trade was confirmed in writing describing the security as a called one

FINRA Rule 11730 shares its two exceptions, word for word in substance, with the rule governing whether a called security is good delivery. What does that correspondence indicate about the two rules?

That one of them supersedes the other, the later adoption governing where they overlap in scope

That the exceptions were drafted separately at different times and happen to have converged on the same wording

That they apply to different categories of security, the exceptions marking where each begins

That they were designed as a coordinated pair, one setting the standard and the other supplying the remedy

FINRA Rule 11730 was amended effective 2 January 1968. What happened to it between then and the Uniform Practice Code's transfer into the Consolidated FINRA Rulebook?

Nothing — it was not amended at all across the more than four decades between those two dates

It was amended twice, once to extend the reclamation period and once to restrict it again

It was amended once, to add the exception for securities dealt in specifically as called securities

It was suspended for part of that period and reinstated when the Code was next reviewed in full

Two members agree an ordinary sale of bonds of an issue on a Monday. The next day notice is published calling part of the issue for redemption, and on Thursday the seller delivers the bonds, one of which is among those called. Can the buyer reclaim that bond under FINRA Rule 11730?

Yes, but only if the buyer reclaims it before the redemption date fixed in the call notice arrives

Yes — the rule asks when the bond was delivered, not when the contract for it was made

No — a reclamation for a called bond lies only where the contract itself was made after the call notice

No — the contract was struck before any call, so the buyer agreed to take the bonds as they then stood

A notice published on 1 May calls certain bonds for redemption on 15 June. On 20 May one of the called bonds is delivered in an ordinary transaction, so it has not yet been redeemed when the buyer receives it. Can the buyer reclaim it under FINRA Rule 11730?

Not yet — the right arises on 15 June, when the redemption turns the bond into a claim for payment

No — until 15 June the bond is still an outstanding security, so the buyer received what it contracted for

Yes — the rule is triggered by publication of the call notice, not by the redemption that follows it

No — before the redemption date the buyer's remedy is to present the bond to the issuer for early payment

After a notice calling part of a bond issue has been published, two members trade bonds of the issue in the ordinary way, nothing in their terms referring to called bonds, and a called bond is delivered. The seller argues that the call was public when they traded. Can the buyer reclaim the bond under FINRA Rule 11730?

No — once the notice was public, every later trade in the issue is treated as a trade in called bonds

Yes, but only if the buyer shows it had not seen the published notice when the trade was made

No — a buyer trading after publication is taken to have accepted the risk of receiving a called bond

Yes — a public call does not make the trade one in which the bond was dealt in specifically as called

A notice calls for redemption the bonds of an issue that bear certain listed serial numbers. After publication, a member delivers two bonds of the issue in an ordinary trade, one bearing a listed number and one not. What may the buyer reclaim under FINRA Rule 11730?

The bond bearing a listed serial number, the other bond not having been called for its redemption

Both bonds, since the issue has been called in part and the entire-issue exception therefore does not apply

Neither bond, since the rule reaches a called issue only when every bond of it has been called

Both bonds, because a partial call puts every bond of the issue in doubt until the numbers are checked

A member accepts delivery of a bond without noticing that it had been called, the call notice having been published before the delivery. It discovers the call weeks later. Does its acceptance of the bond stand in the way of a claim under FINRA Rule 11730?

No, but only because the member had not yet paid for the bond when it discovered the call

No — a reclamation is by definition a claim concerning a security that has already been accepted

Yes — once accepted, a called bond can be dealt with only through a claim made against the issuer

Yes — by accepting the bond without objection it waived any complaint about the bond's called status

A certificate is presented to a receiving member after notice of its call for redemption was published. The member spots the call before accepting it, and neither the entire-issue exception nor the dealt-as-called exception applies. How can the member deal with the certificate there and then?

It can refuse the certificate only after first allowing the deliverer a day to substitute an uncalled one

It has to take the certificate and pursue the issuer for the redemption price when that falls due

It can turn the certificate away at presentation, a called certificate not being a good delivery

It has to accept the certificate, a delivering member being free to settle with any bond of the issue

On 4 June Oak Securities delivers a bond to Pine Capital. On 6 June the issuer publishes notice calling that bond for redemption. Pine delivers it to Elm Partners on 10 June, and Elm delivers it to Ash Securities on 20 June. In December Ash discovers the call and reclaims under FINRA Rule 11730. To which member may the bond be returned?

Elm, the first member to receive the bond after the notice was published

Elm, which delivered the bond to Ash and immediately precedes it in the chain

Oak, which held the bond when it first entered this chain of deliveries

Pine, which held the bond on the day the notice was published

Notice is published that some of a company's outstanding preferred shares are called for redemption, the rest of the issue remaining outstanding. A week later one member delivers shares of that issue to another in an ordinary trade settled directly between them, and some of the shares delivered are among those called. Can the receiving member reclaim the called shares under FINRA Rule 11730?

Yes — the rule reaches a security delivered after its call notice, called shares as well as called bonds

No — the rule is written for called debt, a call of shares being settled between the holder and the issuer

No — called shares may be turned away at presentation, but once accepted they stay with the buyer for good

Yes, but within 30 months of the delivery, the unlimited period being confined to called debt securities

An issuer calls a bond issue in two stages, publishing a separate notice for each stage that lists the serial numbers it calls. Between the first notice and the second, a member delivers in an ordinary trade a bond whose number appears only on the second notice's list. Can the buyer reclaim that bond under FINRA Rule 11730?

Yes — a notice calling part of the same issue had already been published before the delivery took place

No — the notice calling that particular bond had not been published when the bond was delivered

Yes — once the second notice calls the bond, the reclamation right reaches back to the earlier delivery

No — while further stages of the call remain possible, no bond of the issue can be reclaimed under the rule

Two years after receiving a called bond directly from the member that held it when the call notice was published, a member reclaims it under FINRA Rule 11730. The deliverer pays back the money amount of the contract, nothing else is agreed, and no proper delivery follows, so the deliverer is deemed to be failing to deliver. When must the reclaiming member make any claim for damages arising from that nondelivery?

Within 30 months after the settlement date of the original contract between the members

Without any limit of time, the claim taking on the reclamation's own unlimited period

Promptly, as with any claim for damages arising from a nondelivery between members

Within ten days after the money amount of the contract was paid back to the member

A member contracts to buy convertible bonds specifically as called bonds, part of the issue having been called for redemption. The last day for surrendering the called bonds falls after the contract's settlement date, and the seller fails to deliver on the settlement date. Which course is open to the buyer?

Treating the contract as cancelled, the seller's failure to deliver having brought it to an end

Reclaiming the bonds under FINRA Rule 11730 once the seller finally makes its delivery of them

Refusing any later delivery as not a good delivery, the bonds having been called before settlement

Delivering a Liability Notice to the seller, as an alternative to the ordinary close-out procedures

Six years ago a member received a bond in an ordinary trade, delivered after publication of a notice calling that bond for redemption; only part of the issue was called. The member has just discovered the call. Can it still reclaim the bond under FINRA Rule 11730?

No; a delay of six years is treated as having dealt in the bond specifically as a called bond

No; after this long the member's only claim is against the issuer for the redemption price

Yes; a reclamation under the rule may be made without any limit of time

Yes, provided the issuer has not yet paid out the redemption price on the called bond

A notice calls a tenth of a bond issue for redemption by listed serial numbers. After publication a called bond of the issue is delivered in an ordinary trade, and the seller argues that, the issue having been called, FINRA Rule 11730's first exception takes the delivery outside the rule. Is the seller right?

No; that exception needs the entire issue to be called, and a call of a tenth is not that

Yes; once any part of an issue has been called, every bond of that issue falls within the exception

Yes, unless the buyer's comparison listed the serial numbers of the particular bonds it was buying from the seller

No; that exception applies only to issues of shares, never to a bond issue of which part has been called

On 1 March Alder delivers a bond to Birch in an ordinary trade. On 3 March the issuer publishes notice calling that bond for redemption. Birch still holds the bond in October, when it discovers the call. Can Birch reclaim the bond from Alder under FINRA Rule 11730?

Yes; Alder delivered the bond to Birch, so it is the member to which the bond goes back

No; the bond reached Birch before the notice calling it was published

Yes; Alder's sale was an ordinary one, so the exception for called securities does not stand in the way

No; Birch must first deliver the bond on before any member in the chain may reclaim it

A member reclaims a called bond under FINRA Rule 11730. The original deliverer gives back the money amount of the contract and makes no proper delivery. Which remedy does FINRA Rule 11100(c) give the buying member for that failure to deliver?

The remedy that FINRA Rule 11810 provides for a buying member

A second reclamation under FINRA Rule 11730, made without limit of time

A claim against the issuer for the redemption price of the called bond

The sell-out procedure of FINRA Rule 11820, carried out against the reclaiming member

Under which provisions does a called security reclaimed under FINRA Rule 11730 go back to the party entitled to receive it?

A procedure of FINRA Rule 11730's own, set apart from the Code's general reclamation rules

The general provisions of FINRA Rule 11710, as for any other reclaimed security

The issuer's redemption procedure, the security going back through its paying agent

The good delivery provisions of FINRA Rule 11530(a), which fix the form of its return

Birch reclaims a called bond from Alder, which held it at publication and delivered it directly to Birch. Alder gives back the money amount of the contract, and the two members agree that this payment settles the matter between them. Is Alder deemed to be failing to deliver the bond?

Yes; a deliverer that pays back the money amount is deemed failing until it delivers, whatever is agreed

Yes, until the redemption date fixed in the call notice has passed, after which the contract ends

No; the deemed failure to deliver applies unless the parties agree otherwise, as they have here

No; paying back the money amount ends the contract in every case, with or without any agreement

Alder answers Birch's reclamation of a called bond by paying back the money amount of the contract. Nothing else is agreed, Alder makes no proper delivery, and Birch suffers damages from the nondelivery. Is Alder liable for those damages?

No; paying back the money amount discharged it from any further liability

No; damages for a called bond lie against the issuer, not against a member

Yes, but only up to the money amount of the contract it has paid back

Yes; as the party in default it is liable for any damages that accrue

After publication of a notice calling part of a bond issue, a member sells one of the called bonds to a retail customer who is not a member, and the customer later wants to reclaim it under FINRA Rule 11730. Does the rule give the customer that right?

No; the sale is not a transaction between members, so it lies outside the Code the rule belongs to

Yes; the rule reaches any delivery of a called security made after the notice was published, whoever receives it

Yes; a customer that receives a called bond from a member takes the member's place for the purposes of the rule

No; a customer may reclaim a called bond only if the member knew of the call when it made the sale

FINRA Rule 11540(b), like FINRA Rule 11730, allows reclamation without limit of time. What kind of defect does FINRA Rule 11540(b) cover?

An irregularity found in a draft shipment only after the draft had been paid

A foreign securities certificate subject to a persistent black-list or blocked-list stoppage

A security that a public announcement has shown to be worthless after the contract was made

A certificate that the issuer's transfer agent refuses to transfer once the contract has settled

In a contract in securities that a public announcement has disclosed to be worthless, of what may a delivery consist under FINRA Rule 11530(b)?

A Letter of Indemnity alone, the worthless certificates no longer being deliverable

The worthless securities, accompanied by a notice of call for their redemption

The worthless securities themselves, or a Letter of Indemnity in their place

Cash equal to the price last quoted for the securities before the announcement

How does FINRA Rule 11220's description of securities framework bear on FINRA Rule 11730's exception for a security dealt in specifically as a called security?

It fixes the date from which a called security stops being a good delivery between members trading in it

It requires a copy of the call notice to be attached to the comparison for every bond of a called issue traded

It lets the Uniform Practice Code Committee decide, trade by trade, whether the securities were dealt in as called

Its call for the information buyer and seller need to agree on the details reaches whether the trade was in called securities

FINRA Rule 11730: Reclamation Framework for Called Securities

FINRA Rule 11730

FINRA Rule 11730 establishes the reclamation framework for called securities — the second instance, alongside FINRA Rule 11540(b), of an unlimited reclamation period within this dictionary's coverage of the Uniform Practice Code, and the direct reclamation-side counterpart to FINRA Rule 11530(a)'s good delivery framework for called securities.

The rule's complete operative text reads: reclamation by reason of the fact that a security was delivered after publication of notice of call for its redemption, may be made without limit of time and such security may be returned to the party who held it at the time of such publication; except that this Rule shall not apply when an entire issue is called for redemption or when the security involved was dealt in specifically as a "called" security.

FINRA Rule 11730 was amended effective January 2, 1968, and by SR-FINRA-2010-030 effective December 15, 2010 — no amendments have occurred since 2010. One selected notice is associated — Regulatory Notice 10-49.

FINRA Rule 11730 sits within the 11700 Reclamations and Rejections subsection of the 11000 Uniform Practice Code, immediately following FINRA Rule 11721's obligations of members who discover securities to which they are not entitled and immediately preceding FINRA Rule 11740's marking to the market framework, the final rule of the FINRA Rule 11700 subsection.

The Reclamation Right: Unlimited Time, Returned to the Publication-Date Holder

FINRA Rule 11730's core provision establishes a reclamation right for a security delivered after publication of notice of call for its redemption. Recall from FINRA Rule 11530(a) that a certificate of stock or a bond ceases to be good delivery upon publication of notice of call for redemption — FINRA Rule 11730 now provides the reclamation remedy for a violation of that good delivery standard: a security delivered after that publication may be reclaimed.

The reclamation right has two distinctive features. First, it may be made without limit of time — paralleling FINRA Rule 11540(b)'s unlimited reclamation period for foreign securities certificates subject to a persistent black-list or blocked-list stoppage. As this dictionary's FINRA Rule 11540 entry discussed, an unlimited reclamation period departs from the general Uniform Practice Code emphasis on prompt resolution — FINRA Rule 11410(f)'s ten-day deadline, FINRA Rule 11710(d) and (e)'s 15/45-day periods, and even FINRA Rule 11720's substantial but finite 30-month periods. FINRA Rule 11730's unlimited period reflects a similar rationale to FINRA Rule 11540(b)'s — a called security's defect (having been called for redemption, and therefore representing something other than the ongoing security the contract called for) is not the kind of defect that becomes less significant or less reclaimable merely because time has passed; the security remains a called security indefinitely, and the reclamation right correspondingly persists indefinitely.

Second, such security may be returned to the party who held it at the time of such publication — this establishes the specific party to whom the reclaimed called security is returned: not necessarily the immediately preceding party in whatever chain of subsequent transactions may have occurred, but specifically the party who held the security at the time the call notice was published. This publication-date-holder framing connects directly to FINRA Rule 11530(a)'s publication of notice of call for redemption trigger — the same publication event that causes a certificate to cease being good delivery under FINRA Rule 11530(a) is the same event that identifies, under FINRA Rule 11730, to which party the called certificate may be returned, regardless of how many subsequent transactions in that certificate may have occurred after that publication date.

The Two Exceptions: Direct Parallels to FINRA Rule 11530(a)

FINRA Rule 11730's two exceptions — except that this Rule shall not apply when an entire issue is called for redemption or when the security involved was dealt in specifically as a "called" security — are, in substance, identical to the two exceptions this dictionary examined in connection with FINRA Rule 11530(a)'s good delivery framework for called securities.

The entire-issue exception mirrors FINRA Rule 11530(a)'s except when an entire issue is called for redemption exception precisely. As this dictionary's FINRA Rule 11530 entry explained, where an entire issue has been called, every certificate of the security is now a called certificate — there is no mismatch between what a contract called for (an ordinary, uncalled certificate) and what was delivered (a called certificate), since no uncalled certificates exist. With no such mismatch, there is nothing to reclaim — a delivery of a called certificate, where the entire issue is called, is simply the only form in which the security now exists, and FINRA Rule 11730's reclamation right correspondingly does not apply.

The dealt in specifically as a "called" security exception mirrors FINRA Rule 11530(a)'s except against transactions in "called stock" or "called bonds" dealt in specifically as such exception precisely. Where the parties specifically transacted in the security as a called security — with that called status as an acknowledged term of the transaction — the buyer cannot claim the delivery was defective merely because the security was, in fact, called; the buyer specifically contracted for a called security and received exactly that.

The 1968 Origin and Pairing with FINRA Rule 11530

FINRA Rule 11730's amendment history — effective January 2, 1968, followed by SR-FINRA-2010-030 effective December 15, 2010, with no amendments in between — places its earliest recorded amendment among the earliest this dictionary has examined, sharing the January 2, 1968 effective date with FINRA Rule 11620's earliest confirmed amendment. The absence of any intervening amendment across more than four decades — paralleling the stability this dictionary observed for FINRA Rules 11330 and 11350 — suggests that FINRA Rule 11730's called-securities reclamation framework, like its FINRA Rule 11530(a) good-delivery counterpart, addresses a question whose answer has remained stable despite the many settlement-cycle, electronic-communication, and Consolidated-Rulebook changes that have driven amendments to numerous neighboring provisions throughout this dictionary's coverage.

The close textual parallel between FINRA Rule 11730's two exceptions and FINRA Rule 11530(a)'s two exceptions — examined in detail above — confirms that these two rules were designed to operate as a coordinated pair: FINRA Rule 11530(a) establishes the good-delivery-status consequence of a security having been called (ceasing to be good delivery, subject to the entire-issue and dealt-in-specifically-as-called exceptions), while FINRA Rule 11730 establishes the reclamation remedy for a delivery that violates that good-delivery standard (an unlimited-time reclamation right returning the security to the publication-date holder, subject to the identical two exceptions).

Connection to FINRA Rules 11220, 11530, 11540, and 11740

FINRA Rule 11730 connects directly and substantively to FINRA Rule 11530(a) — whose called-securities good delivery framework, including its publication of notice of call for redemption trigger and its identical entire-issue and dealt-in-specifically-as-"called" exceptions, FINRA Rule 11730 provides the reclamation-side counterpart to. It connects to FINRA Rule 11220's description of securities framework — whose requirement that confirmations or comparisons carry the information necessary to ensure that buyer and seller agree as to the details of the transaction, which this dictionary noted in connection with FINRA Rule 11530(a)'s second exception, bears equally on FINRA Rule 11730's parallel exception for securities dealt in specifically as a "called" security.

It connects to FINRA Rule 11540(b) — the other instance of an unlimited reclamation period this dictionary has encountered, both reflecting that certain categories of defect (persistent foreign-securities stoppages for FINRA Rule 11540(b); called status for FINRA Rule 11730) do not diminish with the passage of time in the way that the finite periods of FINRA Rules 11410(f), 11710(d)-(e), and 11720 presuppose for their respective categories of defect. And it connects to FINRA Rule 11740 — the final rule of the FINRA Rule 11700 subsection, addressing marking to the market, which this dictionary anticipates examining next to complete this subsection's coverage and resolve the FINRA Rule 11130(c) cross-reference discrepancy this dictionary flagged in its FINRA Rule 11700 entry.

Delivery After Publication: When the Reclamation Right Arises

FINRA Rule 11730 attaches its reclamation right to one fact: that a security was delivered after publication of notice of call for its redemption. The rule asks when the security was delivered. It does not ask when the contract was made. A contract entered into before any call can therefore lead to a reclamation under FINRA Rule 11730 if the security is delivered after the notice has been published.

Consider an example. On a Monday, Alder Securities agrees to sell Birch Capital 50 bonds of an issue in an ordinary transaction. On the Tuesday the issuer publishes notice calling some of the issue's bonds for redemption. On the Thursday Alder delivers the 50 bonds, and one of them is among those called. That bond was delivered after publication of the notice, so Birch may reclaim it under FINRA Rule 11730, even though the contract was made before any call.

Suppose instead that Alder delivered the bonds on the Monday, the day of the trade, and the notice was published on the Tuesday. That delivery was not made after publication of notice of call, so FINRA Rule 11730 gives Birch no reclamation for it, even though one of the bonds it now holds has been called.

The event that matters is publication of the notice, not the redemption itself. Suppose a notice published on 1 May calls bonds for redemption on 15 June, and a called bond is delivered on 20 May in an ordinary transaction. The bond has not yet been redeemed. It was nonetheless delivered after publication of notice of call for its redemption, so it may be reclaimed under FINRA Rule 11730. The same publication is the moment at which FINRA Rule 11530(a) says the certificate ceases to be a good delivery.

Publication makes the call public, but it does not turn every later trade into a trade in a called security. FINRA Rule 11730's second exception applies only when the security involved "was dealt in specifically as a 'called' security". Suppose that after the notice has been published, two members trade bonds of the issue in the ordinary way, with nothing in their terms about called bonds, and a called bond is delivered. The call was public when they traded, but the bonds were not dealt in specifically as called securities. The exception therefore does not apply, and the called bond may be reclaimed.

Partial Calls: Which Certificates the Rule Reaches

An issuer may call part of an issue rather than the whole of it. FINRA Rule 11730's first exception applies only "when an entire issue is called for redemption", so a call of part of an issue does not take the rule out of operation.

Where only part of an issue is called, the rule still asks about the particular security delivered. It reaches a security delivered after publication of notice of call "for its redemption". Suppose a notice calls the bonds of an issue that bear certain listed serial numbers. After the notice is published, Cedar Partners delivers two bonds of the issue to Dune Securities. One bears a listed serial number and the other does not. Dune may reclaim the called bond under FINRA Rule 11730. The other bond has not been called for its redemption, so FINRA Rule 11730 gives Dune no reclamation for it.

Accepting, Refusing and Reclaiming a Called Security

FINRA Rule 11710(a) defines "reclamation", as the term is used in the Uniform Practice Code, as a claim for the right to return or the right to demand the return of a security which has been previously accepted. FINRA Rule 11730 therefore operates after a called security has been accepted. Suppose a receiving member accepts a called bond without noticing the call and finds it weeks later. Accepting the bond has not cost it the remedy. The acceptance is what makes its claim a reclamation.

At the moment of delivery the position is different. Under FINRA Rule 11530(a), a certificate of stock or a bond ceases to be a good delivery upon publication of notice of call for redemption, subject to the same two exceptions. Suppose a receiving member sees, when a certificate is presented, that it has been called, and neither exception applies. The certificate is not a good delivery, and that is the member's ground for refusing it then and there.

Returning a Called Security: The Form and the Settlement

A called security reclaimed under FINRA Rule 11730 goes back under the general provisions of FINRA Rule 11710, like any other reclaimed security. A properly executed Uniform Reclamation Form must accompany securities on reclamation or return. Suppose Dune sends a called bond back with a covering letter that explains the call and no reclamation form. FINRA Rule 11710(b)(2) then allows the broker receiving the bond, at its option, to sell it out under FINRA Rule 11820, in no event later than three business days after the bond reaches that broker or its agent.

FINRA Rule 11710(c)(2) governs what happens once a security is returned or reclaimed. Take the simplest case. Alder held the bonds when the notice was published and delivered them directly to Birch, so Alder is both the party that held the bond at publication and the party that originally delivered it. Birch reclaims the called bond and sends it back with a properly executed form. Alder must immediately give Birch either a security in proper form for delivery, in exchange for the called bond, or the money amount of the contract.

If Alder gives back the money amount, the contract is not treated as finished. Unless the parties agree otherwise, Alder is deemed to be failing to deliver the security until it makes a proper delivery. FINRA Rule 11100(c) provides that a failure to deliver does not cancel the contract, and that the buyer's remedy is the one FINRA Rule 11810 provides.

A Called Security Received with a Draft

FINRA Rule 11410(f) requires claims about items such as price, interest, protest fees or wire charges, arising from the acceptance of draft shipments in which irregularities exist, to be presented not later than ten days after payment. The same paragraph excludes the reclamation rules from that limit, naming the range that ends with FINRA Rule 11730.

Suppose Birch accepts and pays a draft for a shipment of bonds on 2 June. On 10 September it discovers that one of the bonds had been called before it was delivered. Reclaiming that bond is a matter covered by FINRA Rule 11730, so the ten-day limit in FINRA Rule 11410(f) does not bar it.

Transactions the Rule Does Not Reach

FINRA Rule 11730 is part of the Uniform Practice Code, and it reaches only the transactions the Code reaches. Under FINRA Rule 11100(a), the Code covers over-the-counter secondary market transactions in securities between members, with listed exceptions. FINRA Rule 11730 contains no provision expanding that scope.

Transactions in municipal securities, as defined in Section 3(a)(29) of the Exchange Act, are one of the exceptions. Suppose two members trade a municipal bond, settle directly between themselves, and the bond delivered turns out to have been called before delivery. The transaction is outside the Code, so FINRA Rule 11730 does not supply a reclamation right for it.

Transactions compared, cleared or settled through the facilities of a registered clearing agency are another exception. They fall outside the Code except to the extent that the clearing agency's rules provide that the rules of other organizations shall apply. Suppose a corporate bond trade between two members is settled through a registered clearing agency whose rules make no such provision. FINRA Rule 11730 does not govern a called bond delivered on that trade.

Called Securities and Securities Deemed Worthless

FINRA Rule 11530 deals with two changes in a security's status: a call for redemption in paragraph (a), and securities deemed worthless in paragraph (b). FINRA Rule 11730 is triggered only by publication of notice of call for redemption. A public announcement that securities have been deemed worthless is a different event, and FINRA Rule 11530(b) provides its own consequences. In contracts where such an announcement has disclosed that the securities are worthless, deliveries consist of the worthless securities or a Letter of Indemnity. A delivery made that way operates to close out the contract.

Suppose a buyer receives worthless certificates, delivered under FINRA Rule 11530(b)(1) with the required documentation, and no notice of call for their redemption has ever been published. The delivery has closed out the contract. FINRA Rule 11730 plays no part, because nothing was delivered after publication of notice of call for its redemption.

Worked Scenario: Finding the Publication-Date Holder

FINRA Rule 11730 provides that a reclaimed called security may be returned to the party who held it at the time of publication of the call notice. Working out who that party was depends on the dates. On 1 March, Alder delivers a bond to Birch. On 3 March the issuer publishes notice calling that bond for redemption. Birch delivers the bond to Cedar on 8 March, and Cedar delivers it to Dune on 15 March. In October, Dune discovers the call.

On 3 March the bond was held by Birch. Alder had parted with it on 1 March, before the notice was published. Cedar did not receive it until after publication. The called bond may therefore be returned to Birch.

Common Errors with Called Securities

The errors that FINRA Rule 11730 and the rules around it expose fall into a few patterns:

Sending the called security back to the member that delivered it most recently, when the rule looks to the party that held it at the time the call notice was published.

Treating a trade made after publication as a trade in a called security merely because the call was public by then. The exception requires the security to have been dealt in specifically as a "called" security.

Reclaiming, under FINRA Rule 11730, a bond from a partially called issue that was not itself among the bonds called.

Treating the ten-day claims limit in FINRA Rule 11410(f) as applying to the reclamation of a called security received with a draft.

Returning a called security without a properly executed Uniform Reclamation Form, which exposes it to a sell-out at the receiving broker's option.

Called Shares as Well as Called Bonds

FINRA Rule 11730 speaks of "a security" delivered after publication of notice of call for its redemption. It is not confined to bonds. FINRA Rule 11530(a), the good delivery rule it works alongside, names "a certificate of stock or a bond", and its exception refers to "called stock" as well as "called bonds".

Suppose an issuer publishes notice calling part of an issue of its preferred stock for redemption. A week later Elm Securities delivers 200 shares of that issue to Fir Capital in an ordinary trade between the two members, settled directly between them, and some of the shares delivered are among those called. Those shares were delivered after publication of notice of call for their redemption, the trade was not one in called stock, and only part of the issue was called. Fir may therefore reclaim the called shares under FINRA Rule 11730, in the same way as a called bond.

An Issue Called in Stages: Which Notice Counts

An issuer may call an issue in stages, publishing a separate notice each time. FINRA Rule 11730 looks to the publication of notice of call "for its redemption", that is, the notice that calls the particular security delivered. A notice calling other securities of the same issue does not start the rule running for a security it does not call.

Suppose that on 1 April the issuer of a bond issue publishes notice calling the bonds that bear one list of serial numbers. On 1 July it publishes a second notice calling the bonds that bear another list. On 15 May Gale Securities delivers to Hart Partners, in an ordinary trade, a bond whose number is on the second list. When that bond was delivered, a notice calling part of the issue had been published, but the notice calling that bond had not. The bond was not delivered after publication of notice of call for its redemption, so FINRA Rule 11730 gives Hart no reclamation for it, even though the bond was later called on 1 July.

After a Money-Amount Return: Damages Claims Must Be Prompt

FINRA Rule 11730 sets no time limit for the reclamation itself. What follows the reclamation is governed by other rules, and those rules carry time requirements of their own. Under FINRA Rule 11710(c)(2), the party who originally delivered a returned or reclaimed security must immediately give the party returning it either the security in proper form for delivery or the money amount of the contract. If it gives the money amount, then unless otherwise agreed it is deemed to be failing to deliver the security until a proper delivery is made.

FINRA Rule 11100(c) deals with a failure to deliver between members. In every such case of nondelivery, the party in default is liable for any damages which may accrue thereby, and all claims for such damages shall be made promptly.

Suppose Alder held a bond when notice of its call was published and then delivered it directly to Birch in an ordinary trade between the two members, settled directly between them. Two years later Birch reclaims the called bond with a properly executed Uniform Reclamation Form, and Alder gives Birch the money amount of the contract. The parties agree nothing else, and Alder makes no proper delivery. Alder is deemed to be failing to deliver. If Birch suffers damages from that nondelivery, Alder is liable for them, and Birch's claim for them must be made promptly. The absence of a time limit on the reclamation does not extend to that claim.

Called Convertible Bonds Bought as Called: When the Seller Fails to Deliver

FINRA Rule 11730 deals with a called security that has been delivered on a trade in which it was not dealt in specifically as a called security. A buyer may instead want called securities and contract for them specifically as called. If the seller then fails to deliver, the question is not one of reclamation, because nothing has been delivered. FINRA Rule 11810(j) deals, among other things, with a contract in securities that have been called for redemption. Where the contract is for convertible securities or other securities which have been called for redemption, and the last day on which they must be delivered or surrendered (the expiration date) is the settlement date of the contract or later, the receiving member may deliver a Liability Notice to the delivering member as an alternative to the close-out procedures. If the delivering member fails to deliver on the expiration date, it is liable for any damages which may accrue, and a Liability Notice delivered in accordance with the rule serves as notification of a claim for those damages.

Suppose Juniper Securities contracts with Kestrel Partners to buy, specifically as called bonds, convertible bonds of an issue part of which has been called for redemption. The last day on which the called bonds must be surrendered falls after the contract's settlement date. Kestrel fails to deliver on the settlement date. Juniper has nothing to reclaim under FINRA Rule 11730. It may deliver a Liability Notice to Kestrel, in the manner and within the time FINRA Rule 11810(j) requires, as an alternative to the close-out procedures, and if Kestrel fails to deliver on the expiration date, Kestrel is liable for any damages which may accrue.

Examination Relevance and Key Takeaways

FINRA Rule 11730 is tested on the Series 7 and Series 24 examinations as the reclamation framework for called securities — the direct reclamation-side counterpart to FINRA Rule 11530(a)'s good delivery framework, sharing that rule's two exceptions and establishing the second unlimited reclamation period this dictionary has encountered alongside FINRA Rule 11540(b).

The key points to retain are these: FINRA Rule 11730 provides that reclamation for a security delivered after publication of notice of call for its redemption may be made without limit of time, with such security returned to the party who held it at the time of that publication — not necessarily the immediately preceding party in any subsequent chain of transactions; the rule's two exceptions — entire issue called for redemption, or the security dealt in specifically as a "called" security — directly mirror FINRA Rule 11530(a)'s two exceptions to that rule's good-delivery disqualification for called securities, confirming the two rules operate as a coordinated good-delivery-and-reclamation pair; FINRA Rule 11730's unlimited reclamation period parallels FINRA Rule 11540(b)'s unlimited period for persistent foreign-securities stoppages, both reflecting categories of defect that do not diminish with time; and the rule was amended effective January 2, 1968, and by SR-FINRA-2010-030 effective December 15, 2010 — no amendments since — with one selected notice, 10-49.