FINRA Rule 11720

Paragraph (a), Irregular Delivery, establishes the 30-month-after-settlement-date reclamation period for irregularities in delivery, with a non-exhaustive definition of irregular delivery including wrong, duplicate, misdirected, or over-deliveries and unit investment trust securities delivered with the incorrect payment option.

Paragraph (b), Transfer Refused, establishes the same 30-month period for reclamations based on a transfer agent's refusal to transfer a specific tendered certificate. 

Paragraph (c), Lost or Stolen or Confiscated Securities, establishes the same 30-month period for reclamations based on a security being lost, stolen, or confiscated. 

Paragraph (d), Running of 30 Month Period, confirms that the running of this 30-month period does not foreclose a member's rights to pursue its claim via other open avenues, including but not limited to the FINRA arbitration procedure. 

FINRA Rule 11720 was amended by both SR-FINRA-2010-060 and SR-FINRA-2010-030, both effective December 15, 2010, by SR-NASD-91-13 effective November 1, 1991, and effective January 2, 1968, September 1, 1971, April 1, 1974, March 18, 1983, and September 11, 1991. Two selected notices are associated — 83-69 and 10-49.

FINRA Rule 11720 sits within the 11700 Reclamations and Rejections subsection of the 11000 Uniform Practice Code, immediately following FINRA Rule 11710's general provisions and immediately preceding FINRA Rule 11721's framework for members who discover securities to which they are not entitled.

FINRA Rule 11720(a): Irregular Delivery and Its Non-Exhaustive Definition

FINRA Rule 11720(a) establishes both the 30-month reclamation period and the operative definition of irregular delivery for purposes of that period — reclamation, by reason of the fact of an irregularity in the delivery of a security, shall be within 30 months after the settlement date of the contract. For purposes of this paragraph (a), the term "irregular delivery" shall include, among other things, wrong, duplicate, misdirected or over-deliveries and delivery of unit investment trust securities having the incorrect payment option.

The 30-month-after-settlement-date period stands in marked contrast to the much shorter periods this dictionary has examined elsewhere — FINRA Rule 11410(f)'s ten-day claims deadline for draft-shipment irregularities, and FINRA Rule 11710(d) and (e)'s 15-day (45-day for foreign securities) reclamation periods for minor irregularities and wrong-form certificates. This contrast reflects a meaningful distinction in the categories of defect each period addresses — FINRA Rule 11710(d)'s minor irregularities affecting only the currency of the security in the market, and FINRA Rule 11710(e)'s freely-exchangeable wrong-form certificates, represent relatively readily-identifiable defects that a receiving party would typically discover promptly upon receipt. The categories FINRA Rule 11720(a) addresses — wrong, duplicate, misdirected, or over-deliveries, and unit investment trust securities with the incorrect payment option — may, by their nature, take considerably longer to surface. A duplicate delivery, for example, might not be discovered until some subsequent reconciliation process identifies that the same security was delivered twice; an incorrect payment option on a unit investment trust security, connecting to FINRA Rule 11220's specific requirement that comparisons and confirmations for UIT securities include payment options, might not become apparent until a distribution is actually paid under the incorrect option's terms, potentially well after the original delivery.

The among other things formulation confirms that this definition is illustrative rather than exhaustive — the four enumerated categories (wrong, duplicate, misdirected, over-deliveries) plus the UIT incorrect-payment-option category represent examples of irregular delivery, not a closed list, leaving room for other categories of delivery irregularity not specifically enumerated to fall within paragraph (a)'s 30-month reclamation period as well.

FINRA Rule 11720(b): Transfer Refused — The Specific-Certificate Predicate

FINRA Rule 11720(b) establishes the same 30-month period for a distinct category this dictionary's FINRA Rule 11700 entry anticipated — reclamation, by reason of the fact that a specific certificate tendered in settlement of a contract has been presented for transfer and transfer thereof has been refused by the transfer agent, shall be within 30 months after the settlement date of the contract.

This provision confirms the scenario this dictionary's FINRA Rule 11700 entry anticipated — a security delivered with what appeared to be proper assignment and transfer documentation under FINRA Rule 11550's framework, but where the transfer agent subsequently refuses to process the transfer. The specific certificate language is notable — paragraph (b)'s reclamation right attaches to the specific certificate tendered in settlement, confirming that the transfer-refused reclamation is tied to the particular physical or identified instrument that was actually delivered, not merely to some general entitlement to a security of the relevant type.

The 30-month period for transfer-refused reclamations makes considerable sense given how a transfer agent's refusal typically comes to light — the receiving party accepts the certificate (which, on its face, appeared to bear proper assignment documentation satisfying FINRA Rule 11550's requirements), and only discovers the refusal when it subsequently presents that certificate to the transfer agent for transfer into its own name or a customer's name — a step that may not occur immediately upon receipt, and that depends on the transfer agent's own processing timeline once presentation occurs. A 30-month window accommodates this potentially extended discovery timeline.

FINRA Rule 11720(c): Lost or Stolen or Confiscated Securities

FINRA Rule 11720(c) establishes the same 30-month period for the third category — reclamation, by reason of the fact that a security is lost or stolen or confiscated shall be within 30 months after the settlement date of the contract.

This provision connects to the governmental restriction framework this dictionary examined in connection with FINRA Rule 11540(b)'s black-list and blocked-list stoppage provisions for foreign securities, and more generally to the title-defect concerns that pervade the good delivery framework this dictionary has traced throughout FINRA Rules 11510 through 11650. A security reported as lost or stolen presents a fundamental title defect — the security delivered may not, in fact, belong to whoever purported to deliver it, since it represents property that has been lost by or stolen from its rightful owner. Confiscated adds a further category — a security that has been seized by some governmental or other authority, again presenting a fundamental defect in the delivering party's ability to convey good title.

Like transfer-refused reclamations under paragraph (b), lost-or-stolen-or-confiscated reclamations under paragraph (c) typically come to light only when the receiving party attempts some subsequent action with respect to the security — presenting it for transfer (paralleling paragraph (b)'s scenario), attempting to sell or otherwise deal with it, or receiving notice from some external source (law enforcement, the issuer, or a prior owner) that the specific security has been reported lost, stolen, or confiscated. The 30-month period accommodates this same kind of potentially-delayed-discovery dynamic.

The notable contrast with FINRA Rule 11540(b) deserves mention — recall that FINRA Rule 11540(b) established an unlimited reclamation period (without limit of time) for foreign securities certificates subject to a black list, blocked list, or similar stoppage from which an innocent holder in due course cannot obtain removal by simple request. FINRA Rule 11720(c)'s lost-or-stolen-or-confiscated category, by contrast, is subject to the same 30-month period as paragraphs (a) and (b) — a finite, if substantial, window. This distinction may reflect the different character of the two categories: FINRA Rule 11540(b)'s category involves a persistent governmental stoppage that, by definition, even an innocent holder cannot resolve through simple request — a defect that may remain unresolved indefinitely, justifying an unlimited reclamation period. FINRA Rule 11720(c)'s lost-or-stolen-or-confiscated category, while serious, may be more readily resolvable through ordinary processes (replacement procedures for lost or stolen certificates, for example) once discovered, such that a finite 30-month period — substantially longer than the shorter periods FINRA Rule 11710(d) and (e) establish for more readily-discoverable defects, but not unlimited — represents an appropriate balance.

FINRA Rule 11720(d): The Non-Foreclosure of Other Remedial Avenues, Including FINRA Arbitration

FINRA Rule 11720(d) establishes an important clarification regarding the 30-month period's effect — the running of the 30-month period described in this Rule 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.

This provision confirms that the 30-month period FINRA Rule 11720 establishes operates specifically within the reclamation framework FINRA Rule 11710 and FINRA Rule 11720 together establish — it is not, by its own terms, a general statute-of-limitations-style bar on a member's ability to pursue a claim arising from the underlying irregularity, transfer refusal, or lost-stolen-confiscated security through other means. Once the 30-month period for reclamation under this specific Uniform Practice Code framework has run, a member is not thereby precluded from pursuing whatever claim it may have through other open avenues — with FINRA arbitration specifically identified as one such avenue, consistent with FINRA's broader dispute resolution framework referenced throughout FINRA's rulebook for industry disputes between members.

This non-foreclosure clarification serves an important functional purpose — it confirms that FINRA Rule 11720's 30-month period is a procedural framework specific to the Uniform Practice Code's reclamation mechanism (with its associated documentary requirements under FINRA Rule 11710(b)'s Uniform Reclamation Form, and its settlement mechanics under FINRA Rule 11710(c)), rather than an independent extinguishment of whatever underlying substantive rights a member might have regarding a delivery irregularity, transfer refusal, or lost-stolen-confiscated security. A member whose 30-month reclamation window has closed retains whatever other rights and remedies — including, but not limited to, FINRA arbitration — might otherwise be available to address the underlying issue.

The Amendment History: A Long and Active History Reflecting the Categories' Significance

FINRA Rule 11720's amendment history — effective January 2, 1968, September 1, 1971, April 1, 1974, March 18, 1983, and September 11, 1991, amended by SR-NASD-91-13 effective November 1, 1991, and amended by both SR-FINRA-2010-060 and SR-FINRA-2010-030 effective December 15, 2010 — represents one of the more extensive amendment histories this dictionary has encountered, spanning eight distinct effective dates across more than four decades.

The January 2, 1968 origin places FINRA Rule 11720 among the earliest provisions this dictionary has examined, alongside FINRA Rules 11110, 11361, 11362, and 11410's 1968-era origins. The September 1, 1971 and April 1, 1974 amendments fall within the broader early-1970s period that produced the 1971 Four Uniform Forms this dictionary has traced through FINRA Rules 11210, 11360, 11550, and 11710. The March 18, 1983 amendment connects to the broader 1983 amendment wave reflected in Notice to Members 83-69, which this dictionary has encountered in connection with FINRA Rules 11100, 11140, and 11363. And the closely-spaced September 11, 1991 and SR-NASD-91-13 (effective November 1, 1991) amendments mirror the pattern this dictionary observed for FINRA Rule 11571, which similarly showed both a September 11, 1991 effective date and an SR-NASD-91-13 effective November 1, 1991 amendment within a span of less than two months.

This extensive amendment history — spanning essentially every major amendment wave this dictionary has identified throughout its coverage of the Uniform Practice Code — suggests that the categories FINRA Rule 11720 addresses (irregular delivery, transfer refused, and lost, stolen, or confiscated securities) represent persistently significant concerns that have warranted periodic refinement across the Uniform Practice Code's entire modern history, from its 1968-era origins through the 2010 Consolidated Rulebook transfer.

Connection to FINRA Rules 11100, 11220, 11363, 11410, 11540, 11550, 11571, 11700, 11710, and 11721

FINRA Rule 11720 connects to FINRA Rule 11100, FINRA Rule 11140, and FINRA Rule 11363 — sharing Notice to Members 83-69 as a common selected notice from the broader 1983 amendment wave. It connects to FINRA Rule 11220 — whose specific requirement that UIT comparisons and confirmations include payment options is the documentary predicate against which FINRA Rule 11720(a)'s incorrect-payment-option irregular delivery category is measured. It connects to FINRA Rule 11410(f) and FINRA Rule 11710(d) and (e) — as points of contrast in reclamation-period length, with FINRA Rule 11720's uniform 30-month period substantially exceeding the ten-day, 15-day, and 45-day periods those provisions establish for more readily-discoverable categories of defect. It connects to FINRA Rule 11540(b) — as a point of contrast for FINRA Rule 11720(c)'s lost-or-stolen-or-confiscated category, which receives a finite 30-month period rather than FINRA Rule 11540(b)'s unlimited reclamation period for the more persistent foreign-securities-stoppage category. It connects to FINRA Rule 11550 — whose assignment and transfer framework underlies the scenario FINRA Rule 11720(b)'s transfer-refused category addresses. It connects to FINRA Rule 11571 — sharing the closely-spaced September 11, 1991 and SR-NASD-91-13 November 1, 1991 amendment dates. It connects to FINRA Rule 11700 as its parent series marker. It connects directly to FINRA Rule 11710 — whose paragraph (a) rejection definition explicitly extends to FINRA Rule 11720 as well, and whose general reclamation framework (including the Uniform Reclamation Form requirement) provides the procedural context within which FINRA Rule 11720's 30-month periods operate. And it connects to FINRA Rule 11721 — the next rule in the FINRA Rule 11700 subsection, addressing the affirmative obligations of members who discover securities to which they are not entitled, a category this dictionary anticipates may interact with FINRA Rule 11720's lost-or-stolen-or-confiscated category from the discovering-member's perspective.

Examination Relevance and Key Takeaways

FINRA Rule 11720 is tested on the Series 7 and Series 24 examinations as the uniform 30-month reclamation period for irregular delivery, transfer refused, and lost, stolen, or confiscated securities — a substantially longer period than the shorter reclamation windows FINRA Rule 11710 establishes for more readily-discoverable defects, reflecting the potentially delayed discovery these categories present.

The key points to retain are these: FINRA Rule 11720(a) establishes a 30-month-after-settlement-date reclamation period for irregular delivery, non-exhaustively defined to include wrong, duplicate, misdirected, or over-deliveries and unit investment trust securities delivered with the incorrect payment option; FINRA Rule 11720(b) establishes the same 30-month period for reclamations based on a transfer agent's refusal to transfer a specific certificate tendered in settlement; FINRA Rule 11720(c) establishes the same 30-month period for reclamations based on a security being lost, stolen, or confiscated — a finite period, in contrast to FINRA Rule 11540(b)'s unlimited reclamation period for the more persistent foreign-securities-stoppage category; FINRA Rule 11720(d) confirms that the running of this 30-month period does not foreclose a member's rights to pursue its claim via other open avenues, including but not limited to FINRA arbitration — confirming the 30-month period operates within the Uniform Practice Code's reclamation framework specifically, without extinguishing other substantive remedies; and the rule has an extensive amendment history spanning effective dates of January 2, 1968, September 1, 1971, April 1, 1974, March 18, 1983, and September 11, 1991, SR-NASD-91-13 effective November 1, 1991, and both SR-FINRA-2010-060 and SR-FINRA-2010-030 effective December 15, 2010, with two selected notices — 83-69 and 10-49.