Rule G-26. (a)
Definitions. For purposes of this rule, the following terms
have the following meanings:
(i) The term "delayed delivery asset" means an
asset subject to a delayed delivery and includes when-issued
securities.
(ii) The term "in-transfer asset" means an asset
which has been submitted to the registrar or transfer agent
for transfer and shipment to the customer at the time the
transfer instruction is received by the carrying party.
(iii) The term “nontransferable asset” means an asset that
is incapable of being transferred from the carrying party
to the receiving party because (A) it is an issue in default
for which the carrying party does not possess the proper denominations
to effect delivery and no transfer agent is available to re-register
the securities, or (B) it is a municipal fund security which
the issuer requires to be held in an account carried by one
or more specified brokers, dealers or municipal securities
dealers that does not include the receiving party.
(b) Responsibility to Expedite Customer’s Request.
When a customer whose municipal securities account is carried
by a broker, dealer or municipal securities dealer (the "carrying
party") wishes to transfer its entire account to another
broker, dealer or municipal securities dealer (the "receiving
party") and gives written notice of that fact to the receiving
party, the receiving party and the carrying party must expedite
and coordinate activities with respect to the transfer as follows.
(c) Transfer Instructions.
(i) Parties may use Form G-26, the transfer instruction prescribed
by the Board, or the transfer instructions required by a clearing
agency registered with the Securities and Exchange Commission
in connection with its automated customer account transfer
system, or transfer instructions that are substantially similar
to those required by such clearing agency, when accomplishing
account transfers pursuant to this rule.
(ii) If an account
includes any nontransferable assets, the carrying party must
request, in writing and prior to or at the time of validation
of the transfer instruction, further instructions from the
customer with respect to the disposition of such assets. Such
request shall provide the customer with the following alternative
methods of disposition of nontransferable assets, if applicable:
(A) liquidation, with a specific indication of any redemption
or other liquidation-related fees that may result from
such liquidation and that those fees may be deducted from
the money balance due the customer; or
(B) retention by the carrying party for the customer’s
benefit; or
(C) in the case of a nontransferable asset described
in section (a)(iii)(B), transfer to another broker, dealer
or municipal securities dealer, if any, which the issuer
has specified as being permitted to carry such asset.
(d) Transfer Procedures.
(i) Upon receipt from the customer of a signed transfer instruction
to receive such customer's securities account from the carrying
party, the receiving party must immediately submit such instruction
to the carrying party. The carrying party must, within three
business days following receipt of such instruction, validate
and return the transfer instruction to the receiving party
(with an attachment reflecting all positions and money balances
as shown on its books) or take exception to the transfer instruction
for reasons other than securities positions or money balance
differences and advise the receiving party of the exception
taken.
(ii) A carrying party may take exception to a transfer instruction
only if:
(A) it has no record of the account on its books;
(B) the transfer instruction is incomplete; or
(C) the transfer instruction contains an improper signature.
(iii) The carrying party and the receiving party must promptly
resolve any exceptions taken to the transfer instruction.
(iv) Upon validation of a transfer instruction, the carrying
party must:
(A) "freeze" the account to be transferred,
i.e., all open orders must be cancelled and no new orders
may be taken; and
(B) return the transfer instruction to the receiving party
with an attachment indicating all securities positions and
any money balance in the account as shown on the books of
the carrying party. Except as hereinafter provided, the
attachment must include a then-current market value for
all assets in the account. However, delayed delivery assets,
nontransferable assets, and assets in-transfer to the customer,
need not be valued, although the "delayed delivery,"
"nontransferable," or "in-transfer"
status of such assets, respectively, must be indicated on
the attachment. A carrying party must provide the description
set forth in rule G-12(c)(v)(E) with respect to any municipal
security that has not been assigned a CUSIP number in an
account it is to transfer.
(v) Within four business days following the validation of
a transfer instruction, the carrying party must complete the
transfer of the account to the receiving party. The receiving
party and the carrying party must immediately establish fail-to-receive
and fail-to-deliver contracts at the then-current market value
as of the date of validation upon their respective books of
account against the long/short positions in the customer’s
accounts that have not been physically delivered/received
and the receiving party/carrying party must debit/credit the
related money amount. Nontransferable assets and assets in-transfer
to the customer are exempt from the requirement that fail-to-receive
and fail-to-deliver contracts must be established for positions
in a customer’s securities account that have not been
physically delivered. Zero value fail-to-receive and fail-to-deliver
instructions shall be established for delayed delivery assets.
The customer's account(s) shall thereupon be deemed transferred.
(vi) To the extent any assets in the account are not readily
transferable, with or without penalties, such assets are not
subject to the time frames required by the rule; and if the
customer has authorized liquidation of any nontransferable
assets, the carrying member must distribute the resulting
money balance to the customer within five business days following
receipt of the customer’s disposition instructions.
(e) Fail Contracts Established. Any fail contracts resulting
from this account transfer procedure must be closed out in accordance
with rule G-12(h).
(f) Prompt Resolution of Discrepancies. Any discrepancies
relating to positions or money balances that exist or occur after
transfer of a customer's securities account must be resolved promptly.
(g) Exemptions. The Board may exempt from the provisions
of this rule, either unconditionally or on specified terms and
conditions, any dealer or any type of account, security or municipal
security.
(h) Participant in a Registered Clearing Agency. When
both the carrying party and the receiving party are direct participants
in a clearing agency registered with the Securities and Exchange
Commission offering automated customer securities account transfer
capabilities, the account transfer procedure, including the establishing
and closing out of fail contracts, must be accomplished pursuant
to the rules of and through such registered clearing agency.
(i) Forwarding of Copy of Form G-26 to Enforcement Authority
on Request. The carrying party shall forward a copy of each
customer account transfer instruction issued pursuant to paragraph
(c)(i) to the enforcement authority having jurisdiction over the
carrying party member, at the request of such authority.
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