I think this might be untested waters IMO...after reading what FINRA has to say on the matter.
I am tucking my shares away in my pillowcase....just for safe keeping
3. Proposed FINRA Rules 11810 (Buying-In) and 11810.03 (Sample Buy-In Forms) As approved by this filing, the current NASD Rule 11810 (Buying-In) will be adopted as FINRA Rule 11810 (Buy-In Procedures and Requirements) in the Consolidated FINRA Rulebook with certain clarifications and changes. Incorporated NYSE Rules 282 (Buy-in Procedures) and related Supplementary Material paragraphs .10-.80 be deleted. The changes are intended to harmonize the differences between the NYSE rule and the NASD rule and to update certain procedures and time frames. FINRA will also adopt NASD IM-11810, which contains the sample buy-in forms, into the Consolidated FINRA Rulebook as accompanying Supplementary Material .03 to FINRA Rule 11810 with minor changes to replace references to NASD with FINRA.Show citation box As approved, FINRA Rule 11810 will continue to set forth the required steps that members must follow to effect the “buy-in” of securities including the procedures to be followed in issuing a “buy-in” notice, the contents of such notice, the expectations of the receiving party to respond to such notice, and the time frames in which a “buy-in” may be issued, retransmitted, and effected.Show citation box FINRA will also make certain minor clarifications and add the following more substantive provisions to proposed FINRA Rule 11810, which are currently contained in NYSE Rule 282 either with or without modifications, as specified:Show citation box a. Include in paragraph (a) a statement clarifying that the rule does not apply to, among other things, securities contracts that are subject to the requirements of a national securities exchange or a registered clearing agency.Show citation box b. Amend certain time frames for action specified in the proposed rule:Show citation box i. Clarify the time frames within which members must take action to effect the “buy-in” of securities as required therein. Specifically, the NASD rule requires that a member act within the specified local time at the member's location whereas the NYSE rule requires action to be taken based on Eastern Time (ET). To promote operational consistency among members, the proposal would amend the required time frame for action to be ET.Show citation box ii. Amend the current time frames specified by the NASD and NYSE rules for the acknowledgement of a “buy-in” notice and the notification of an execution of the buy-in from 5 p.m. to 6 p.m. ET. FINRA understands that the 5 p.m. time may be operationally difficult for members to achieve in some cases and the 6 p.m. ET time frame would be more operationally feasible.Show citation box iii. Add Supplementary Material .01 (Early Closure of Markets) to clarify that in the event of an announced early closure of the market upon which the security subject to the “buy-in” notice is traded, members may take the action required by the rule not earlier than one hour prior to the announced early closure of such market.Show citation box c. Add new paragraph (b)(4) to specify that (1) the buyer must maintain as part of its records, confirmation of receipt of the notice by the seller and (2) if the seller does not accept the notice of “buy-in,” it must reject it by response to the buyer no later than 6 p.m. ET on the same date that it receives such notice, and in the absence of doing so, the seller will have been deemed by the buyer to have accepted such notice. The provision would clarify that the seller, in such case, would have the right to request proof of the fail obligation from the buyer, which the buyer must deliver to the seller prior to the effective date of the “buy-in.” However, in no event would a buyer be entitled to a “buy-in” that exceeds the liability of a seller under an unsettled securities contract because of the failure of the seller to reject a “buy-in” notice as provided in the rule, and a buyer may not execute a “buy-in” notice to such extent the buyer fails to deliver the proof of fail obligation in accordance with the requirements of the rule. Requirements (1) and (2) described above are contained in the current NYSE rule in a similar form except FINRA will change the time to 6 p.m. ET. FINRA is also adding new provisions regarding “passive acceptance” of the “buy-in” by the seller as described above, subject to certain safeguards for the benefit of the seller such as requiring the buyer to provide the proof of fail obligation and “buying-in” the seller only for the securities contract amount in accordance with the proposed rule.Show citation box d. Add new paragraph (b)(5) to specify that the receiving party shall immediately retransmit a notice of “buy-in” to other parties from which the securities may be due in the form of a retransmitted “buy-in” notice. Consistent with new paragraph (b)(4) described above, the provision would clarify that each party receiving a retransmitted “buy-in” notice will be required to maintain confirmation of receipt of the notice as part of its books and records and either reject a retransmitted “buy-in” notice that it has received by 6 p.m. ET on the date such notice is received or be deemed to have accepted the notice (“passive acceptance”). The safeguards described above in proposed paragraph (b)(4) would also apply to sellers receiving a retransmitted notice.Show citation box e. Add new paragraph (b)(6), which is contained in the NYSE rule, to clarify that when a notice of “buy-in” or a retransmitted notice thereof is given for less than the full amount of securities due, it shall not be for less than one trading unit.Show citation box f. Amend paragraph (d) as follows:Show citation box i. Retitle proposed paragraph (d) from the current rule title “Seller's Failure to Deliver After Receipt of Notice” to “Procedures for Closing of Contracts” to better align the title with the content of that paragraph.Show citation box ii. Amend the time frames, as discussed generally above, to generally require the party receiving the “buy-in” notice to deliver the securities to the party issuing the notice by 3 p.m. ET on the effective date of the “buy-in” notice.Show citation box iii. Add language to clarify that if the buyer/issuing party prior to executing the “buy-in” is notified by the seller/delivering party that some or all of the securities are in the seller's physical possession and will be delivered to the issuing party then the order to “buy-in” shall not be executed with respect to such securities, and the member that initiated the original order to “buy-in” shall accept and pay for such securities. However, if such securities are not promptly delivered, the seller that represented that it would make such delivery shall be liable for any resulting damages.Show citation box iv. Add language contained in the NYSE rule to clarify the operation of the rule when a retransmitted buy-in notice is sent to the defaulting party but is not received by such party prior to the delivery of shares or the execution of the “buy-in.” In such case, the sender of the buy-in notice may unless otherwise agreed promptly reestablish by a new sale the contract subject to the notice of “buy-in.”Show citation box g. Amend paragraph (h) as follows:Show citation box i. Amend the time frame, as discussed above, for notice to be made to the party for whose account the securities were bought to 6 p.m. ET on the date of execution of the “buy-in.”Show citation box ii. Add new language, not contained in either legacy rule, to clarify that the confirmation of the executed “buy-in” provided for by the rule shall be forwarded to the party entitled to the confirmation by no later than 9:30 a.m. ET on the following business day after the execution of the “buy-in.”Show citation box iii. Add a provision contained in the NYSE rule that requires that a statement of any resulting money differences from the execution of the “buy-in” be provided immediately and that such money differences shall be paid by no later than 3 p.m. ET on the business day after the settlement date of the executed “buy-in.”Show citation box h. Amend paragraph (i) to clarify, as provided in the NYSE rule, that notification of all close-outs as provided by the paragraph shall be sent immediately to the member being closed-out pursuant to the confirmation provisions of the Rule 11200 Series at least thirty minutes before such “close-out.”Show citation box i. Add Supplementary Material .02 to clarify, as provided in the NYSE rule, that where securities have been delivered by the seller after the “buy-in” order has been placed but not executed, such securities may be returned to the seller if the “buy-in” was executed in accordance with the rule before it could reasonably be cancelled by the initiating party.Show citation box
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