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Rule 10a-2 -- Requirements for Covering Purchases
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No broker or dealer shall lend, or arrange for the loan of, any security registered on, or admitted to unlisted trading privileges on, a national securities exchange for delivery to the broker for the purchaser after sale, or shall fail to deliver a security on the date delivery is due, if such broker or dealer knows or has reasonable grounds to believe that the sale was effected, or will be effected, pursuant to an order marked "long," unless such broker or dealer knows, or has been informed by the seller


that the security sold has been forwarded to the account for which the sale was effected, or


that the seller owns the security sold, that it is then impracticable to deliver to such account the security owned and that he will deliver such security to such account as soon as it is possible without undue inconvenience or expense.


The provisions of paragraph (a) of this section shall not apply


to the lending of a security registered on, or admitted to unlisted trading privileges on, a national securities exchange by a broker or dealer through the medium of a loan to another broker or dealer, or


to any loan, or arrangement for the loan, of any such security, or to any failure to deliver any such security if, prior to such loan, arrangement or failure to deliver, a national securities exchange, in the case of a sale effected thereon, or a national securities association, in the case of a sale not effected on an exchange, finds


that such sale resulted from a mistake made in good faith,


that due diligence was used to ascertain that the circumstances specified in Rule 10a-1(d)(1) existed or to obtain the information specified in clause (2) thereof, and


either that the condition of the market at the time the mistake was discovered was such that undue hardship would result from covering the transaction by a "purchase for cash" or that the mistake was made by the seller's broker and the sale was at a price permissible for a short sale under Rule 10a-1 (a) or (b).

http://www.law.uc.edu/CCL/34ActRls/rule10a-2.html