Rejections and Reclamations
A buyer is permitted to reject delivery from a seller if the securities are not in good delivery form. Similarly, a seller has the right to reclaim securities that have been delivered and accepted. A buyer also has the right to demand the return of a previously accepted delivery.
Legitimate reasons for rejections may include the following:
- • The certificate was mutilated or had imperfections
- • Delivery was made prior to the settlement date
- • The security was not properly assigned
- • Delivery was not made in proper denominations
Delivery cannot be rejected because of a deterioration in the market or because a company has gone bankrupt, suffered a reduced credit rating, or defaulted on a loan.
The return of an already delivered security is called a reclamation, and it may be reclaimed for these reasons:
- • A mutilated or irregular certificate
- • An improper assignment
- • A counterfeit or stolen security
- • A rejection by the issuer’s transfer agent
If a seller receives a returned security, the seller must provide the buyer with a certificate in good form or return the buyer’s money.
All reclamations and rejections must be accompanied by a Uniform Reclamation Form stating the reason for the rejection. If this form is not attached, the receiver of the returned security has the option of “selling out” the security no later than three days after receipt of return (discussed