Rejections and Reclamations
A buyer may reject delivery from a seller if the securities are not in good delivery form. Legitimate reasons for rejections may include the following:
- • The certificate was mutilated or had imperfections.
- • The security was not properly assigned.
- • Delivery was not made in proper denominations.
However, delivery cannot be rejected because of a deterioration in the market. Rejection of delivery can also never occur as a result of a company going bankrupt, suffering a reduced credit rating, or defaulting on a loan.
A buyer also has the right to demand the return of an already delivered security for many of the same reasons: a mutilated or irregular certificate, an improper assignment, a counterfeit or stolen security, rejection by the transfer agent. This right is called reclamation, and under it, 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 must be accompanied by a Uniform Reclamation Form. If this form is not attached, the receiver of the returned security has the option of selli