2.1.4.6 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:
- • Mutilated or irregular certificate
- • Improper assignment
- • Counterfeit or stolen security
- • 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 r