2.2.4 Close-Out by Seller: Sell-Out Procedures
Sometimes a seller makes a good delivery but the buying firm rejects the transaction, either because it can’t pay for it or because it doesn’t believe it was a good delivery. In such a case, the seller (delivering party) has the option to close out the transaction.
If the buyer refuses to accept delivery in accordance with the terms of the contract, it must attach a Uniform Reclamation Form with the security’s return. This form formally identifies the reason or reasons for the rejection. Without this attachment, the seller may, without notice, “sell out” all or any part of the securities in the best available market. The buyer will be responsible for any difference between the original selling price and the new price.
The seller must send, by 6:00 p.m. ET on the day the close-out is executed, a written, electronic notice detailing the quantity sold and the price received. A formal confirmation of the sale must be forwarded as soon as possible after the execution of the sell-out.
FINRA Rule 11820
Note: Buyers conduct “buy-ins,” whereas sellers conduct “sell-outs.”
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