11130. When, As and If Issued/Distributed Contracts
(a) Confirmations or Comparisons
(1) Each party to the transaction shall send a written "when, as and if issued" or "when as and if distributed" confirmation or comparison in the same form as set forth in the Sample Form appearing in Supplementary Material .01 of this Rule and pursuant to the requirements of Rules 11210(a), 11220, and 11860.
(2) Each confirmation or comparison covering a contract in a "when, as and if issued" or "when, as and if distributed" security shall, at a minimum, contain:
(A) an adequate description of the security and the plan, if any, under which the security is proposed to be issued or distributed;
(B) designation of FINRA as the authority which shall rule upon the performance of the contract; and
(C) provision for marking the contract to the market.
(3) The Committee will furnish, upon written request, an adequate description of any particular issue of securities and of the plan under which the securities are proposed to be issued for the purpose of inclusion in all contracts or confirmations covering transactions on a "when, as and if issued" or "when, as and if distributed" basis in the particular securities.
(b) Accrued Interest
(1) Unless the parties agree otherwise, "when, as and if issued" or "when, as and if distributed" transactions between members in fixed obligations of new or reorganized companies shall be "and accrued interest" to date of settlement. Interest shall be computed on the basis of the expired portion of the coupon current at the time of settlement, and all due and past due coupons shall be detached.
(2) "When, as and if issued" or "when, as and if distributed" transactions between members in income or contingent interest securities of such companies shall be traded "flat" and shall carry all payments that may be made or declared in connection with such new securities from the effective date of the plan; except that, if any payment is made or declared directly or indirectly in connection with such securities, prior to the settlement date, transactions made on and after the "ex" date for such payment shall carry only payments made or declared in connection with such securities from such "ex" date.
(3) Securities of such companies which bear a fixed rate of interest, plus contingent additional payment, are to be traded "and accrued interest" at the rate of the fixed interest, and traded "flat" in respect to the contingent payments.
(c) Marks to the Market
In case of "when, as and if issued" or "when, as and if distributed" contracts, the time of issuance or distribution of the securities is indefinite and may be long delayed. Therefore, such contracts should be marked to the market pursuant to the provisions of Rule 11730.
(d) Contracts on Margin
All "when, as and if issued" or "when, as and if distributed" contracts shall be in compliance with Sections 220.4 and 220.5 of Regulation T of the Board of Governors of the Federal Reserve System.
(e) Request for Deposits
A member may require a customer to deposit cash or collateral to secure a "when, as and if issued" or "when, as and if distributed" contract even though Section 220.8(b)(1) of Regulation T of the Board of Governors of the Federal Reserve System may not require such deposit.
(f) Segregation of Funds
(1) Deposits against "when, as and if issued" or "when, as and if distributed" transactions should be segregated on the books of the member in order to present a true picture of the member's position and its commitment in transactions of this kind. It may be appropriate to segregate such deposits from the member's general cash balances by depositing them in a bank other than those containing the general deposits, loans or other obligations of the member. Whether or not such physical segregation is made, no member should permit any part of deposits against "when, as and if issued" or "when, as and if distributed" contracts to be used for any purpose whatsoever other than to secure such contracts.
(2) As a minimum, every member doing business in "when, as and if issued " or "when, as and if distributed" securities shall ensure that the sum of the cash balances and any deposits with banks, clearing houses, or other brokers against "when, as and if issued" or "when, as and if distributed" contracts always exceeds the aggregates of all free credits and deposits against "when, as and if issued" or "when, as and if distributed" contracts by an amount fully ample to conduct its business without employing any part of such deposits.
(g) Settlement of Contracts
(1) A date for the settlement of "when, as and if issued" and "when, as and if distributed" contracts shall be determined by the Committee when a sufficient percentage of the issue is outstanding.
(2) In connection with a transaction in a security "when, as and if issued," delivery shall be made at the office of the purchaser on the date declared by the Committee; except that if no delivery date shall be declared by the Committee:
(A) delivery may be made by the seller on the business day following the day upon which the seller has delivered at the office of the purchaser written notice of intention to deliver, and
(B) open market "when, as and if issued" contracts in securities currently being publicly offered through a syndicate or selling group shall be settled on the date such syndicate or selling group contracts are settled; provided, however, delivery of securities in accordance with this subparagraph shall be made during the normal delivery hours in the community where the buyer is located.
(3) In connection with a transaction in a security "when, as and if distributed," delivery shall be made at the office of the purchaser on the date declared by the Committee; except that if no delivery date shall be declared by the Committee, delivery may be made by the seller on the business day following the day upon which the seller has delivered at the office of the purchaser written notice of intention to deliver.
(h) Cancellation of Contracts
(1) Pursuant to Rule 11110, the Committee may cancel or terminate "when, as and if issued" and "when, as and if distributed" contracts as necessary to resolve conflicts over the settlement of such contracts.
(2) Contracts will be canceled if the securities are not to be issued or distributed.
(3) Contracts will generally be canceled if the securities which are to be issued or distributed are not substantially the same as those contemplated in the contract. Material changes which will generally result in cancellation include, but are not limited to, changes to the redemption schedule, dividend payments, interest rates, maturity, yield, and exercise price.
(4) Notwithstanding paragraph (h)(3) of this Rule, contracts will not generally be canceled as a result of changes that do not constitute material changes to the terms of the security called for under the contract. Changes which will not generally result in cancellation include, but are not limited to:
(A) changes in the dollar value of securities to be issued or distributed;
(B) restructuring of financing arrangements previously announced by the issuer of the securities; or
(C) settlement of any legal action or the occurrence of any other event which has or will have a material effect on the financial condition of the issuer of the securities.
• • • Supplementary Material: --------------
.01 Standard Forms of "When, As and If Issued" or "When, As and If Distributed" Contract.
(a) For use by dealers and brokers in confirming transactions with other dealers and brokers
| "When, as and if Issued" or "When, as and if Distributed" Contract | ||||
| ___________________________________________________________________________ | ||||
| (Firm Name) | ||||
| Date _________________________ | ||||
| (Sold to) (Purchased From) |
Quantity | Description of Security | Price | |
If this contract was made on a national securities exchange, it shall be subject to and governed by the requirements of such exchange, its constitution, rules, practices and interpretations thereof, relating to contracts between members of such exchange, as the same may be amended or modified from time to time.
If this contract was made elsewhere than on a national securities exchange, it shall be subject to and governed by the requirements of FINRA, its By-Laws, Rules, Uniform Practice Code and interpretations thereof as the same may be amended or modified from time to time.
This contract shall be settled and payment therefor made at such time and place, in such manner, and by the delivery of such securities and/or other property as the exchange or association to whose requirements this contract is subject in its sole discretion may determine, or shall be canceled and thereafter shall be null and void if such exchange or association determines in its sole discretion that the securities which are to be issued or distributed are not substantially the same as those contemplated in the contract. During the pendency of this contract either party shall have the right to call for a mark to the market, and upon failure of the other party to comply therewith the party not in default may close this contract in accordance with the requirements of the exchange or association to whose requirements this contract is subject.
(b) For use by a dealer (principal) and its customer covering transactions on a principal basis
| "When, as and if Issued" or "When, as and if Distributed" Contract | |
| TO __________________________________________________________________________ | |
I/we have sold to you/purchased from you __________________ , shares/par value _________________ at __________________. These securities shall be payable and deliverable "when, as and if issued" or "when, as and if distributed," or this contract shall be cancelable in accordance with the requirements of FINRA, its By-Laws, Rules, Uniform Practice Code, applicable rules and interpretations thereunder and amendments thereof. |
|
| I/we shall have the right to demand deposits according to such requirements. On your failure to comply therewith, we may close the contract in accordance with such requirements. | |
| ______________________________________________ | |
|
(Firm Signature) |
|
| Accepted: | |
| ____________________________________________ | |
| (Signature of Customer) | |
| Amended by SR-FINRA-2010-030 eff. Dec. 15, 2010. Amended by SR-NASD-91-66 eff. Nov. 2, 1992. Amended eff. Feb. 9, 1968; Mar. 1, 1970. Selected Notices: 92-51, 10-49. |