Assignment

Aurelia owns a policy on her own life and wants her adult daughter to become the owner, with full authority to change the beneficiary, take loans and surrender the contract. What does the policy's OWNERSHIP provision permit her to do?

1. A.Execute the insurer's change of ownership form; ownership then transfers, and every ownership right passes with it.Correct. The ownership provision expressly contemplates a change of owner on the insurer's form, and the rights transfer as a package on acceptance and recording.
2. B.Nothing; ownership is fixed at issue and can be changed only by surrendering the policy and buying a new one.Ownership is freely transferable under the ownership provision. Surrendering and rebuying would be pointlessly costly and would require new underwriting.
3. C.Change owners only if the insured submits to medical re-underwriting.Underwriting evaluates the insurance risk, which is unchanged. The identity of the owner does not affect the mortality the insurer has already accepted.
4. D.Change owners only with the current beneficiary's consent.A revocable beneficiary has no vested interest and no veto. Consent is required only where the beneficiary designation is irrevocable.

Why: The ownership provision identifies the policyowner and confirms that all rights in the contract belong to that person. It also provides for a change of owner, which is accomplished by filing the insurer's change of ownership form. On acceptance and recording, every ownership right transfers together: naming and changing beneficiaries, borrowing against or surrendering the contract, assigning it, and electing settlement options and dividend options.

Devendra Rao exercises his long Calderon Tools November 40 call on Wednesday, October 8. Under the current regular way settlement cycle for listed equities, when does the resulting purchase of Calderon shares settle?

1. A.Wednesday, October 8Same day settlement applies only when the parties specifically agree to a cash trade. An exercise defaults to regular way delivery.
2. B.Tuesday, October 14T+3 is an obsolete cycle retired years ago, and it also does not account for the intervening weekend correctly.
3. C.Thursday, October 9Correct. Exercise creates a regular way stock trade, which settles T+1 under the current cycle.
4. D.Friday, October 10T+2 was the equity settlement cycle before May 2024. It no longer governs regular way stock delivery.

Why: Exercising an equity option produces an ordinary stock trade between the exercising holder and the assigned writer, and that stock trade settles regular way. Since May 2024 the regular way cycle for equities is T+1, so an exercise on Wednesday, October 8 settles on Thursday, October 9. The option premium itself settled on the business day after the original opening trade and is unrelated to this delivery.

A customer delivers a certificate to Cadmus Brokerage for sale but does not want to endorse the certificate itself. What does the firm ask for instead, and what must be true of it?

1. A.A letter of authorization instructing the firm to sell the shares.Wrong. That document authorises the transaction and does nothing to transfer title in the underlying instrument.
2. B.A medallion stamp applied by the firm to the face of the certificate.Wrong. A guarantee attests to a signature that already exists rather than substituting for one that is missing.
3. C.A new certificate issued by the transfer agent in the nominee name of the firm.Wrong. Re-registration is the outcome of a valid assignment, not an alternative to producing one.
4. D.A stock power executed by the registered owner, signed exactly as the certificate is registered.Correct. It carries the assignment separately so the certificate itself can travel unendorsed.

Why: An assignment can live on the back of the certificate or on a separate document called a stock power, and the two are equivalent. Using a stock power lets the certificate travel without an endorsement on its face, which matters because an endorsed certificate is negotiable by whoever holds it. Either way the signature must correspond exactly to the registration on the certificate, so a certificate registered to a trust, an estate or a corporation needs the assignment signed in that capacity, and a signature guarantee is normally required so the transfer agent can rely on it. If the name signed does not match the registration, the item is not good delivery no matter which document carries the signature.

Halloran Securities settles a customer purchase of listed equity options and, the same day, a customer purchase of corporate bonds. In what type of funds does each of those transactions settle?

1. A.Both settle in clearing house fundsClearing house funds apply to corporate and municipal securities. Listed options settle in immediately available federal funds.
2. B.Both settle in federal fundsFederal funds cover options and government securities. Corporate bonds settle in clearing house funds.
3. C.Options in clearing house funds; corporate bonds in federal fundsThis reverses the two. Government securities and options are the categories that use same-day federal funds.
4. D.Options in federal funds; corporate bonds in clearing house fundsOptions and government securities settle in immediately available federal funds, while corporate and municipal securities settle in clearing house funds.

Why: Listed options and U.S. government securities settle in federal funds, which are immediately available same-day money. Corporate and municipal securities settle in clearing house funds, which require an additional processing day before the money becomes available. The distinction explains why an options assignment settles faster than a corporate bond purchase.