A claim by the party that accepted a delivery to give the securities back and recover the money paid, because the delivery turned out to be defective. It differs from a rejection in timing: a rejection refuses a defective delivery at the point of receipt, while a reclamation unwinds one already accepted.
Practice questions using Reclamation
Original questions written against the published FINRA and NASAA exam content outlines — not actual exam questions. Every choice is explained.
Ferrisham Securities accepted a delivery of securities and credited the position. Reviewing the certificates afterwards, cashiering finds a valid irregularity that makes them unacceptable. Which process returns them, and what must go with them?
A.A rejection, with a written statement of the reason the securities were refused.Wrong. Refusal is only available while the securities are still being presented, and that moment has passed.
B.A reclamation, with a properly executed Uniform Reclamation Form.Correct. Taking the delivery in first is exactly what converts the return into a claim for the right to send it back.
C.A don't know notice, since the delivery no longer answers to an acceptable contract.Wrong. That notice addresses whether a trade exists at all, which is not in dispute here.
D.A buy-in notice, on the ground that the delivering firm has not made good delivery.Wrong. That remedy forces performance on an open fail rather than unwinding a delivery already taken in.
Why: The dividing line between the two return processes is acceptance. Securities presented for delivery and refused for a valid reason at the point of presentation are a rejection. Securities that have already been accepted and are later sent back are a reclamation, which is a claim of the right to demand the return of what was taken in, and a properly executed Uniform Reclamation Form must accompany them. Ferrisham took the delivery in and credited it, so the later discovery puts it on the reclamation side of the line. Had the irregularity been spotted at the window before acceptance, the same certificates would have gone back as a rejection instead.
A member returns securities to Ravensworth Securities on a transaction but omits a properly executed Uniform Reclamation Form. What does the Uniform Practice Code permit Ravensworth to do?
A.Accept the return and deliver conforming securities, because the defect is in paperwork rather than in the securities.Wrong. It puts the burden of the defect on the firm that did not create it.
B.Refuse the return outright, on the ground that a reclamation without the prescribed form has no effect at all.Wrong. The Code supplies a priced remedy rather than treating the return as a nullity.
C.Hold the securities in a suspense account until the returning member supplies the missing form.Wrong. No such holding requirement exists, and it would leave the position unresolved indefinitely.
D.Sell the securities out, at its option, and look to the returning member for any resulting difference.Correct. The receiving broker gets an election, and the price difference falls on the returning member.
Why: The reclamation process runs on a prescribed form because the returning firm is asserting a right against a delivery that was already accepted, and the receiving firm needs to know on what ground. Where securities are reclaimed or returned without a properly executed Uniform Reclamation Form, the Code gives the receiving broker an option rather than an obligation: it may sell the securities out and look to the returning member for any resulting difference. The remedy belongs to the receiving firm, to take or to leave, and if it declines, the parties are back to negotiating the underlying claim.
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