(a) Definitions. For purposes of this rule, the following terms have the following meanings:
(i) The term "delayed delivery asset" means an asset subject to a delayed delivery and includes when-issued securities.
(ii) The term "in-transfer asset" means an asset which has been submitted to the registrar or transfer agent for transfer and shipment to the customer at the time the transfer instruction is received by the carrying party.
(iii) The term "nontransferable asset" means an asset that is incapable of being transferred from the carrying party to the receiving party because (A) it is an issue in default for which the carrying party does not possess the proper denominations to effect delivery and no transfer agent is available to re-register the securities, or (B) it is a municipal fund security which the issuer requires to be held in an account carried by one or more specified brokers, dealers or municipal securities dealers that does not include the receiving party.
(b) Responsibility to Expedite Customer’s Request. When a customer whose municipal securities account is carried by a broker, dealer or municipal securities dealer (the "carrying party") wishes to transfer its entire account to another broker, dealer or municipal securities dealer (the "receiving party") and gives written notice of that fact to the receiving party, the receiving party and the carrying party must expedite and coordinate activities with respect to the transfer as follows.
(c) Transfer Instructions.
(i) Parties may use Form G-26, the transfer instruction prescribed by the Board, or the transfer instructions required by a clearing agency registered with the Securities and Exchange Commission in connection with its automated customer account transfer system, or transfer instructions that are substantially similar to those required by such clearing agency, when accomplishing account transfers pursuant to this rule.
(ii) If an account includes any nontransferable assets, the carrying party must request, in writing and prior to or at the time of validation of the transfer instruction, further instructions from the customer with respect to the disposition of such assets. Such request shall provide the customer with the following alternative methods of disposition of nontransferable assets, if applicable:
(A) liquidation, with a specific indication of any redemption or other liquidation-related fees that may result from such liquidation and that those fees may be deducted from the money balance due the customer; or
(B) retention by the carrying party for the customer’s benefit; or
(C) in the case of a nontransferable asset described in section (a)(iii)(B), transfer to another broker, dealer or municipal securities dealer, if any, which the issuer has specified as being permitted to carry such asset.
(d) Transfer Procedures.
(i) Upon receipt from the customer of a signed transfer instruction to receive such customer's securities account from the carrying party, the receiving party must immediately submit such instruction to the carrying party. The carrying party must, within three business days following receipt of such instruction, validate and return the transfer instruction to the receiving party (with an attachment reflecting all positions and money balances as shown on its books) or take exception to the transfer instruction for reasons other than securities positions or money balance differences and advise the receiving party of the exception taken.
(ii) A carrying party may take exception to a transfer instruction only if:
(A) it has no record of the account on its books;
(B) the transfer instruction is incomplete; or
(C) the transfer instruction contains an improper signature.
(iii) The carrying party and the receiving party must promptly resolve any exceptions taken to the transfer instruction.
(iv) Upon validation of a transfer instruction, the carrying party must:
(A) "freeze" the account to be transferred, i.e., all open orders must be cancelled and no new orders may be taken; and
(B) return the transfer instruction to the receiving party with an attachment indicating all securities positions and any money balance in the account as shown on the books of the carrying party. Except as hereinafter provided, the attachment must include a then-current market value for all assets in the account. However, delayed delivery assets, nontransferable assets, and assets in-transfer to the customer, need not be valued, although the "delayed delivery," "nontransferable," or "in-transfer" status of such assets, respectively, must be indicated on the attachment. A carrying party must provide the description set forth in rule G-12(c)(v)(E) with respect to any municipal security that has not been assigned a CUSIP number in an account it is to transfer.
(v) Within four business days following the validation of a transfer instruction, the carrying party must complete the transfer of the account to the receiving party. The receiving party and the carrying party must immediately establish fail-to-receive and fail-to-deliver contracts at the then-current market value as of the date of validation upon their respective books of account against the long/short positions in the customer’s accounts that have not been physically delivered/received and the receiving party/carrying party must debit/credit the related money amount. Nontransferable assets and assets in-transfer to the customer are exempt from the requirement that fail-to-receive and fail-to-deliver contracts must be established for positions in a customer’s securities account that have not been physically delivered. Zero value fail-to-receive and fail-to-deliver instructions shall be established for delayed delivery assets. The customer's account(s) shall thereupon be deemed transferred.
(vi) To the extent any assets in the account are not readily transferable, with or without penalties, such assets are not subject to the time frames required by the rule; and if the customer has authorized liquidation of any nontransferable assets, the carrying member must distribute the resulting money balance to the customer within five business days following receipt of the customer’s disposition instructions.
(e) Fail Contracts Established.
Any fail contracts resulting from this account transfer procedure must be closed out in accordance with rule G-12(h).
(f) Prompt Resolution of Discrepancies. Any discrepancies relating to positions or money balances that exist or occur after transfer of a customer's securities account must be resolved promptly.
(g) Exemptions. The Board may exempt from the provisions of this rule, either unconditionally or on specified terms and conditions, any dealer or any type of account, security or municipal security.
(h) Participant in a Registered Clearing Agency
. When both the carrying party and the receiving party are direct participants in a clearing agency registered with the Securities and Exchange Commission offering automated customer securities account transfer capabilities, the account transfer procedure, including the establishing and closing out of fail contracts, must be accomplished pursuant to the rules of and through such registered clearing agency.
(i) Forwarding of Copy of Form G-26 to Enforcement Authority on Request
. The carrying party shall forward a copy of each customer account transfer instruction issued pursuant to paragraph (c)(i) to the enforcement authority having jurisdiction over the carrying party member, at the request of such authority.