11840. Rights and Warrants
(a) Definition — "Rights"
The term "rights" or "rights to subscribe," as used in this Rule is the privilege offered to holders of record of issued securities to subscribe (usually on a pro rata basis) for additional securities of the same class, of a different class, or of a different issuer as the case may be.
(b) Definition — "Warrants"
The term "warrants" or "stock purchase warrants" as used in this Rule is an instrument issued separately or accompanying other securities, but not necessarily issued to stockholders of record as of a specific date; i.e., warrants issued with or attached to bonds, common stock, preferred stocks, etc. The instrument represents the privilege to purchase securities at a stipulated price or prices and is usually valid for several years.
(c) Basis and Unit of Trading — Rights
Except as otherwise designated by the Committee, transactions in rights to subscribe shall be on the basis of one right accruing to each share of issued stock and the unit of trading in rights shall be 100 rights (unless otherwise specified).
(d) Basis and Unit of Trading — Warrants
Except as otherwise agreed or designated by the Committee, transactions in stock purchase warrants shall be on the basis of one warrant representing the right of the purchaser to receive one warrant in settlement of such transaction and the unit of trading shall be 100 warrants. Members must ascertain how many warrants they have to sell, what each warrant entitles the holder to purchase, the purchase price, and the current price of the warrant relative to the price of the underlying security which may be purchased. Trades in warrants should be properly described on comparisons and confirmations.
(e) Securities Which Have Expired by Their Terms
(1) In contracts for warrants, rights or other securities which have expired by their terms, deliveries effected more than 30 days after expiration shall be consist of (A) the expired securities; or (B) a Letter of Indemnity in lieu of the expired instrument.
(2) In the case of units or other securities of which one or more of the integral parts of the instrument has expired by its terms, after expiration, the instrument shall cease to be a unit as originally contemplated in the contract. Deliveries effected after expiration shall consist of the unexpired security and (A) the expired instrument; or (B) a Letter of Indemnity in lieu of the expired instrument.
(3) Deliveries effected pursuant to paragraphs (e)(1) and (2) of this Rule shall be settled at the existing contract price.
• • • Supplementary Material: --------------
.01 Sample Letter of Indemnity.
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_______________________________________________ (Date) |
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| To:_______________________________________________ | |
| Re:_______________________________________________ | |
| (Quantity and Description) | |
| CUSIP #:_______________________________________________ | |
| For value received the undersigned hereby assigns, transfers and sets over to you all rights and privileges which may accrue on the above contract made on (Date of Contract) _______________________________________________ at (Contract Price) _______________________________________________ for settlement (Settlement Date). | |
| Upon acceptance of this delivery in lieu of physical certificates, we agree, for ourselves, our successors, assigns, heirs, executors and administrators, to at all times indemnify and hold harmless from and against any and all claims, liabilities, damages, taxes, charges and expense sustained or incurred by reason of this action. Acceptance of this delivery shall operate to close-out the above stated contract in accordance with the provisions of the FINRA's Uniform Practice Code. | |
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______________________________________ (Member Firm) |
______________________________________ (Official Signature) |
| If any questions, please contact ______________________at (Telephone Number)______________________ | |
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Amended by SR-FINRA-2010-030 eff. Dec. 15, 2010. Amended by SR-NASD-91-13 eff. Nov. 1, 1991. Amended eff. Sept. 1, 1969; Mar. 1, 1970. Selected Notice: 10-49. |