Good Delivery: Units, Form, and Restricted Certificates

Good delivery is the rulebook for what counts as a valid physical or electronic delivery between members. The principal must understand the unit standards, the assignment-and-guarantee requirements, and the special rules for mutilated and fiduciary-registered certificates.

Units of Delivery

The unit-of-delivery rules define the denomination in which securities must be delivered. Each rule covers a different security type:

Why Round Lots Matter

The 100-share round lot is the historical standard for U.S. equity delivery. It reflects how certificates were physically issued and how custody was operationally managed. Modern electronic settlement makes the rule largely a recordkeeping convention, but the rule still applies:

• A delivery of 250 shares is composed of two 100-share certificates plus one 50-share certificate (an odd lot)
• A delivery of exactly 250 shares contracted as such must be 250 shares (no aggregation requirement)
• A delivery of 500 shares could be five 100-share certificates, or one 500-share certificate, or any combination from which 100-share units can be made

Exam Tip: Gotchas

• Stocks deliver in 100-share ROUND LOTS or multiples; bonds deliver in $1,000 PAR FACE multiples; UITs deliver in single units. The exam tests the unit by security type as a recall question.
• The 100-share round-lot rule does not prevent odd-lot trades; it governs how delivery is structured. A 250-share trade can settle in mixed certificate denominations.
• CDs for bonds use the same unit as the underlying bond ($1,000 par). A CD wrapping a bond does not have its own unit standard.

Assignments and Powers of Substitution

A registered security is good delivery only if accompanied by an assignment (and a power of substitution where required) in conforming form.

Required Components

For good delivery:

• The assignment must be in proper form (typically the back of the certificate or a separate stock power)
• The signature on the assignment must match the registered owner's name exactly
• The signature must be guaranteed (medallion guarantee from a participating bank or broker-dealer)

The signature must match the registered name on the certificate exactly. The rule permits some standard equivalences:

• "&" and "and" are interchangeable
• "Co." and "Company" are interchangeable

But beyond those narrow equivalences, the signature must be the registered name exactly. A misalignment requires a re-execution.

Signature Guarantee

The signature guarantee is a medallion stamp from a participating bank or broker-dealer. The medallion participant is liable if the signature turns out to be forged or unauthorized. Medallion programs (like the Securities Transfer Agents Medallion Program, STAMP) backstop the assignment.

A signature without a guarantee is not good delivery, even if the signature is genuine.

Who Pays for Compliance Failures

Under the assignment rule, expense for failure to comply is paid by the seller. If the seller delivers a certificate with a mismatched signature, missing assignment, or no guarantee, the seller bears the cost of fixing it.

Exam Tip: Gotchas

• Signatures must MATCH the registered name exactly, with narrow equivalences for "&"/"and" and "Co."/"Company." A signature that adds or omits a middle name is not a match.
• A signature without a medallion guarantee is NOT good delivery. Even a genuine signature requires the medallion stamp from a participating institution.
• The seller pays the expense of fixing assignment defects. The buyer is not on the hook for the seller's improperly executed assignment.

Mutilated Securities

A mutilated certificate is not good delivery until authenticated by:

• The trustee, OR
• The registrar, OR
• The transfer agent, OR
• The issuer

Mutilation can take many forms: a torn certificate, a damaged signature, a defaced corporate seal. Whatever the form, the receiver must obtain authentication from one of the four authorized parties before accepting delivery.

Mutilated Coupons on Bonds

For bearer bonds (rare today, but still on exams), a mutilated coupon (number, signature, or one canceled in error) requires an endorsement by an authorized officer of the obligor or trustee on the reverse of the coupon. Without that endorsement, the coupon is not good delivery.

Exam Tip: Gotchas

• Mutilated certificates are NOT good delivery until authenticated by the trustee, registrar, transfer agent, or issuer. Any one of the four authorized parties can authenticate.
• A mutilated coupon requires an endorsement by an authorized officer on the REVERSE of the coupon. Not the front, not a separate document.

Deceased, Infant, and Fiduciary Certificates

The fiduciary-delivery rule addresses the question: when can a certificate registered in the name of a deceased person, infant, or fiduciary make good delivery?

General Rule

A certificate is NOT good delivery if assigned by a:

• Deceased registered owner (the registered name is a person who has died)
• Infant (a minor)
• Trustee, guardian, executor, or administrator (general rule)

The estate or fiduciary must re-register the security in a different name before delivery can occur.

Exception for Fiduciary-Registered Domestic Securities

The fiduciary-delivery rule carves out an exception for fiduciary-registered domestic securities under specific conditions. A domestic individual executor, administrator, trustee (under inter vivos or testamentary trust), or guardian may make good delivery if:

• The security is of a domestic issuer, AND
• The certificate is registered in their name (in their fiduciary capacity), AND
• The signature is guaranteed under the assignment rule

The exception covers situations where the fiduciary is already the registered owner in their fiduciary capacity. It does not cover certificates still registered in the deceased person's individual name; those must be re-registered to the executor or administrator first.

Deceased Registered Owner Re-Registration

The exam frequently tests this distinction. A certificate registered to "John Smith" who has died is not good delivery, even if assigned by his executor. The certificate must first be re-registered to "Jane Smith, Executor of the Estate of John Smith." Then, with a guaranteed signature, it can be delivered under the fiduciary exception.

Exam Tip: Gotchas

• A certificate signed by a DECEASED registered owner is NEVER good delivery. The estate must re-register the security in the executor or administrator's name first.
• The fiduciary exception covers FIDUCIARY-REGISTERED securities (already in the fiduciary's name), not securities still in the deceased's individual name. The exam tests this trap.
• The fiduciary exception requires three conditions: domestic issuer, fiduciary-registered, and guaranteed signature. Missing any of the three means no good delivery.
• Infant-owned certificates are also not good delivery. Minors cannot sign valid assignments; a guardian must hold the security in fiduciary capacity.

How Good Delivery Standards Connect

Good delivery is a multi-part test. A delivery must satisfy all of the following:

A delivery that fails any one of these is not good delivery, and the receiver may reject it. The seller bears the cost of fixing defects.

Think of it this way: Good delivery is a checklist. Every box must be checked. The unit must match, the assignment must be proper, mutilation must be authenticated, and the owner must be a qualifying party. A single defect kills the delivery.