What is the term for an indorsement that restricts the use of financial instruments?

The term for an indorsement that restricts the use of financial instruments is a restrictive indorsement. This type of indorsement specifies conditions that must be met for the financial instrument, such as a check, to be negotiated or transferred. For example, a restrictive indorsement might include a statement like "for deposit only," which means that the check can only be deposited into the account of the person or entity named on it. This prevents anyone else from cashing or negotiating the check, thereby providing a layer of security and control over the instrument's use.

In contrast, qualified indorsements allow for the transfer of liability, blank indorsements do not contain any restrictions and simply involve the signature of the indorser, making the instrument payable to whoever holds it, and special indorsements name a specific person or entity to whom the instrument is payable but do not impose restrictions on negotiation.