While reviewing an accounts deposits I saw that the names on some of the checks did not match the styling on the account. After checking further I found that the account officer had placed an addendum on the account stating it was OK to accept these checks. When questioned about this the account officer said "Another one of my customers sold the business and during the transition, they were still getting checks payable to the other entity which was the old name that got changed to the new name. I placed the addenda to help them out during the name change, however, we forgot to delete it".

This has been going on for some time now and I need to get the account officers to understand this is never acceptable to do unless they have some formal written understanding between the 2 entities and we have the document on file(I think this would cover us).

Can someone tell me where I could find a rule or regulation to back this up?

Sounds like a UCC endorsement question (your state's UCC 4-205?), and yes, written proof of the acquisition and the merged entities' approval of the resulting legal name should help with any questions that arise. Perhaps the best endorsement would be "ABC Co. NKA (now known as) XYZ Co."