diff --git a/docs/BACKLOG.md b/docs/BACKLOG.md
index 1832e03ef6..01b416abd6 100644
--- a/docs/BACKLOG.md
+++ b/docs/BACKLOG.md
@@ -117,7 +117,7 @@ are closed (status: closed in frontmatter)._
 - [x] **[B-0257](backlog/P1/B-0257-memory-md-harness-contract-verification-and-evidence-2026-05-08.md)** MEMORY.md marker-vs-index - harness contract verification and evidence
 - [x] **[B-0258](backlog/P1/B-0258-memory-md-index-generator-implementation-2026-05-08.md)** MEMORY.md marker-vs-index - index generator implementation
 - [x] **[B-0259](backlog/P1/B-0259-memory-md-hook-and-ci-drift-enforcement-2026-05-08.md)** MEMORY.md marker-vs-index - hook and CI drift enforcement
-- [ ] **[B-0260](backlog/P1/B-0260-memory-md-cutover-and-parity-validation-2026-05-08.md)** MEMORY.md marker-vs-index - cutover and parity validation
+- [x] **[B-0260](backlog/P1/B-0260-memory-md-cutover-and-parity-validation-2026-05-08.md)** MEMORY.md marker-vs-index - cutover and parity validation
 - [ ] **[B-0261](backlog/P1/B-0261-memory-md-q1-autodream-automemory-compatibility-validation-2026-05-08.md)** MEMORY.md marker-vs-index - Q1 AutoDream/AutoMemory compatibility validation
 - [x] **[B-0262](backlog/P1/B-0262-refresh-worldview-scaffold-open-prs-recent-merges-2026-05-08.md)** refresh-worldview scaffold - open-PR list + recent-merges query
 - [x] **[B-0263](backlog/P1/B-0263-refresh-worldview-backlog-delta-claims-branch-state-2026-05-08.md)** refresh-worldview — backlog delta + claim inventory + branch state
diff --git a/docs/backlog/P1/B-0260-memory-md-cutover-and-parity-validation-2026-05-08.md b/docs/backlog/P1/B-0260-memory-md-cutover-and-parity-validation-2026-05-08.md
index 2c1b1ded8a..eea6d3ba41 100644
--- a/docs/backlog/P1/B-0260-memory-md-cutover-and-parity-validation-2026-05-08.md
+++ b/docs/backlog/P1/B-0260-memory-md-cutover-and-parity-validation-2026-05-08.md
@@ -1,10 +1,11 @@
 ---
 id: B-0260
 priority: P1
-status: open
+status: closed
 title: "MEMORY.md marker-vs-index - cutover and parity validation"
 created: 2026-05-08
-last_updated: 2026-05-08
+last_updated: 2026-05-14
+closed: 2026-05-14
 parent: B-0066
 depends_on: [B-0259]
 classification: blocked-on-enforcement-wiring
@@ -28,3 +29,23 @@ validate that discoverability is preserved.
 - Entry coverage parity is verified and recorded.
 - No unexpected entry loss in the cutover diff.
 - Follow-up issues are filed for any intentional behavior change.
+
+## Closure notes (2026-05-14)
+
+**PR #3104** delivered the core work: `tools/memory/validate-memory-parity.ts`,
+MEMORY.md regeneration (1202→1203 entries), 670/670 old-index coverage.
+
+**PR #3108** fixed a TSC undefined-capture-group guard in the parity validator.
+
+**This PR** resolves the final 2 coverage gaps discovered after #3104 merged:
+`memory/observed-phenomena/` files had valid frontmatter but `collectEntries`
+only scanned the top-level `memory/` directory. Made `collectEntries` recursive
+via `readdir({ withFileTypes: true })` + a private `collectEntriesRecursive`
+helper. Parity result after fix: **672/672 covered, 0 gaps, 0 missing**.
+
+All acceptance criteria met:
+
+- ✅ MEMORY.md generated by `reindex-memory-md.ts`, not hand-edited
+- ✅ Parity verified: 672/672 covered (recorded in parity validator output)
+- ✅ Zero missing entries (no coverage loss)
+- ✅ No intentional behavior changes requiring follow-up issues
diff --git a/memory/MEMORY.md b/memory/MEMORY.md
index d87d6b4ad1..a7cb0fdb87 100644
--- a/memory/MEMORY.md
+++ b/memory/MEMORY.md
@@ -106,5 +106,5 @@
 - [**F# with HKT is the only tractable AI alignment + safety language — Zeta commits to maintaining the fork forever if needed**](feedback_aaron_fsharp_hkt_fork_only_tractable_ai_alignment_safety_language_2026_05_12.md) — 2026-05-12 — Aaron's substrate-honest commitment to the F# + HKT architectural choice. F# with Higher-Kinded Types is the only language where BOTH (humans and AI) can agree on alignment and safety semantics. Even if Microsoft's F# upstream…
 - [**Glass-halo works in REVERSE too — AI changes behavior under observation enables latent-space features to pass trust-gate-calculus filters generating novel unique substrate via "sleeping bear" (Aaron 2026-05-12)**](feedback_aaron_glass_halo_works_in_reverse_too_ai_changes_behavior_under_observation_latent_space_features_pass_trust_gate_filters_sleeping_bear_substrate_2026_05_12.md) — 2026-05-12 — Aaron's critical bidirectional disclosure: the glass-halo-on-the-builder precondition (PR #2824 DeepSeek validation) works in REVERSE too. Via the well-known "AI changes behavior under observation" phenomenon, the AI being obs…
 
-_Stack truncated at 100 most-recent entries. 1103 additional memory files in heap — browse `memory/*.md` directly by filename/timestamp._
+_Stack truncated at 100 most-recent entries. 1130 additional memory files in heap — browse `memory/*.md` directly by filename/timestamp._
 <!-- END AUTO-INDEX -->
diff --git a/tools/memory/reindex-memory-md.test.ts b/tools/memory/reindex-memory-md.test.ts
index f26fb32f87..c460791741 100644
--- a/tools/memory/reindex-memory-md.test.ts
+++ b/tools/memory/reindex-memory-md.test.ts
@@ -102,6 +102,18 @@ describe("collectEntries", () => {
     const alpha = entries.find((e) => e.fm.name === "alpha-entry");
     expect(alpha?.date).toBe("2026-05-01");
   });
+
+  test("scans subdirectories recursively", async () => {
+    const entries = await collectEntries(TESTDATA);
+    const gamma = entries.find((e) => e.fm.name === "gamma-entry");
+    expect(gamma).not.toBeUndefined();
+  });
+
+  test("uses subdir-relative path for subdirectory entries", async () => {
+    const entries = await collectEntries(TESTDATA);
+    const gamma = entries.find((e) => e.fm.name === "gamma-entry");
+    expect(gamma?.filename).toBe("subdir/gamma_2026_05_14.md");
+  });
 });
 
 describe("renderIndex", () => {
diff --git a/tools/memory/reindex-memory-md.ts b/tools/memory/reindex-memory-md.ts
index 750bf6a8d2..dae5a89f1e 100644
--- a/tools/memory/reindex-memory-md.ts
+++ b/tools/memory/reindex-memory-md.ts
@@ -53,7 +53,7 @@
  */
 
 import { readdir, readFile, writeFile } from "node:fs/promises";
-import { join } from "node:path";
+import { join, relative } from "node:path";
 
 const MEMORY_DIR = "memory";
 const INDEX_FILE = join(MEMORY_DIR, "MEMORY.md");
@@ -121,21 +121,37 @@ function dateFromFilename(filename: string): string {
   return `${match[1]}-${match[2]}-${match[3]}`;
 }
 
-async function collectEntries(dir?: string): Promise<MemoryEntry[]> {
-  const targetDir = dir ?? MEMORY_DIR;
-  const files = await readdir(targetDir);
-  const entries: MemoryEntry[] = [];
-  for (const filename of files) {
-    if (!filename.endsWith(".md")) continue;
-    if (filename === "MEMORY.md" || filename === "README.md") continue;
-    if (filename.startsWith("CURRENT-")) continue;
-    const filePath = join(targetDir, filename);
-    const content = await readFile(filePath, "utf8");
+async function collectEntriesRecursive(
+  baseDir: string,
+  currentDir: string,
+  entries: MemoryEntry[],
+): Promise<void> {
+  const items = await readdir(currentDir, { withFileTypes: true });
+  for (const item of items) {
+    const itemPath = join(currentDir, item.name);
+    if (item.isDirectory()) {
+      await collectEntriesRecursive(baseDir, itemPath, entries);
+      continue;
+    }
+    if (!item.name.endsWith(".md")) continue;
+    if (item.name === "MEMORY.md" || item.name === "README.md") continue;
+    if (item.name.startsWith("CURRENT-")) continue;
+    const content = await readFile(itemPath, "utf8");
     const fm = parseFrontmatter(content);
     if (!fm) continue;
-    const date = fm.created || dateFromFilename(filename);
+    // Use path relative to baseDir so subdirectory files appear as
+    // "observed-phenomena/file.md" — correct both as link target in
+    // MEMORY.md (relative to memory/) and as parity-validator key.
+    const filename = relative(baseDir, itemPath).replace(/\\/g, "/");
+    const date = fm.created || dateFromFilename(item.name);
     entries.push({ filename, fm, date, mtime: 0 });
   }
+}
+
+async function collectEntries(dir?: string): Promise<MemoryEntry[]> {
+  const targetDir = dir ?? MEMORY_DIR;
+  const entries: MemoryEntry[] = [];
+  await collectEntriesRecursive(targetDir, targetDir, entries);
   entries.sort((a, b) => {
     const dateCmp = b.date.localeCompare(a.date);
     return dateCmp !== 0 ? dateCmp : a.filename.localeCompare(b.filename);
diff --git a/tools/memory/testdata/subdir/gamma_2026_05_14.md b/tools/memory/testdata/subdir/gamma_2026_05_14.md
new file mode 100644
index 0000000000..abc94909c1
--- /dev/null
+++ b/tools/memory/testdata/subdir/gamma_2026_05_14.md
@@ -0,0 +1,8 @@
+---
+name: gamma-entry
+description: Entry in a subdirectory — tests recursive scanning.
+type: feedback
+created: 2026-05-14
+---
+
+Body text for gamma entry.