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You can find the "Passive Mode" option by click on on File->Edit Servers. There is a Passive Mode checkbox on the right hand side.
In the FTP protocol two ports are normally used, 20 and 21.
Port 21 is the control channel in which requests such as PUT, GET, and PWD are sent to the server.
Port 20 is the data channel in which actual files, folders and directory listings are sent.
Normally, when you connect to an FTP site, the site establishes the data connection to your PC (the client) on Port 20. However, if the site allows passive transfers, you can have your PC establish the data connection. We recommend that you use passive mode for most transfers.
Definition from RFC 959: PASSIVE (PASV) This command requests the server to "listen" on a data port (which is not its default data port) and to wait for a connection rather than initiate one upon receipt of a transfer command. The response to this command includes the host and port address this server is listening on.
Certain ftp servers support both active and passive transfers while other ftp servers only allow active transfers.
In some cases passive mode may be required for users who are behind some types of router-based firewalls or behind a gateway requiring passive transfers.
If you are using Passive Mode and getting a 426 error, try disabling Passive Mode, as chances are, the server does not allow Passive transfers.