Senate Bill No. 441
(By Senator Grubb)
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[Introduced February 20, 1995; referred to the Committee
on the Judiciary.]
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A BILL to amend and reenact sections one hundred five and two
hundred six, article one, chapter forty-six of the code of
West Virginia, one thousand nine hundred thirty-one, as
amended; to amend and reenact section one hundred four,
article four of said chapter; to amend and reenact section
one hundred fourteen, article five of said chapter; to amend
and reenact article eight of said chapter; to amend and
reenact sections one hundred three, one hundred five, one
hundred six, three hundred one, three hundred two, three
hundred four, three hundred five, three hundred six, three
hundred nine and three hundred twelve, article nine, of said
chapter; and to further amend said article by adding thereto two new sections, designated sections one hundred fifteen
and one hundred sixteen, all relating to the uniform
commercial code (UCC); investment securities; territorial
application of the UCC; parties' power to choose applicable
law; statute of frauds for kinds of personal property not
otherwise covered; bank deposits and collections;
definitions; letters of credit; issuer's duty and privilege
to honor; right to reimbursement; investment securities;
short title; definitions; rules for determining whether
certain obligations and interests are securities or
financial assets; acquisition of security or financial asset
or interest therein; notice of adverse claim; control;
whether indorsement, instruction or entitlement order is
effective; warranties in direct holding; warranties in
indirect holding; applicability; choice of law; clearing
corporation rules; creditor's legal process; statute of
frauds inapplicable; evidentiary rules concerning
certificated securities; securities intermediary and others
not liable to adverse claimant; securities intermediary as
purchaser for value; issuer; issuer's responsibility and
defenses; notice of defect or defense; staleness as notice of defect or defense; effect of issuer's restriction on
transfer; effect of unauthorized signature on security
certificate; completion or alteration of security
certificate; rights and duties of issuer with respect to
registered owners; effect of signature of authenticating
trustee, registrar or transfer agent; issuer's lien;
overissue; transfer of certificated and uncertificated
securities; delivery; rights of purchaser; protected
purchaser; indorsement; instruction; effect of guaranteeing
signature, indorsement or instruction; purchaser's right to
requisites for registration of transfer; registration; duty
of issuer to register transfer; assurance that indorsement
or instruction is effective; demand that issuer not register
transfer; wrongful registration; replacement of lost,
destroyed or wrongfully taken security certificate;
obligation to notify issuer of lost, destroyed or wrongfully
taken security certificate; authenticating trustee, transfer
agent and registrar; security entitlements; securities
account; acquisition of security entitlement from securities
intermediary; assertion of adverse claim against entitlement
holder; property interest of entitlement holder in financial asset held by securities intermediary; duty of securities
intermediary to maintain financial asset; duty of securities
intermediary with respect to payments and distributions;
duty of securities intermediary to exercise rights as
directed by entitlement holder; duty of securities
intermediary to comply with entitlement order; duty of
securities intermediary to change entitlement holder's
position to other form of security holding; specification of
duties of securities intermediary by other statute or
regulation; manner of performance of duties by securities
intermediary and exercise of rights of entitlement holder;
rights of purchaser of security entitlement from entitlement
holder; priority among security interests and entitlement
holders; savings clause; secured transactions and sales of
accounts and chattel paper; perfection of security interests
in multiple state transactions; definitions; account and
general intangibles defined; investment property; security
interest arising in purchase or delivery of financial asset;
attachment and enforceability of security interest;
proceeds; formal requisites; persons who take priority over
unperfected security interests; rights of lien creditor; when filing is required to perfect security interest;
security interests to which filing provisions of this
article do not apply; perfection of security interest in
instruments, documents and goods covered by documents;
perfection by permissive filing; temporary perfection
without filing or transfer of possession; when possession by
secured party perfects security interest without filing;
proceeds; secured party's rights on disposition of
collateral; protection of purchasers of instruments,
documents and securities; and priorities among conflicting
security interests in the same collateral.
Be it enacted by the Legislature of West Virginia:
That sections one hundred five and two hundred six, article
one, chapter forty-six of the code of West Virginia, one thousand
nine hundred thirty-one, as amended, be amended and reenacted;
that section one hundred four, article four of said chapter be
amended and reenacted; that section one hundred fourteen, article
five of said chapter be amended and reenacted; that article eight
of said chapter be amended and reenacted; that sections one
hundred three, one hundred five, one hundred six, three hundred
one, three hundred two, three hundred four, three hundred five, three hundred six, three hundred nine and three hundred twelve,
article nine of said chapter be amended and reenacted; and that
said article be further amended by adding thereto two new
sections, designated sections one hundred fifteen and one hundred
sixteen, all to read as follows:
ARTICLE 1. GENERAL PROVISIONS.
§46-1-105.
Territorial application of this chapter; parties'
power to choose applicable law.
(1) Except as provided hereafter in this section, when a
transaction bears a reasonable relation to this state and also to
another state or nation the parties may agree that the law either
of this state or of such other state or nation shall govern their
rights and duties. Failing such agreement this chapter applies
to transactions bearing an appropriate relation to this state.
(2) Where one of the following provisions of this chapter
specifies the applicable law, that provision governs and a
contrary agreement is effective only to the extent permitted by
the law (including the conflict of laws rules) so specified:
Rights of creditors against sold goods. Section 2-402.
Applicability of the article on bank deposits and
collections. Section 4-102.
Applicability of the article on investment securities.
Section 8-110.
Perfection provisions of the article on secured
transactions. Section 9-103.
§46-1-206. Statute of frauds for kinds of personal property not
otherwise
covered.
(1) Except in the cases described in subsection (2) of this
section a contract for the sale of personal property is not
enforceable by way of action or defense beyond five thousand
dollars in amount or value of remedy unless there is some writing
which indicates that a contract for sale has been made between
the parties at a defined or stated price, reasonably identifies
the subject matter, and is signed by the party against whom
enforcement is sought or by his authorized agent.
(2) Subsection (1) of this section does not apply to
contracts for the sale of goods (section 2-201) nor of securities
(section 8-113) nor to security agreements (section 9-203).
ARTICLE 4. BANK DEPOSITS AND COLLECTIONS.
§46-4-104. Definitions and index of definitions.
(a) In this article unless the context otherwise requires:
(1) "Account" means any deposit or credit account with a bank, including demand, time, savings, passbook, share draft, or
like account, other than an account evidenced by a certificate of
deposit;
(2) "Afternoon" means the period of a day between noon and
midnight;
(3) "Banking day" means the part of a day on which a bank is
open to the public for carrying on substantially all of its
banking functions;
(4) "Clearing house" means an association of banks or other
payors regularly clearing items;
(5) "Customer" means a person having an account with a bank
or for whom a bank has agreed to collect items, including a bank
that maintains an account at another bank;
(6) "Documentary draft" means a draft to be presented for
acceptance or payment if specified documents, certificated
securities (section 8-102) or instructions for uncertificated
securities (section 8-102), or other certificates, statements or
the like are to be received by the drawee or other payor before
acceptance or payment of the draft;
(7) "Draft" means a draft as defined in section 3-104 or an
item, other than an instrument, that is an order;
(8) "Drawee" means a person ordered in a draft to make
payment;
(9) "Item" means an instrument or a promise or order to pay
money handled by a bank for collection or payment. The term does
not include a payment order governed by article four-a or a
credit or debit card slip;
(10) "Midnight deadline" with respect to a bank is midnight
on its next banking day following the banking day on which it
receives the relevant item or notice or from which the time for
taking action commences to run, whichever is later;
(11) "Settle" means to pay in cash, by clearing-house
settlement, in a charge or credit or by remittance, or otherwise
as agreed. A settlement may be either provisional or final;
(12) "Suspends payments" with respect to a bank means that
it has been closed by order of the supervisory authorities, that
a public officer has been appointed to take it over or that it
ceases or refuses to make payments in the ordinary course of
business.
(b) Other definitions applying to this article and the
sections in which they appear are:
"Agreement for electronic
presentment"Section 4-110.
"Bank"Section 4-105.
"Collecting bank"Section 4-105.
"Depositary bank"Section 4-105.
"Intermediary bank"Section 4-105.
"Payor bank"Section 4-105.
"Presenting bank"Section 4-105.
"Presentment notice"Section 4-110.
(c) The following definitions in other articles of this
chapter apply to this article:
"Acceptance"Section 3-409.
"Alteration"Section 3-407.
"Cashier's check"Section 3-104.
"Certificate of deposit"Section 3-104.
"Certified check" Section 3-409.
"Check"Section 3-104.
"Draft"Section 3-104.
"Good faith"Section 3-103.
"Holder in due course"Section 3-302.
"Instrument"Section 3-104.
"Notice of dishonor"Section 3-503.
"Order"Section 3-103.
"Ordinary care"Section 3-103.
"Person entitled to enforce"Section 3-301.
"Presentment"Section 3-501.
"Promise"Section 3-103.
"Prove"Section 3-103.
"Teller's check"Section 3-104.
"Unauthorized signature"Section 3-403.
(d) In addition article one contains general definitions and
principles of construction and interpretation applicable
throughout this article.
ARTICLE 5. LETTERS OF CREDIT.
§46-5-114. Issuer's duty and privilege to honor; right to
reimbursement.
(1) An issuer must honor a draft or demand for payment which
complies with the terms of the relevant credit regardless of
whether the goods or documents conform to the underlying contract
for sale or other contract between the customer and the
beneficiary. The issuer is not excused from honor of such a
draft or demand by reason of an additional general term that all
documents must be satisfactory to the issuer, but an issuer may require that specified documents must be satisfactory to it.
(2) Unless otherwise agreed when documents appear on their
face to comply with the terms of a credit but a required document
does not in fact conform to the warranties made on negotiation or
transfer of a document of title (section 7-507) or of a
certificated security (section 8-108) or is forged or fraudulent
or there is fraud in the transaction:
(a) The issuer must honor the draft or demand for payment if
honor is demanded by a negotiating bank or other holder of the
draft or demand which has taken the draft or demand under the
credit and under circumstances which would make it a holder in
due course (section 3-302) and in an appropriate case would make
it a person to whom a document of title has been duly negotiated
(section 7-502) or a bona fide purchaser of a certificated
security (section 8-302); and
(b) In all other cases as against its customer, an issuer
acting in good faith may honor the draft or demand for payment
despite notification from the customer of fraud, forgery or other
defect not apparent on the face of the documents but a court of
appropriate jurisdiction may enjoin such honor.
(3) Unless otherwise agreed an issuer which has duly honored a draft or demand for payment is entitled to immediate
reimbursement of any payment made under the credit and to be put
in effectively available funds not later than the day before
maturity of any acceptance made under the credit.
(4) When a credit provides for payment by the issuer on
receipt of notice that the required documents are in the
possession of a correspondent or other agent of the issuer:
(a) Any payment made on receipt of such notice is
conditional; and
(b) The issuer may reject documents which do not comply with
the credit if it does so within three banking days following its
receipt of the documents; and
(c) In the event of such rejection, the issuer is entitled
by charge-back or otherwise to return of the payment made.
(5) In the case covered by subsection (4) of this section
failure to reject documents within the time specified in
subdivision (b) of said subsection constitutes acceptance of the
documents and makes the payment final in favor of the
beneficiary.
ARTICLE 8. INVESTMENT SECURITIES.
PART 1. SHORT TITLE AND GENERAL MATTERS.
§46-8-101. Short title.
This article may be cited as uniform commercial
code--investment securities.
§46-8-102. Definitions.
(a) In this article:
(1) "Adverse claim" means a claim that a claimant has a
property interest in a financial asset and that it is a violation
of the rights of the claimant for another person to hold,
transfer, or deal with the financial asset.
(2) "Bearer form", as applied to a certificated security,
means a form in which the security is payable to the bearer of
the security certificate according to its terms but not by reason
of an indorsement.
(3) "Broker" means a person defined as a broker or dealer
under the federal securities laws, but without excluding a bank
acting in that capacity.
(4) "Certificated security" means a security that is
represented by a certificate.
(5) "Clearing corporation" means:
(i) A person that is registered as a "clearing agency" under
the federal securities laws;
(ii) A federal reserve bank; or
(iii) Any other person that provides clearance or settlement
services with respect to financial assets that would require it
to register as a clearing agency under the federal securities
laws but for an exclusion or exemption from the registration
requirement, if its activities as a clearing corporation,
including promulgation of rules, are subject to regulation by a
federal or state governmental authority.
(6) "Communicate" means to:
(i) Send a signed writing; or
(ii) Transmit information by any mechanism agreed upon by
the persons transmitting and receiving the information.
(7) "Entitlement holder" means a person identified in the
records of a securities intermediary as the person having a
security entitlement against the securities intermediary. If a
person acquires a security entitlement by virtue of section
8-501(b)(2) or (3), that person is the entitlement holder.
(8) "Entitlement order" means a notification communicated to
a securities intermediary directing transfer or redemption of a
financial asset to which the entitlement holder has a security
entitlement.
(9) "Financial asset", except as otherwise provided in
section 8-103, means:
(i) A security;
(ii) An obligation of a person or a share, participation, or
other interest in a person or in property or an enterprise of a
person, which is, or is of a type, dealt in or traded on
financial markets or which is recognized in any area in which it
is issued or dealt in as a medium for investment; or
(iii) Any property that is held by a securities intermediary
for another person in a securities account if the securities
intermediary has expressly agreed with the other person that the
property is to be treated as a financial asset under this
article. As context requires, the term means either the interest
itself or the means by which a person's claim to it is evidenced,
including a certificated or uncertificated security, a security
certificate or a security entitlement.
(10) "Good faith", for purposes of the obligation of good
faith in the performance or enforcement of contracts or duties
within this article, means honesty in fact and the observance of
reasonable commercial standards of fair dealing.
(11) "Indorsement" means a signature that alone or accompanied by other words is made on a security certificate in
registered form or on a separate document for the purpose of
assigning, transferring or redeeming the security or granting a
power to assign, transfer or redeem it.
(12) "Instruction" means a notification communicated to the
issuer of an uncertificated security which directs that the
transfer of the security be registered or that the security be
redeemed.
(13) "Registered form", as applied to a certificated
security, means a form in which:
(i) The security certificate specifies a person entitled to
the security; and
(ii) A transfer of the security may be registered upon books
maintained for that purpose by or on behalf of the issuer, or the
security certificate so states.
(14) "Securities intermediary" means:
(i) A clearing corporation; or
(ii) A person, including a bank or broker, that in the
ordinary course of its business maintains securities accounts for
others and is acting in that capacity.
(15) "Security", except as otherwise provided in section 8-103, means an obligation of an issuer or a share, participation
or other interest in an issuer or in property or an enterprise of
an issuer:
(i) Which is represented by a security certificate in bearer
or registered form, or the transfer of which may be registered
upon books maintained for that purpose by or on behalf of the
issuer;
(ii) Which is one of a class or series or by its terms is
divisible into a class or series of shares, participations,
interests or obligations; and
(iii) Which:
(A) Is, or is of a type, dealt in or traded on securities
exchanges or securities markets; or
(B) Is a medium for investment and by its terms expressly
provides that it is a security governed by this article.
(16) "Security certificate" means a certificate representing
a security.
(17) "Security entitlement" means the rights and property
interest of an entitlement holder with respect to a financial
asset specified in Part 5.
(18) "Uncertificated security" means a security that is not represented by a certificate.
(b) Other definitions applying to this article and the
sections in which they appear are:
"Appropriat
e person"Sect
ion 8-107
"Control"Section 8-106
"Delivery"Section 8-301
"Investment company security"Section 8-103
"Issuer"Section 8-201
"Overissue"
Section 8-210
"Protected purchaser"Section 8-303
"Securities account"Section 8-501
(c) In addition, article one contains general definitions
and principles of construction and interpretation applicable
throughout this article.
(d) The characterization of a person, business, or
transaction for purposes of this article does not determine the
characterization of the person, business or transaction for
purposes of any other law, regulation or rule.
§46-8-103. Rules for determining whether certain obligations and
interests are securities or financial assets.
(a) A share or similar equity interest issued by a corporation, business trust, joint stock company or similar
entity is a security.
(b) An "investment company security" is a security.
"Investment company security" means a share or similar equity
interest issued by an entity that is registered as an investment
company under the federal investment company laws, an interest in
a unit investment trust that is so registered or a face-amount
certificate issued by a face-amount certificate company that is
so registered. Investment company security does not include an
insurance policy or endowment policy or annuity contract issued
by an insurance company.
(c) An interest in a partnership or limited liability
company is not a security unless it is dealt in or traded on
securities exchanges or in securities markets, its terms
expressly provide that it is a security governed by this article
or it is an investment company security. However, an interest in
a partnership or limited liability company is a financial asset
if it is held in a securities account.
(d) A writing that is a security certificate is governed by
this article and not by article three, even though it also meets
the requirements of that article. However, a negotiable instrument governed by article three is a financial asset if it
is held in a securities account.
(e) An option or similar obligation issued by a clearing
corporation to its participants is not a security, but is a
financial asset.
(f) A commodity contract, as defined in section 9-115, is
not a security or a financial asset.
§46-8-104. Acquisition of security or financial asset or
interest therein.
(a) A person acquires a security or an interest therein,
under this article, if:
(1) The person is a purchaser to whom a security is
delivered pursuant to section 8-301; or
(2) The person acquires a security entitlement to the
security pursuant to section 8-501.
(b) A person acquires a financial asset, other than a
security, or an interest therein, under this article, if the
person acquires a security entitlement to the financial asset.
(c) A person who acquires a security entitlement to a
security or other financial asset has the rights specified in
Part 5, but is a purchaser of any security, security entitlement, or other financial asset held by the securities intermediary only
to the extent provided in section 8-503.
(d) Unless the context shows that a different meaning is
intended, a person who is required by other law, regulation,
rule, or agreement to transfer, deliver, present, surrender,
exchange, or otherwise put in the possession of another person a
security or financial asset satisfies that requirement by causing
the other person to acquire an interest in the security or
financial asset pursuant to subsection (a) or (b) of this
section.
§46-8-105. Notice of adverse claim.
(a) A person has notice of an adverse claim if:
(1) The person knows of the adverse claim;
(2) The person is aware of facts sufficient to indicate that
there is a significant probability that the adverse claim exists
and deliberately avoids information that would establish the
existence of the adverse claim; or
(3) The person has a duty, imposed by statute or regulation,
to investigate whether an adverse claim exists, and the
investigation so required would establish the existence of the
adverse claim.
(b) Having knowledge that a financial asset or interest
therein is or has been transferred by a representative imposes no
duty of inquiry into the rightfulness of a transaction and is not
notice of an adverse claim. However, a person who knows that a
representative has transferred a financial asset or interest
therein in a transaction that is, or whose proceeds are being
used, for the individual benefit of the representative or
otherwise in breach of duty has notice of an adverse claim.
(c) An act or event that creates a right to immediate
performance of the principal obligation represented by a security
certificate or sets a date on or after which the certificate is
to be presented or surrendered for redemption or exchange does
not itself constitute notice of an adverse claim except in the
case of a transfer more than:
(1) One year after a date set for presentment or surrender
for redemption or exchange; or
(2) Six months after a date set for payment of money against
presentation or surrender of the certificate, if money was
available for payment on that date.
(d) A purchaser of a certificated security has notice of an
adverse claim if the security certificate:
(1) Whether in bearer or registered form, has been indorsed
"for collection" or "for surrender" or for some other purpose not
involving transfer; or
(2) Is in bearer form and has on it an unambiguous statement
that it is the property of a person other than the transferor,
but the mere writing of a name on the certificate is not such a
statement.
(e) Filing of a financing statement under article nine is
not notice of an adverse claim to a financial asset.
§46-8-106. Control.
(a) A purchaser has "control" of a certificated security in
bearer form if the certificated security is delivered to the
purchaser.
(b) A purchaser has "control" of a certificated security in
registered form if the certificated security is delivered to the
purchaser and:
(1) The certificate is indorsed to the purchaser or in blank
by an effective indorsement; or
(2) The certificate is registered in the name of the
purchaser, upon original issue or registration of transfer by the
issuer.
(c) A purchaser has "control" of an uncertificated security
if:
(1) The uncertificated security is delivered to the
purchaser; or
(2) The issuer has agreed that it will comply with
instructions originated by the purchaser without further consent
by the registered owner.
(d) A purchaser has "control" of a security entitlement if:
(1) The purchaser becomes the entitlement holder; or
(2) The securities intermediary has agreed that it will
comply with entitlement orders originated by the purchaser
without further consent by the entitlement holder.
(e) If an interest in a security entitlement is granted by
the entitlement holder to the entitlement holder's own securities
intermediary, the securities intermediary has control.
(f) A purchaser who has satisfied the requirements of
subdivision (2), subsection (c) of this section or subdivision
(2), subsection (d) of this section has control even if the
registered owner in the case of subdivision (2), subsection(c) of
this section), subsection (c) of this section or the entitlement
holder in the case of subdivision (2), subsection (d) of this section retains the right to make substitutions for the
uncertificated security or security entitlement, to originate
instructions or entitlement orders to the issuer or securities
intermediary, or otherwise to deal with the uncertificated
security or security entitlement.
(g) An issuer or a securities intermediary may not enter
into an agreement of the kind described in subdivision (2),
subsection (c) of this section or subdivision (2), subsection(d)
of this section without the consent of the registered owner or
entitlement holder, but an issuer or a securities intermediary is
not required to enter into such an agreement even though the
registered owner or entitlement holder so directs. An issuer or
securities intermediary that has entered into such an agreement
is not required to confirm the existence of the agreement to
another party unless requested to do so by the registered owner
or entitlement holder.
§46-8-107. Whether indorsement, instruction, or entitlement
order is effective.
(a) "Appropriate person" means:
(1) With respect to an indorsement, the person specified by
a security certificate or by an effective special indorsement to be entitled to the security;
(2) With respect to an instruction, the registered owner of
an uncertificated security;
(3) With respect to an entitlement order, the entitlement
holder;
(4) If the person designated in subdivision (1), (2) or (3)
of this subsection is deceased, the designated person's successor
taking under other law or the designated person's personal
representative acting for the estate of the decedent; or
(5) If the person designated in subdivision (1), (2) or (3)
of this subsection lacks capacity, the designated person's
guardian, conservator, or other similar representative who has
power under other law to transfer the security or financial
asset.
(b) An indorsement, instruction, or entitlement order is
effective if:
(1) It is made by the appropriate person;
(2) It is made by a person who has power under the law of
agency to transfer the security or financial asset on behalf of
the appropriate person, including, in the case of an instruction
or entitlement order, a person who has control under section 8-106(c)(2) or (d)(2); or
(3) The appropriate person has ratified it or is otherwise
precluded from asserting its ineffectiveness.
(c) An indorsement, instruction, or entitlement order made
by a representative is effective even if:
(1) The representative has failed to comply with a
controlling instrument or with the law of the state having
jurisdiction of the representative relationship, including any
law requiring the representative to obtain court approval of the
transaction; or
(2) The representative's action in making the indorsement,
instruction, or entitlement order or using the proceeds of the
transaction is otherwise a breach of duty.
(d) If a security is registered in the name of or specially
indorsed to a person described as a representative, or if a
securities account is maintained in the name of a person
described as a representative, an indorsement, instruction, or
entitlement order made by the person is effective even though the
person is no longer serving in the described capacity.
(e) Effectiveness of an indorsement, instruction, or
entitlement order is determined as of the date the indorsement, instruction, or entitlement order is made, and an indorsement,
instruction, or entitlement order does not become ineffective by
reason of any later change of circumstances.
§46-8-108. Warranties in direct holding.
(a) A person who transfers a certificated security to a
purchaser for value warrants to the purchaser, and an indorser,
if the transfer is by indorsement, warrants to any subsequent
purchaser, that:
(1) The certificate is genuine and has not been materially
altered;
(2) The transferor or indorser does not know of any fact
that might impair the validity of the security;
(3) There is no adverse claim to the security;
(4) The transfer does not violate any restriction on
transfer;
(5) If the transfer is by indorsement, the indorsement is
made by an appropriate person or if the indorsement is by an
agent, the agent has actual authority to act on behalf of the
appropriate person; and
(6) The transfer is otherwise effective and rightful.
(b) A person who originates an instruction for registration of transfer of an uncertificated security to a purchaser for
value warrants to the purchaser that:
(1) The instruction is made by an appropriate person, or if
the instruction is by an agent, the agent has actual authority to
act on behalf of the appropriate person;
(2) The security is valid;
(3) There is no adverse claim to the security; and
(4) At the time the instruction is presented to the issuer:
(i) The purchaser will be entitled to the registration of
transfer;
(ii) The transfer will be registered by the issuer free from
all liens, security interests, restrictions, and claims other
than those specified in the instruction;
(iii) The transfer will not violate any restriction on
transfer; and
(iv) The requested transfer will otherwise be effective and
rightful.
(c) A person who transfers an uncertificated security to a
purchaser for value and does not originate an instruction in
connection with the transfer warrants that:
(1) The uncertificated security is valid;
(2) There is no adverse claim to the security;
(3) The transfer does not violate any restriction on
transfer; and
(4) The transfer is otherwise effective and rightful.
(d) A person who indorses a security certificate warrants to
the issuer that:
(1) There is no adverse claim to the security; and
(2) The indorsement is effective.
(e) A person who originates an instruction for registration
of transfer of an uncertificated security warrants to the issuer
that:
(1) The instruction is effective; and
(2) At the time the instruction is presented to the issuer
the purchaser will be entitled to the registration of transfer.
(f) A person who presents a certificated security for
registration of transfer or for payment or exchange warrants to
the issuer that the person is entitled to the registration,
payment, or exchange, but a purchaser for value and without
notice of adverse claims to whom transfer is registered warrants
only that the person has no knowledge of any unauthorized
signature in a necessary indorsement.
(g) If a person acts as agent of another in delivering a
certificated security to a purchaser, the identity of the
principal was known to the person to whom the certificate was
delivered, and the certificate delivered by the agent was
received by the agent from the principal or received by the agent
from another person at the direction of the principal, the person
delivering the security certificate warrants only that the
delivering person has authority to act for the principal and does
not know of any adverse claim to the certificated security.
(h) A secured party who redelivers a security certificate
received, or after payment and on order of the debtor delivers
the security certificate to another person, makes only the
warranties of an agent under subsection (g) of this section.
(i) Except as otherwise provided in subsection (g) of this
section, a broker acting for a customer makes to the issuer and
a purchaser the warranties provided in subsections (a) through
(f) of this section. A broker that delivers a security
certificate to its customer, or causes its customer to be
registered as the owner of an uncertificated security, makes to
the customer the warranties provided in subsection (a) or (b) of
this section, and has the rights and privileges of a purchaser under this section. The warranties of and in favor of the broker
acting as an agent are in addition to applicable warranties given
by and in favor of the customer.
§46-8-109. Warranties in indirect holding.
(a) A person who originates an entitlement order to a
securities intermediary warrants to the securities intermediary
that:
(1) The entitlement order is made by an appropriate person,
or if the entitlement order is by an agent, the agent has actual
authority to act on behalf of the appropriate person; and
(2) There is no adverse claim to the security entitlement.
(b) A person who delivers a security certificate to a
securities intermediary for credit to a securities account or
originates an instruction with respect to an uncertificated
security directing that the uncertificated security be credited
to a securities account makes to the securities intermediary the
warranties specified in section 8-108(a) or (b).
(c) If a securities intermediary delivers a security
certificate to its entitlement holder or causes its entitlement
holder to be registered as the owner of an uncertificated
security, the securities intermediary makes to the entitlement holder the warranties specified in section 8-108(a) or (b).
§46-8-110. Applicability; choice of law.
(a) The local law of the issuer's jurisdiction, as specified
in subsection (d) of this section governs:
(1) The validity of a security;
(2) The rights and duties of the issuer with respect to
registration of transfer;
(3) The effectiveness of registration of transfer by the
issuer;
(4) Whether the issuer owes any duties to an adverse
claimant to a security; and
(5) Whether an adverse claim can be asserted against a
person to whom transfer of a certificated or uncertificated
security is registered or a person who obtains control of an
uncertificated security.
(b) The local law of the securities intermediary's
jurisdiction, as specified in subsection (e) of this section,
governs:
(1) Acquisition of a security entitlement from the
securities intermediary;
(2) The rights and duties of the securities intermediary and entitlement holder arising out of a security entitlement;
(3) Whether the securities intermediary owes any duties to
an adverse claimant to a security entitlement; and
(4) Whether an adverse claim can be asserted against a
person who acquires a security entitlement from the securities
intermediary or a person who purchases a security entitlement or
interest therein from an entitlement holder.
(c) The local law of the jurisdiction in which a security
certificate is located at the time of delivery governs whether an
adverse claim can be asserted against a person to whom the
security certificate is delivered.
(d) "Issuer's jurisdiction" means the jurisdiction under
which the issuer of the security is organized or, if permitted by
the law of that jurisdiction, the law of another jurisdiction
specified by the issuer. An issuer organized under the law of
this state may specify the law of another jurisdiction as the law
governing the matters specified in subdivisions (2) through (5),
subsection (a) of this section.
(e) The following rules determine a "securities
intermediary's jurisdiction" for purposes of this section:
(1) If an agreement between the securities intermediary and its entitlement holder specifies that it is governed by the law
of a particular jurisdiction, that jurisdiction is the securities
intermediary's jurisdiction.
(2) If an agreement between the securities intermediary and
its entitlement holder does not specify the governing law as
provided in subdivision (1) of this subsection, but expressly
specifies that the securities account is maintained at an office
in a particular jurisdiction, that jurisdiction is the securities
intermediary's jurisdiction.
(3) If an agreement between the securities intermediary and
its entitlement holder does not specify a jurisdiction as
provided in subdivision (1) or (2) of this subsection, the
securities intermediary's jurisdiction is the jurisdiction in
which is located the office identified in an account statement as
the office serving the entitlement holder's account.
(4) If an agreement between the securities intermediary and
its entitlement holder does not specify a jurisdiction as
provided in subdivision (1) or (2) of this subsection and an
account statement does not identify an office serving the
entitlement holder's account as provided in subdivision (3) of
this subsection, the securities intermediary's jurisdiction is the jurisdiction in which is located the chief executive office
of the securities intermediary.
(f) A securities intermediary's jurisdiction is not
determined by the physical location of certificates representing
financial assets, or by the jurisdiction in which is organized
the issuer of the financial asset with respect to which an
entitlement holder has a security entitlement or by the location
of facilities for data processing or other record keeping
concerning the account.
§46-8-111. Clearing corporation rules.
A rule adopted by a clearing corporation governing rights
and obligations among the clearing corporation and its
participants in the clearing corporation is effective even if the
rule conflicts with this and affects another party who does not
consent to the rule.
§46-8-112. Creditor's legal process.
(a) The interest of a debtor in a certificated security may
be reached by a creditor only by actual seizure of the security
certificate by the officer making the attachment or levy, except
as otherwise provided in subsection (d) of this section. However,
a certificated security for which the certificate has been surrendered to the issuer may be reached by a creditor by legal
process upon the issuer.
(b) The interest of a debtor in an uncertificated security
may be reached by a creditor only by legal process upon the
issuer at its chief executive office in the United States, except
as otherwise provided in subsection (d) of this section.
(c) The interest of a debtor in a security entitlement may
be reached by a creditor only by legal process upon the
securities intermediary with whom the debtor's securities account
is maintained, except as otherwise provided in subsection (d) of
this section.
(d) The interest of a debtor in a certificated security for
which the certificate is in the possession of a secured party, or
in an uncertificated security registered in the name of a secured
party, or a security entitlement maintained in the name of a
secured party, may be reached by a creditor by legal process upon
the secured party.
(e) A creditor whose debtor is the owner of a certificated
security, uncertificated security or security entitlement is
entitled to aid from a court of competent jurisdiction, by
injunction or otherwise, in reaching the certificated security, uncertificated security or security entitlement or in satisfying
the claim by means allowed at law or in equity in regard to
property that cannot readily be reached by other legal process.
§46-8-113. Statute of frauds inapplicable.
A contract or modification of a contract for the sale or
purchase of a security is enforceable whether or not there is a
writing signed or record authenticated by a party against whom
enforcement is sought, even if the contract or modification is
not capable of performance within one year of its making.
§46-8-114. Evidentiary rules concerning certificated securities.
The following rules apply in an action on a certificated
security against the issuer:
(1) Unless specifically denied in the pleadings, each
signature on a security certificate or in a necessary indorsement
is admitted.
(2) If the effectiveness of a signature is put in issue, the
burden of establishing effectiveness is on the party claiming
under the signature, but the signature is presumed to be genuine
or authorized.
(3) If signatures on a security certificate are admitted or
established, production of the certificate entitles a holder to recover on it unless the defendant establishes a defense or a
defect going to the validity of the security.
(4) If it is shown that a defense or defect exists, the
plaintiff has the burden of establishing that the plaintiff or
some person under whom the plaintiff claims is a person against
whom the defense or defect cannot be asserted.
§46-8-115. Securities intermediary and others not liable to
adverse claimant.
A securities intermediary that has transferred a financial
asset pursuant to an effective entitlement order, or a broker or
other agent or bailee that has dealt with a financial asset at
the direction of its customer or principal, is not liable to a
person having an adverse claim to the financial asset, unless the
securities intermediary or broker or other agent or bailee:
(1) Took the action after it had been served with an
injunction, restraining order or other legal process enjoining it
from doing so, issued by a court of competent jurisdiction, and
had a reasonable opportunity to act on the injunction,
restraining order or other legal process; or
(2) Acted in collusion with the wrongdoer in violating the
rights of the adverse claimant; or
(3) In the case of a security certificate that has been
stolen, acted with notice of the adverse claim.
§46-8-116. Securities intermediary as purchaser for value.
A securities intermediary that receives a financial asset
and establishes a security entitlement to the financial asset in
favor of an entitlement holder is a purchaser for value of the
financial asset. A securities intermediary that acquires a
security entitlement to a financial asset from another securities
intermediary acquires the security entitlement for value if the
securities intermediary acquiring the security entitlement
establishes a security entitlement to the financial asset in
favor of an entitlement holder.
PART 2. ISSUE AND ISSUER.
§46-8-201. Issuer.
(a) With respect to an obligation on or a defense to a
security, an "issuer" includes a person that:
(1) Places or authorizes the placing of its name on a
security certificate, other than as authenticating trustee,
registrar, transfer agent or the like, to evidence a share,
participation or other interest in its property or in an
enterprise or to evidence its duty to perform an obligation represented by the certificate;
(2) Creates a share, participation, or other interest in its
property or in an enterprise, or undertakes an obligation, that
is an uncertificated security;
(3) Directly or indirectly creates a fractional interest in
its rights or property, if the fractional interest is represented
by a security certificate; or
(4) Becomes responsible for, or in place of, another person
described as an issuer in this section.
(b) With respect to an obligation on or defense to a
security, a guarantor is an issuer to the extent of its guaranty,
whether or not its obligation is noted on a security certificate.
(c) With respect to a registration of a transfer, issuer
means a person on whose behalf transfer books are maintained.
§46-8-202. Issuer's responsibility and defenses; notice of
defect or defense.
(a) Even against a purchaser for value and without notice,
the terms of a certificated security include terms stated on the
certificate and terms made part of the security by reference on
the certificate to another instrument, indenture, or document or
to a Constitution, statute, ordinance, rule, regulation, order or the like, to the extent the terms referred to do not conflict
with terms stated on the certificate. A reference under this
subsection does not of itself charge a purchaser for value with
notice of a defect going to the validity of the security, even if
the certificate expressly states that a person accepting it
admits notice. The terms of an uncertificated security include
those stated in any instrument, indenture, or document or in a
Constitution, statute, ordinance, rule, regulation, order or the
like, pursuant to which the security is issued.
(b) The following rules apply if an issuer asserts that a
security is not valid:
(1) A security other than one issued by a government or
governmental subdivision, agency or instrumentality, even though
issued with a defect going to its validity, is valid in the hands
of a purchaser for value and without notice of the particular
defect unless the defect involves a violation of a constitutional
provision. In that case, the security is valid in the hands of
a purchaser for value and without notice of the defect, other
than one who takes by original issue.
(2) Subdivision (1) of this subsection applies to an issuer
that is a government or governmental subdivision, agency, or instrumentality only if there has been substantial compliance
with the legal requirements governing the issue or the issuer has
received a substantial consideration for the issue as a whole or
for the particular security and a stated purpose of the issue is
one for which the issuer has power to borrow money or issue the
security.
(c) Except as otherwise provided in section 8-205, lack of
genuineness of a certificated security is a complete defense,
even against a purchaser for value and without notice.
(d) All other defenses of the issuer of a security,
including nondelivery and conditional delivery of a certificated
security, are ineffective against a purchaser for value who has
taken the certificated security without notice of the particular
defense.
(e) This section does not affect the right of a party to
cancel a contract for a security "when, as and if issued" or
"when distributed" in the event of a material change in the
character of the security that is the subject of the contract or
in the plan or arrangement pursuant to which the security is to
be issued or distributed.
(f) If a security is held by a securities intermediary against whom an entitlement holder has a security entitlement
with respect to the security, the issuer may not assert any
defense that the issuer could not assert if the entitlement
holder held the security directly.
§46-8-203. Staleness as notice of defect or defense.
After an act or event, other than a call that has been
revoked, creating a right to immediate performance of the
principal obligation represented by a certificated security or
setting a date on or after which the security is to be presented
or surrendered for redemption or exchange, a purchaser is charged
with notice of any defect in its issue or defense of the issuer,
if the act or event:
(1) Requires the payment of money, the delivery of a
certificated security, the registration of transfer of an
uncertificated security, or any of them on presentation or
surrender of the security certificate, the money or security is
available on the date set for payment or exchange, and the
purchaser takes the security more than one year after that date;
or
(2) Is not covered by subdivision (1) of this section and
the purchaser takes the security more than two years after the date set for surrender or presentation or the date on which
performance became due.
§46-8-204. Effect of issuer's restriction on transfer.
A restriction on transfer of a security imposed by the
issuer, even if otherwise lawful, is ineffective against a person
without knowledge of the restriction unless:
(1) The security is certificated and the restriction is
noted conspicuously on the security certificate; or
(2) The security is uncertificated and the registered owner
has been notified of the restriction.
§46-8-205. Effect of unauthorized signature on security
certificate.
An unauthorized signature placed on a security certificate
before or in the course of issue is ineffective, but the
signature is effective in favor of a purchaser for value of the
certificated security if the purchaser is without notice of the
lack of authority and the signing has been done by:
(1) An authenticating trustee, registrar, transfer agent or
other person entrusted by the issuer with the signing of the
security certificate or of similar security certificates, or the
immediate preparation for signing of any of them; or
(2) An employee of the issuer, or of any of the persons
listed in subdivision (1) of this section, entrusted with
responsible handling of the security certificate.
§46-8-206. Completion or alteration of security certificate.
(a) If a security certificate contains the signatures
necessary to its issue or transfer but is incomplete in any other
respect:
(1) Any person may complete it by filling in the blanks as
authorized; and
(2) Even if the blanks are incorrectly filled in, the
security certificate as completed is enforceable by a purchaser
who took it for value and without notice of the incorrectness.
(b) A complete security certificate that has been improperly
altered, even if fraudulently, remains enforceable, but only
according to its original terms.
§46-8-207. Rights and duties of issuer with respect to
registered owners.
(a) Before due presentment for registration of transfer of
a certificated security in registered form or of an instruction
requesting registration of transfer of an uncertificated
security, the issuer or indenture trustee may treat the registered owner as the person exclusively entitled to vote,
receive notifications, and otherwise exercise all the rights and
powers of an owner.
(b) This article does not affect the liability of the
registered owner of a security for a call, assessment or the
like.
§46-8-208. Effect of signature of authenticating trustee,
registrar, or transfer agent.
(a) A person signing a security certificate as
authenticating trustee, registrar, transfer agent or the like,
warrants to a purchaser for value of the certificated security,
if the purchaser is without notice of a particular defect, that:
(1) The certificate is genuine;
(2) The person's own participation in the issue of the
security is within the person's capacity and within the scope of
the authority received by the person from the issuer; and
(3) The person has reasonable grounds to believe that the
certificated security is in the form and within the amount the
issuer is authorized to issue.
(b) Unless otherwise agreed, a person signing under
subsection (a) of this section does not assume responsibility for the validity of the security in other respects.
§46-8-209. Issuer's lien.
A lien in favor of an issuer upon a certificated security is
valid against a purchaser only if the right of the issuer to the
lien is noted conspicuously on the security certificate.
§46-8-210. Overissue.
(a) In this section, "overissue" means the issue of
securities in excess of the amount the issuer has corporate power
to issue, but an overissue does not occur if appropriate action
has cured the overissue.
(b) Except as otherwise provided in subsections (c) and (d)
of this section, the provisions of this article which validate a
security or compel its issue or reissue do not apply to the
extent that validation, issue or reissue would result in
overissue.
(c) If an identical security not constituting an overissue
is reasonably available for purchase, a person entitled to issue
or validation may compel the issuer to purchase the security and
deliver it if certificated or register its transfer if
uncertificated, against surrender of any security certificate the
person holds.
(d) If a security is not reasonably available for purchase,
a person entitled to issue or validation may recover from the
issuer the price the person or the last purchaser for value paid
for it with interest from the date of the person's demand.
PART 3. TRANSFER OF CERTIFICATED
AND UNCERTIFICATED SECURITIES.
§46-8-301. Delivery.
(a) Delivery of a certificated security to a purchaser
occurs when:
(1) The purchaser acquires possession of the security
certificate;
(2) Another person, other than a securities intermediary,
either acquires possession of the security certificate on behalf
of the purchaser or, having previously acquired possession of the
certificate, acknowledges that it holds for the purchaser; or
(3) A securities intermediary acting on behalf of the
purchaser acquires possession of the security certificate, only
if the certificate is in registered form and has been specially
indorsed to the purchaser by an effective indorsement.
(b) Delivery of an uncertificated security to a purchaser
occurs when:
(1) The issuer registers the purchaser as the registered
owner, upon original issue or registration of transfer; or
(2) Another person, other than a securities intermediary,
either becomes the registered owner of the uncertificated
security on behalf of the purchaser or, having previously become
the registered owner, acknowledges that it holds for the
purchaser.
§46-8-302. Rights of purchaser.
(a) Except as otherwise provided in subsections (b) and (c)
of this section, upon delivery of a certificated or
uncertificated security to a purchaser, the purchaser acquires
all rights in the security that the transferor had or had power
to transfer.
(b) A purchaser of a limited interest acquires rights only
to the extent of the interest purchased.
(c) A purchaser of a certificated security who as a previous
holder had notice of an adverse claim does not improve its
position by taking from a protected purchaser.
§46-8-303. Protected purchaser.
(a) "Protected purchaser" means a purchaser of a
certificated or uncertificated security, or of an interest therein, who:
(1) Gives value;
(2) Does not have notice of any adverse claim to the
security; and
(3) Obtains control of the certificated or uncertificated
security.
(b) In addition to acquiring the rights of a purchaser, a
protected purchaser also acquires its interest in the security
free of any adverse claim.
§46-8-304. Indorsement.
(a) An indorsement may be in blank or special. An
indorsement in blank includes an indorsement to bearer. A
special indorsement specifies to whom a security is to be
transferred or who has power to transfer it. A holder may
convert a blank indorsement to a special indorsement.
(b) An indorsement purporting to be only of part of a
security certificate representing units intended by the issuer to
be separately transferable is effective to the extent of the
indorsement.
(c) An indorsement, whether special or in blank, does not
constitute a transfer until delivery of the certificate on which it appears or, if the indorsement is on a separate document,
until delivery of both the document and the certificate.
(d) If a security certificate in registered form has been
delivered to a purchaser without a necessary indorsement, the
purchaser may become a protected purchaser only when the
indorsement is supplied. However, against a transferor, a
transfer is complete upon delivery and the purchaser has a
specifically enforceable right to have any necessary indorsement
supplied.
(e) An indorsement of a security certificate in bearer form
may give notice of an adverse claim to the certificate, but it
does not otherwise affect a right to registration that the holder
possesses.
(f) Unless otherwise agreed, a person making an indorsement
assumes only the obligations provided in section 8-108 and not an
obligation that the security will be honored by the issuer.
§46-8-305. Instruction.
(a) If an instruction has been originated by an appropriate
person but is incomplete in any other respect, any person may
complete it as authorized and the issuer may rely on it as
completed, even though it has been completed incorrectly.
(b) Unless otherwise agreed, a person initiating an
instruction assumes only the obligations imposed by section 8-108
and not an obligation that the security will be honored by the
issuer.
§46-8-306. Effect of guaranteeing signature, indorsement, or
instruction.
(a) A person who guarantees a signature of an indorser of a
security certificate warrants that at the time of signing:
(1) The signature was genuine;
(2) The signer was an appropriate person to indorse, or if
the signature is by an agent, the agent had actual authority to
act on behalf of the appropriate person; and
(3) The signer had legal capacity to sign.
(b) A person who guarantees a signature of the originator of
an instruction warrants that at the time of signing:
(1) The signature was genuine;
(2) The signer was an appropriate person to originate the
instruction, or if the signature is by an agent, the agent had
actual authority to act on behalf of the appropriate person, if
the person specified in the instruction as the registered owner
was, in fact, the registered owner, as to which fact the signature guarantor does not make a warranty; and
(3) The signer had legal capacity to sign.
(c) A person who specially guarantees the signature of an
originator of an instruction makes the warranties of a signature
guarantor under subsection (b) of this section and also warrants
that at the time the instruction is presented to the issuer:
(1) The person specified in the instruction as the
registered owner of the uncertificated security will be the
registered owner; and
(2) The transfer of the uncertificated security requested in
the instruction will be registered by the issuer free from all
liens, security interests, restrictions, and claims other than
those specified in the instruction.
(d) A guarantor under subsections (a) and (b) of this
section or a special guarantor under subsection (c) of this
section does not otherwise warrant the rightfulness of the
transfer.
(e) A person who guarantees an indorsement of a security
certificate makes the warranties of a signature guarantor under
subsection (a) of this section and also warrants the rightfulness
of the transfer in all respects.
(f) A person who guarantees an instruction requesting the
transfer of an uncertificated security makes the warranties of a
special signature guarantor under subsection (c) of this section
and also warrants the rightfulness of the transfer in all
respects.
(g) An issuer may not require a special guaranty of
signature, a guaranty of indorsement, or a guaranty of
instruction as a condition to registration of transfer.
(h) The warranties under this section are made to a person
taking or dealing with the security in reliance on the guaranty,
and the guarantor is liable to the person for loss resulting from
their breach. An indorser or originator of an instruction whose
signature, indorsement, or instruction has been guaranteed is
liable to a guarantor for any loss suffered by the guarantor as
a result of breach of the warranties of the guarantor.
§46-8-307. Purchaser's right to requisites for registration of
transfer.
Unless otherwise agreed, the transferor of a security on due
demand shall supply the purchaser with proof of authority to
transfer or with any other requisite necessary to obtain
registration of the transfer of the security, but if the transfer is not for value, a transferor need not comply unless the
purchaser pays the necessary expenses. If the transferor fails
within a reasonable time to comply with the demand, the purchaser
may reject or rescind the transfer.
PART 4. REGISTRATION.
§46-8-401. Duty of issuer to register transfer.
(a) If a certificated security in registered form is
presented to an issuer with a request to register transfer or an
instruction is presented to an issuer with a request to register
transfer of an uncertificated security, the issuer shall register
the transfer as requested if:
(1) Under the terms of the security the person seeking
registration of transfer is eligible to have the security
registered in its name;
(2) The indorsement or instruction is made by the
appropriate person or by an agent who has actual authority to act
on behalf of the appropriate person;
(3) Reasonable assurance is given that the indorsement or
instruction is genuine and authorized (section 8-402);
(4) Any applicable law relating to the collection of taxes
has been complied with;
(5) The transfer does not violate any restriction on
transfer imposed by the issuer in accordance with section 8-204;
(6) A demand that the issuer not register transfer has not
become effective under section 8-403, or the issuer has complied
with section 8-403(b) but no legal process or indemnity bond is
obtained as provided in section 8-403(d); and
(7) The transfer is in fact rightful or is to a protected
purchaser.
(b) If an issuer is under a duty to register a transfer of
a security, the issuer is liable to a person presenting a
certificated security or an instruction for registration or to
the person's principal for loss resulting from unreasonable delay
in registration or failure or refusal to register the transfer.
§46-8-402. Assurance that indorsement or instruction is
effective.
(a) An issuer may require the following assurance that each
necessary indorsement or each instruction is genuine and
authorized:
(1) In all cases, a guaranty of the signature of the person
making an indorsement or originating an instruction including, in
the case of an instruction, reasonable assurance of identity;
(2) If the indorsement is made or the instruction is
originated by an agent, appropriate assurance of actual authority
to sign;
(3) If the indorsement is made or the instruction is
originated by a fiduciary pursuant to section 8-107(a)(4) or
(a)(5), appropriate evidence of appointment or incumbency;
(4) If there is more than one fiduciary, reasonable
assurance that all who are required to sign have done so; and
(5) If the indorsement is made or the instruction is
originated by a person not covered by another provision of this
subsection, assurance appropriate to the case corresponding as
nearly as may be to the provisions of this subsection.
(b) An issuer may elect to require reasonable assurance
beyond that specified in this section.
(c) In this section:
(1) "Guaranty of the signature" means a guaranty signed by
or on behalf of a person reasonably believed by the issuer to be
responsible. An issuer may adopt standards with respect to
responsibility if they are not manifestly unreasonable.
(2) "Appropriate evidence of appointment or incumbency"
means:
(i) In the case of a fiduciary appointed or qualified by a
court, a certificate issued by or under the direction or
supervision of the court or an officer thereof and dated within
sixty days before the date of presentation for transfer; or
(ii) In any other case, a copy of a document showing the
appointment or a certificate issued by or on behalf of a person
reasonably believed by an issuer to be responsible or, in the
absence of that document or certificate, other evidence the
issuer reasonably considered appropriate.
§46-8-403. Demand that issuer not register transfer.
(a) A person who is an appropriate person to make an
indorsement or originate an instruction may demand that the
issuer not register transfer of a security by communicating to
the issuer a notification that identifies the registered owner
and the issue of which the security is a part and provides an
address for communications directed to the person making the
demand. The demand is effective only if it is received by the
issuer at a time and in a manner affording the issuer reasonable
opportunity to act on it.
(b) If a certificated security in registered form is
presented to an issuer with a request to register transfer or an instruction is presented to an issuer with a request to register
transfer of an uncertificated security after a demand that the
issuer not register transfer has become effective, the issuer
shall promptly communicate to: (i) The person who initiated the
demand at the address provided in the demand; and (ii) the person
who presented the security for registration of transfer or
initiated the instruction requesting registration of transfer a
notification stating that:
(1) The certificated security has been presented for
registration of transfer or instruction for registration of
transfer of uncertificated security has been received;
(2) A demand that the issuer not register transfer had
previously been received; and
(3) The issuer will withhold registration of transfer for a
period of time stated in the notification in order to provide the
person who initiated the demand an opportunity to obtain legal
process or an indemnity bond.
(c) The period described in subdivision (3), subsection (b)
of this section may not exceed thirty days after the date of
communication of the notification. A shorter period may be
specified by the issuer if it is not manifestly unreasonable.
(d) An issuer is not liable to a person who initiated a
demand that the issuer not register transfer for any loss the
person suffers as a result of registration of a transfer pursuant
to an effective indorsement or instruction if the person who
initiated the demand does not, within the time stated in the
issuer's communication, either:
(1) Obtain an appropriate restraining order, injunction or
other process from a court of competent jurisdiction enjoining
the issuer from registering the transfer; or
(2) File with the issuer an indemnity bond, sufficient in
the issuer's judgment to protect the issuer and any transfer
agent, registrar or other agent of the issuer involved from any
loss it or they may suffer by refusing to register the transfer.
(e) This section does not relieve an issuer from liability
for registering transfer pursuant to an indorsement or
instruction that was not effective.
§46-8-404. Wrongful registration.
(a) Except as otherwise provided in section 8-406, an issuer
is liable for wrongful registration of transfer if the issuer has
registered a transfer of a security to a person not entitled to
it, and the transfer was registered:
(1) Pursuant to an ineffective indorsement or instruction;
(2) After a demand that the issuer not register transfer
became effective under section 8-403(a) and the issuer did not
comply with section 8-403(b);
(3) After the issuer had been served with an injunction,
restraining order, or other legal process enjoining it from
registering the transfer, issued by a court of competent
jurisdiction, and the issuer had a reasonable opportunity to act
on the injunction, restraining order, or other legal process; or
(4) By an issuer acting in collusion with the wrongdoer.
(b) An issuer that is liable for wrongful registration of
transfer under subsection (a) of this section on demand shall
provide the person entitled to the security with a like
certificated or uncertificated security, and any payments or
distributions that the person did not receive as a result of the
wrongful registration. If an overissue would result, the
issuer's liability to provide the person with a like security is
governed by section 8-210.
(c) Except as otherwise provided in subsection (a) of this
section or in a law relating to the collection of taxes, an
issuer is not liable to an owner or other person suffering loss as a result of the registration of a transfer of a security if
registration was made pursuant to an effective indorsement or
instruction.
§46-8-405. Replacement of lost, destroyed, or wrongfully taken
security certificate.
(a) If an owner of a certificated security, whether in
registered or bearer form, claims that the certificate has been
lost, destroyed, or wrongfully taken, the issuer shall issue a
new certificate if the owner:
(1) So requests before the issuer has notice that the
certificate has been acquired by a protected purchaser;
(2) Files with the issuer a sufficient indemnity bond; and
(3) Satisfies other reasonable requirements imposed by the
issuer.
(b) If, after the issue of a new security certificate, a
protected purchaser of the original certificate presents it for
registration of transfer, the issuer shall register the transfer
unless an overissue would result. In that case, the issuer's
liability is governed by section 8-210. In addition to any
rights on the indemnity bond, an issuer may recover the new
certificate from a person to whom it was issued or any person taking under that person, except a protected purchaser.
§46-8-406. Obligation to notify issuer of lost, destroyed, or
wrongfully taken security certificate.
If a security certificate has been lost, apparently
destroyed, or wrongfully taken, and the owner fails to notify the
issuer of that fact within a reasonable time after the owner has
notice of it and the issuer registers a transfer of the security
before receiving notification, the owner may not assert against
the issuer a claim for registering the transfer under section
8-404 or a claim to a new security certificate under section
8-405.
§46-8-407. Authenticating trustee, transfer agent, and
registrar.
A person acting as authenticating trustee, transfer agent,
registrar, or other agent for an issuer in the registration of a
transfer of its securities, in the issue of new security
certificates or uncertificated securities or in the cancellation
of surrendered security certificates has the same obligation to
the holder or owner of a certificated or uncertificated security
with regard to the particular functions performed as the issuer
has in regard to those functions.
PART 5. SECURITY ENTITLEMENTS.
§46-8-501. Securities account; acquisition of security
entitlement from securities intermediary.
(a) "Securities account" means an account to which a
financial asset is or may be credited in accordance with an
agreement under which the person maintaining the account
undertakes to treat the person for whom the account is maintained
as entitled to exercise the rights that comprise the financial
asset.
(b) Except as otherwise provided in subsections (d) and (e)
of this section, a person acquires a security entitlement if a
securities intermediary:
(1) Indicates by book entry that a financial asset has been
credited to the person's securities account;
(2) Receives a financial asset from the person or acquires
a financial asset for the person and, in either case, accepts it
for credit to the person's securities account; or
(3) Becomes obligated under other law, regulation, or rule
to credit a financial asset to the person's securities account.
(c) If a condition of subsection (b) of this section has
been met, a person has a security entitlement even though the securities intermediary does not itself hold the financial asset.
(d) If a securities intermediary holds a financial asset for
another person, and the financial asset is registered in the name
of, payable to the order of, or specially indorsed to the other
person, and has not been indorsed to the securities intermediary
or in blank, the other person is treated as holding the financial
asset directly rather than as having a security entitlement with
respect to the financial asset.
(e) Issuance of a security is not establishment of a
security entitlement.
§46-8-502. Assertion of adverse claim against entitlement
holder.
An action based on an adverse claim to a financial asset,
whether framed in conversion, replevin, constructive trust,
equitable lien or other theory, may not be asserted against a
person who acquires a security entitlement under section 8-501
for value and without notice of the adverse claim.
§46-8-503. Property interest of entitlement holder in financial
asset held by securities intermediary.
(a) To the extent necessary for a securities intermediary to
satisfy all security entitlements with respect to a particular financial asset, all interests in that financial asset held by
the securities intermediary are held by the securities
intermediary for the entitlement holders, are not property of the
securities intermediary, and are not subject to claims of
creditors of the securities intermediary, except as otherwise
provided in section 8-511.
(b) An entitlement holder's property interest with respect
to a particular financial asset under subsection (a) of this
section is a pro rata property interest in all interests in that
financial asset held by the securities intermediary, without
regard to the time the entitlement holder acquired the security
entitlement or the time the securities intermediary acquired the
interest in that financial asset.
(c) An entitlement holder's property interest with respect
to a particular financial asset under subsection (a) of this
section may be enforced against the securities intermediary only
by exercise of the entitlement holder's rights under sections
8-505 through 8-508.
(d) An entitlement holder's property interest with respect
to a particular financial asset under subsection (a) of this
section may be enforced against a purchaser of the financial asset or interest therein only if:
(1) Insolvency proceedings have been initiated by or against
the securities intermediary;
(2) The securities intermediary does not have sufficient
interests in the financial asset to satisfy the security
entitlements of all of its entitlement holders to that financial
asset;
(3) The securities intermediary violated its obligations
under section 8-504 by transferring the financial asset or
interest therein to the purchaser; and
(4) The purchaser is not protected under subsection (e) of
this section. The trustee or other liquidator, acting on behalf
of all entitlement holders having security entitlements with
respect to a particular financial asset, may recover the
financial asset, or interest therein, from the purchaser. If the
trustee or other liquidator elects not to pursue that right, an
entitlement holder whose security entitlement remains unsatisfied
has the right to recover its interest in the financial asset from
the purchaser.
(e) An action based on the entitlement holder's property
interest with respect to a particular financial asset under subsection (a) of this section, whether framed in conversion,
replevin, constructive trust, equitable lien or other theory, may
not be asserted against any purchaser of a financial asset or
interest therein who gives value, obtains control and does not
act in collusion with the securities intermediary in violating
the securities intermediary's obligations under section 8-504.
§46-8-504. Duty of securities intermediary to maintain financial
asset.
(a) A securities intermediary shall promptly obtain and
thereafter maintain a financial asset in a quantity corresponding
to the aggregate of all security entitlements it has established
in favor of its entitlement holders with respect to that
financial asset. The securities intermediary may maintain those
financial assets directly or through one or more other securities
intermediaries.
(b) Except to the extent otherwise agreed by its entitlement
holder, a securities intermediary may not grant any security
interests in a financial asset it is obligated to maintain
pursuant to subsection (a) of this section.
(c) A securities intermediary satisfies the duty in
subsection (a) of this section if:
(1) The securities intermediary acts with respect to the
duty as agreed upon by the entitlement holder and the securities
intermediary; or
(2) In the absence of agreement, the securities intermediary
exercises due care in accordance with reasonable commercial
standards to obtain and maintain the financial asset.
(d) This section does not apply to a clearing corporation
that is itself the obligor of an option or similar obligation to
which its entitlement holders have security entitlements.
§46-8-505. Duty of securities intermediary with respect to
payments and distributions.
(a) A securities intermediary shall take action to obtain a
payment or distribution made by the issuer of a financial asset.
A securities intermediary satisfies the duty if:
(1) The securities intermediary acts with respect to the
duty as agreed upon by the entitlement holder and the securities
intermediary; or
(2) In the absence of agreement, the securities intermediary
exercises due care in accordance with reasonable commercial
standards to attempt to obtain the payment or distribution.
(b) A securities intermediary is obligated to its entitlement holder for a payment or distribution made by the
issuer of a financial asset if the payment or distribution is
received by the securities intermediary.
§46-8-506. Duty of securities intermediary to exercise rights as
directed by entitlement holder.
A securities intermediary shall exercise rights with respect
to a financial asset if directed to do so by an entitlement
holder. A securities intermediary satisfies the duty if:
(1) The securities intermediary acts with respect to the
duty as agreed upon by the entitlement holder and the securities
intermediary; or
(2) In the absence of agreement, the securities intermediary
either places the entitlement holder in a position to exercise
the rights directly or exercises due care in accordance with
reasonable commercial standards to follow the direction of the
entitlement holder.
§46-8-507. Duty of securities intermediary to comply with
entitlement order.
(a) A securities intermediary shall comply with an
entitlement order if the entitlement order is originated by the
appropriate person, the securities intermediary has had
reasonable opportunity to assure itself that the entitlement order is genuine and authorized, and the securities intermediary
has had reasonable opportunity to comply with the entitlement
order. A securities intermediary satisfies the duty if:
(1) The securities intermediary acts with respect to the
duty as agreed upon by the entitlement holder and the securities
intermediary; or
(2) In the absence of agreement, the securities intermediary
exercises due care in accordance with reasonable commercial
standards to comply with the entitlement order.
(b) If a securities intermediary transfers a financial asset
pursuant to an ineffective entitlement order, the securities
intermediary shall reestablish a security entitlement in favor of
the person entitled to it, and pay or credit any payments or
distributions that the person did not receive as a result of the
wrongful transfer. If the securities intermediary does not
reestablish a security entitlement, the securities intermediary
is liable to the entitlement holder for damages.
§46-8-508. Duty of securities intermediary to change entitlement
holder's position to other form of security
holding.
A securities intermediary shall act at the direction of an entitlement holder to change a security entitlement into another
available form of holding for which the entitlement holder is
eligible, or to cause the financial asset to be transferred to a
securities account of the entitlement holder with another
securities intermediary. A securities intermediary satisfies the
duty if:
(1) The securities intermediary acts as agreed upon by the
entitlement holder and the securities intermediary; or
(2) In the absence of agreement, the securities intermediary
exercises due care in accordance with reasonable commercial
standards to follow the direction of the entitlement holder.
§46-8-509. Specification of duties of securities intermediary by
other statute or regulation; manner of performance
of duties of securities intermediary and exercise
of rights of entitlement holder.
(a) If the substance of a duty imposed upon a securities
intermediary by sections 8-504 through 8-508 is the subject of
other statute, regulation or rule, compliance with that statute,
regulation or rule satisfies the duty.
(b) To the extent that specific standards for the
performance of the duties of a securities intermediary or the
exercise of the rights of an entitlement holder are not specified by other statute, regulation or rule or by agreement between the
securities intermediary and entitlement holder, the securities
intermediary shall perform its duties and the entitlement holder
shall exercise its rights in a commercially reasonable manner.
(c) The obligation of a securities intermediary to perform
the duties imposed by sections 8-504 through 8-508 is subject to:
(1) Rights of the securities intermediary arising out of a
security interest under a security agreement with the entitlement
holder or otherwise; and
(2) Rights of the securities intermediary under other law,
regulation, rule, or agreement to withhold performance of its
duties as a result of unfulfilled obligations of the entitlement
holder to the securities intermediary.
(d) Sections 8-504 through 8-508 do not require a securities
intermediary to take any action that is prohibited by other
statute, regulation or rule.
§46-8-510. Rights of purchaser of security entitlement from
entitlement holder.
(a) An action based on an adverse claim to a financial asset
or security entitlement, whether framed in conversion, replevin,
constructive trust, equitable lien or other theory, may not be asserted against a person who purchases a security entitlement,
or an interest therein, from an entitlement holder if the
purchaser gives value, does not have notice of the adverse claim,
and obtains control.
(b) If an adverse claim could not have been asserted against
an entitlement holder under section 8-502, the adverse claim
cannot be asserted against a person who purchases a security
entitlement, or an interest therein, from the entitlement holder.
(c) In a case not covered by the priority rules in article
nine, a purchaser for value of a security entitlement, or an
interest therein, who obtains control has priority over a
purchaser of a security entitlement, or an interest therein, who
does not obtain control. Purchasers who have control rank
equally, except that a securities intermediary as purchaser has
priority over a conflicting purchaser who has control unless
otherwise agreed by the securities intermediary.
§46-8-511. Priority among security interests and entitlement
holders.
(a) Except as otherwise provided in subsections (b) and (c)
of this section, if a securities intermediary does not have
sufficient interests in a particular financial asset to satisfy both its obligations to entitlement holders who have security
entitlements to that financial asset and its obligation to a
creditor of the securities intermediary who has a security
interest in that financial asset, the claims of entitlement
holders, other than the creditor, have priority over the claim of
the creditor.
(b) A claim of a creditor of a securities intermediary who
has a security interest in a financial asset held by a securities
intermediary has priority over claims of the securities
intermediary's entitlement holders who have security entitlements
with respect to that financial asset if the creditor has control
over the financial asset.
(c) If a clearing corporation does not have sufficient
financial assets to satisfy both its obligations to entitlement
holders who have security entitlements with respect to a
financial asset and its obligation to a creditor of the clearing
corporation who has a security interest in that financial asset,
the claim of the creditor has priority over the claims of
entitlement holders.
PART 6. TRANSITION PROVISIONS FOR REVISED ARTICLE 8 AND
CONFORMING AMENDMENTS TO ARTICLES 1, 5, 9 AND 10.
§46-8-601.
Savings clause.
(a) This article does not affect an action or proceeding
commenced before this article takes effect.
(b) If a security interest in a security is perfected at the
date this article takes effect and the action by which the
security interest was perfected would suffice to perfect a
security interest under this article, no further action is
required to continue perfection. If a security interest in a
security is perfected at the date this article takes effect but
the action by which the security interest was perfected would not
suffice to perfect a security interest under this article, the
security interest remains perfected for a period of four months
after the effective date and continues perfected thereafter if
appropriate action to perfect under this article is taken within
that period. If a security interest is perfected at the date
this article takes effect and the security interest can be
perfected by filing under this article, a financing statement
signed by the secured party instead of the debtor may be filed
within that period to continue perfection or thereafter to
perfect.
ARTICLE 9. SECURED TRANSACTIONS; SALES OF ACCOUNTS AND CHATTEL PAPER.
§46-9-103. Perfection of security interests in multiple state
transactions.
(1)
Documents, instruments and ordinary goods. --
(a) This subsection applies to documents and instruments and
to goods other than those covered by a certificate of title
described in subsection (2) of this section, mobile goods
described in subsection (3), and minerals described in subsection
(5) of this section.
(b) Except as otherwise provided in this subsection,
perfection and the effect of perfection or nonperfection of a
security interest in collateral are governed by the law of the
jurisdiction where the collateral is when the last event occurs
on which is based the assertion that the security interest is
perfected or unperfected.
(c) If the parties to a transaction creating a purchase
money security interest in goods in one jurisdiction understand
at the time that the security interest attaches that the goods
will be kept in another jurisdiction, then the law of the other
jurisdiction governs the perfection and the effect of perfection
or nonperfection of the security interest from the time it attaches until thirty days after the debtor receives possession
of the goods and thereafter if the goods are taken to the other
jurisdiction before the end of the thirty-day period.
(d) When collateral is brought into and kept in this state
while subject to a security interest perfected under the law of
the jurisdiction from which the collateral was removed, the
security interest remains perfected, but if action is required by
Part 3 of this article to perfect the security interest:
(i) If the action is not taken before the expiration of the
period of perfection in the other jurisdiction or the end of four
months after the collateral is brought into this state, whichever
period first expires, the security interest becomes unperfected
at the end of that period and is thereafter deemed to have been
unperfected as against a person who became a purchaser after
removal;
(ii) If the action is taken before the expiration of the
period specified in paragraph (i) of this subdivision, the
security interest continues perfected thereafter;
(iii) For the purpose of priority over a buyer of consumer
goods (subsection (2) of section 9-307), the period of the
effectiveness of a filing in the jurisdiction from which the collateral is removed is governed by the rules with respect to
perfection in paragraphs (i) and (ii) of this subdivision.
(2)
Certificate of title. --
(a) This subsection applies to goods covered by a
certificate of title issued under a statute of this state or of
another jurisdiction under the law of which indication of a
security interest on the certificate is required as a condition
of perfection.
(b) Except as otherwise provided in this subsection,
perfection and the effect of perfection or nonperfection of the
security interest are governed by the law (including the conflict
of laws rules) of the jurisdiction issuing the certificate until
four months after the goods are removed from that jurisdiction
and thereafter until the goods are registered in another
jurisdiction, but in any event not beyond surrender of the
certificate. After the expiration of that period, the goods are
not covered by the certificate of title within the meaning of
this section.
(c) Except with respect to the rights of a buyer described
in the next paragraph, a security interest, perfected in another
jurisdiction otherwise than by notation on a certificate of title, in goods brought into this state and thereafter covered by
a certificate of title issued by this state is subject to the
rules stated in subdivision (d) subsection (1) of this section.
(d) If goods are brought into this state while a security
interest therein is perfected in any manner under the law of the
jurisdiction from which the goods are removed and a certificate
of title is issued by this state and the certificate does not
show that the goods are subject to the security interest or that
they may be subject to security interests not shown on the
certificate, the security interest is subordinate to the rights
of a buyer of the goods who is not in the business of selling
goods of that kind to the extent that he gives value and receives
delivery of the goods after issuance of the certificate and
without knowledge of the security interest.
(3)
Accounts, general intangibles and mobile goods. --
(a) This subsection applies to accounts (other than an
account described in subsection (5) of this section on minerals)
and general intangibles (other than uncertificated securities)
and to goods which are mobile and which are of a type normally
used in more than one jurisdiction, such as motor vehicles,
trailers, rolling stock, airplanes, shipping containers, road building and construction machinery and commercial harvesting
machinery and the like, if the goods are equipment or are
inventory leased or held for lease by the debtor to others, and
are not covered by a certificate of title described in subsection
(2) of this section.
(b) The law (including the conflict of laws rules) of the
jurisdiction in which the debtor is located governs the
perfection and the effect of perfection or nonperfection of the
security interest.
(c) If, however, the debtor is located in a jurisdiction
which is not a part of the United States, and which does not
provide for perfection of the security interest by filing or
recording in that jurisdiction, the law of the jurisdiction in
the United States in which the debtor has its major executive
office in the United States governs the perfection and the effect
of perfection or nonperfection of the security interest through
filing. In the alternative, if the debtor is located in a
jurisdiction which is not a part of the United States or Canada
and the collateral is accounts or general intangibles for money
due or to become due, the security interest may be perfected by
notification to the account debtor. As used in this paragraph, "United States" includes its territories and possessions and the
Commonwealth of Puerto Rico.
(d) A debtor shall be deemed located at his place of
business if he has one, at his chief executive office if he has
more than one place of business, otherwise at his residence. If,
however, the debtor is a foreign air carrier under the federal
Aviation Act of 1958, as amended, it shall be deemed located at
the designated office of the agent upon whom service of process
may be made on behalf of the foreign air carrier.
(e) A security interest perfected under the law of the
jurisdiction of the location of the debtor is perfected until the
expiration of four months after a change of the debtor's location
to another jurisdiction, or until perfection would have ceased by
the law of the first jurisdiction, whichever period first
expires. Unless perfected in the new jurisdiction before the end
of that period, it becomes unperfected thereafter and is deemed
to have been unperfected as against a person who became a
purchaser after the change.
(4)
Chattel paper. --
The rules stated for goods in subsection (1) of this section
apply to a possessory security interest in chattel paper. The rules stated for accounts in subsection (3) of this section apply
to a nonpossessory security interest in chattel paper, but the
security interest may not be perfected by notification to the
account debtor.
(5)
Minerals. --
Perfection and the effect of perfection or nonperfection of
a security interest which is created by a debtor who has an
interest in minerals or the like (including oil and gas) before
extraction and which attaches thereto as extracted, or which
attaches to an account resulting from the sale thereof at the
wellhead or minehead are governed by the law (including the
conflict of laws rules) of the jurisdiction wherein the wellhead
or minehead is located.
(6)
Investment property. --
(a) This subsection applies to investment property.
(b) Except as otherwise provided in subdivision (f) of this
section, during the time that a security certificate is located
in a jurisdiction, perfection of a security interest, the effect
of perfection or nonperfection, and the priority of a security
interest in the certificated security represented thereby are
governed by the local law of that jurisdiction.
(c) Except as otherwise provided in subdivision (f) of this
section, perfection of a security interest, the effect of
perfection or nonperfection, and the priority of a security
interest in an uncertificated security are governed by the local
law of the issuer's jurisdiction as specified in section
8-110(d).
(d) Except as otherwise provided in subdivision (f) of this
section, perfection of a security interest, the effect of
perfection or nonperfection, and the priority of a security
interest in a security entitlement or securities account are
governed by the local law of the securities intermediary's
jurisdiction as specified in section 8-110(e).
(e) Except as otherwise provided in paragraph (f),
perfection of a security interest, the effect of perfection or
nonperfection, and the priority of a security interest in a
commodity contract or commodity account are governed by the local
law of the commodity intermediary's jurisdiction. The following
rules determine a "commodity intermediary's jurisdiction" for
purposes of this paragraph:
(i) If an agreement between the commodity intermediary and
commodity customer specifies that it is governed by the law of a particular jurisdiction, that jurisdiction is the commodity
intermediary's jurisdiction.
(ii) If an agreement between the commodity intermediary and
commodity customer does not specify the governing law as provided
in paragraph (i) of this subdivision, but expressly specifies
that the commodity account is maintained at an office in a
particular jurisdiction, that jurisdiction is the commodity
intermediary's jurisdiction.
(iii) If an agreement between the commodity intermediary and
commodity customer does not specify a jurisdiction as provided in
paragraphs (i) or (ii) of this subdivision, the commodity
intermediary's jurisdiction is the jurisdiction in which is
located the office identified in an account statement as the
office serving the commodity customer's account.
(iv) If an agreement between the commodity intermediary and
commodity customer does not specify a jurisdiction as provided in
subparagraph (i) or (ii) of this subdivision and an account
statement does not identify an office serving the commodity
customer's account as provided in paragraph (iii) of this
subdivision, the commodity intermediary's jurisdiction is the
jurisdiction in which is located the chief executive office of the commodity intermediary.
(f) Perfection of a security interest by filing, automatic
perfection of a security interest in investment property granted
by a broker or securities intermediary, and automatic perfection
of a security interest in a commodity contract or commodity
account granted by a commodity intermediary are governed by the
local law of the jurisdiction in which the debtor is located.
§46-9-105. Definitions and index of definitions.
(1) In this article unless the context otherwise requires:
(a) "Account debtor" means the person who is obligated on an
account, chattel paper or general intangible;
(b) "Chattel paper" means a writing or writings which
evidence both a monetary obligation and a security interest in or
a lease of specific goods, but a charter or other contract
involving the use or hire of a vessel is not chattel paper. When
a transaction is evidenced both by such a security agreement or
a lease and by an instrument or a series of instruments, the
group of writings taken together constitutes chattel paper;
(c) "Collateral" means the property subject to a security
interest, and includes accounts, and chattel paper which have
been sold;
(d) "Debtor" means the person who owes payment or other
performance of the obligation secured, whether or not he owns or
has rights in the collateral, and includes the seller of
accounts, or chattel paper. Where the debtor and the owner of
the collateral are not the same person, the term "debtor" means
the owner of the collateral in any provision of the article
dealing with the collateral, the obligor in any provision dealing
with the obligation, and may include both where the context so
requires;
(e) "Deposit account" means a demand, time, savings,
passbook or like account maintained with a bank, savings and loan
association, credit union or like organization, other than an
account evidenced by a certificate of deposit;
(f) "Document" means document of title as defined in the
general definitions of article 1 (section 1-201), and a receipt
of the kind described in subsection (2) of section 7- 201;
(g) "Encumbrance" includes real estate mortgages and other
liens on real estate and all other rights in real estate that are
not ownership interests;
(h) "Goods" includes all things which are moveable at the
time the security interest attaches or which are fixtures (section 9-313), but does not include money, documents,
instruments, investment property, commodity contracts, accounts,
chattel paper, general intangibles, or minerals or the like
(including oil and gas) before extraction. "Goods" also includes
standing timber which is to be cut and removed under a conveyance
or contract for sale, the unborn young of animals, and growing
crops;
(i) "Instrument" means a negotiable instrument (defined in
section 3-104), or any other writing which evidences a right to
the payment of money and is not itself a security agreement or
lease and is of a type which is in ordinary course of business
transferred by delivery with any necessary endorsement or
assignment. The term does not include investment property;
(j) "Mortgage" means a consensual interest created by a real
estate mortgage, a trust deed on real estate, or the like;
(k) An advance is made "pursuant to commitment" if the
secured party has bound himself to make it, whether or not a
subsequent event of default or other event not within his control
has relieved or may relieve him from his obligation;
(l) "Security agreement" means an agreement which creates or
provides for a security interest;
(m) "Secured party" means a lender, seller or other person
in whose favor there is a security interest, including a person
to whom accounts or chattel paper have been sold. When the
holders of obligations issued under an indenture of trust,
equipment trust agreement or the like are represented by a
trustee or other person, the representative is the secured party;
(n) "Transmitting utility" means any person primarily
engaged in the railroad, street railway or trolley bus business,
the electric or electronics communications transmission business,
the transmission of goods by pipeline, or the transmission or the
production and transmission of electricity, steam, gas or water,
or the provision of sewer service.
(2) Other definitions applying to this article and the
sections in which they appear are:
"Account".Section 9-106.
"Attach".Section 9-203.
"Commodity contract".Section 9-115.
"Commodity customer".Section 9-115.
"Commodity intermediary".Section 9-115.
"Construction mortgage".Section 9-313(1).
"Consumer goods".Section 9-109(1).
"Control".Section 9-115.
"Equipment".Section 9-109(2).
"Farm products".Section 9-109(3).
"Fixture".Section 9-313(1).
"Fixture filing".Section 9-313(1).
"General intangibles".Section 9-106.
"Inventory".Section 9-109(4).
"Investment property".Section 9-115.
"Lien creditor".Section 9-301(3).
"Proceeds".Section 9-306(1).
"Purchase money security
interest".Section 9-107.
"United States".Section 9-103.
(3) The following definitions in other articles apply to
this article:
"Broker".Section 8-102.
"Certificated security".Section 8-102.
"Check".Section 3-104.
"Clearing corporation".Section 8-102.
"Contract for sale".Section 2-106.
"Control".Section 8-106.
"Delivery".Section 8-301.
"Entitlement holder".Section 8-102.
"Financial asset".Section 8-102.
"Holder in due course".Section 3-302.
"Note".Section 3-104.
"Sale".Section 2-106.
"Securities intermediary".Section 8-102.
"Security".Section 8-102.
"Security certificate".Section 8-102.
"Security entitlement".Section 8-102.
"Uncertificated security".Section 8-102.
(4) In addition, article 1 contains general definitions and
principles of construction and interpretation applicable
throughout this article.
§46-9-106. Definitions: "Account"; "general intangibles."
"Account" means any right to payment for goods sold or
leased or for services rendered which is not evidenced by an
instrument or chattel paper, whether or not it has been earned by
performance. "General intangibles" means any personal property
(including things in action) other than goods, accounts, chattel
paper, documents, instruments, investment property and money. All rights to payment earned or unearned under a charter or other
contract involving the use or hire of a vessel and all rights
incident to the charter or contract are accounts.
§46-9-115. Investment property.
(1) In this article:
(a) "Commodity account" means an account maintained by a
commodity intermediary in which a commodity contract is carried
for a commodity customer.
(b) "Commodity contract" means a commodity futures contract,
an option on a commodity futures contract, a commodity option, or
other contract that, in each case, is:
(i) Traded on or subject to the rules of a board of trade
that has been designated as a contract market for such a contract
pursuant to the federal commodities laws; or
(ii) Traded on a foreign commodity board of trade, exchange
or market, and is carried on the books of a commodity
intermediary for a commodity customer.
(c) "Commodity customer" means a person for whom a commodity
intermediary carries a commodity contract on its books.
(d) "Commodity intermediary" means:
(i) A person who is registered as a futures commission merchant under the federal commodities laws; or
(ii) A person who in the ordinary course of its business
provides clearance or settlement services for a board of trade
that has been designated as a contract market pursuant to the
federal commodities laws.
(e) "Control" with respect to a certificated security,
uncertificated security, or security entitlement has the meaning
specified in section 8-106. A secured party has control over a
commodity contract if by agreement among the commodity customer,
the commodity intermediary, and the secured party, the commodity
intermediary has agreed that it will apply any value distributed
on account of the commodity contract as directed by the secured
party without further consent by the commodity customer. If a
commodity customer grants a security interest in a commodity
contract to its own commodity intermediary, the commodity
intermediary as secured party has control. A secured party has
control over a securities account or commodity account if the
secured party has control over all security entitlements or
commodity contracts carried in the securities account or
commodity account.
(f) "Investment property" means:
(i) A security, whether certificated or uncertificated;
(ii) A security entitlement;
(iii) A securities account;
(iv) A commodity contract; or
(v) A commodity account.
(2) Attachment or perfection of a security interest in a
securities account is also attachment or perfection of a security
interest in all security entitlements carried in the securities
account. Attachment or perfection of a security interest in a
commodity account is also attachment or perfection of a security
interest in all commodity contracts carried in the commodity
account.
(3) A description of collateral in a security agreement or
financing statement is sufficient to create or perfect a security
interest in a certificated security, uncertificated security,
security entitlement, securities account, commodity contract or
commodity account whether it describes the collateral by those
terms, or as investment property, or by description of the
underlying security, financial asset or commodity contract. A
description of investment property collateral in a security
agreement or financing statement is sufficient if it identifies the collateral by specific listing, by category, by quantity, by
a computational or allocational formula or procedure or by any
other method, if the identity of the collateral is objectively
determinable.
(4) Perfection of a security interest in investment property
is governed by the following rules:
(a) A security interest in investment property may be
perfected by control.
(b) Except as otherwise provided in subdivision (c) and (d)
of this subsection, a security interest in investment property
may be perfected by filing.
(c) If the debtor is a broker or securities intermediary a
security interest in investment property is perfected when it
attaches. The filing of a financing statement with respect to a
security interest in investment property granted by a broker or
securities intermediary has no effect for purposes of perfection
or priority with respect to that security interest.
(d) If a debtor is a commodity intermediary, a security
interest in a commodity contract or a commodity account is
perfected when it attaches. The filing of a financing statement
with respect to a security interest in a commodity contract or a commodity account granted by a commodity intermediary has no
effect for purposes of perfection or priority with respect to
that security interest.
(5) Priority between conflicting security interests in the
same investment property is governed by the following rules:
(a) A security interest of a secured party who has control
over investment property has priority over a security interest of
a secured party who does not have control over the investment
property.
(b) Except as otherwise provided in subdivision (c) and (d)
of this subsection, conflicting security interests of secured
parties each of whom has control rank equally.
(c) Except as otherwise agreed by the securities
intermediary, a security interest in a security entitlement or a
securities account granted to the debtor's own securities
intermediary has priority over any security interest granted by
the debtor to another secured party.
(d) Except as otherwise agreed by the commodity
intermediary, a security interest in a commodity contract or a
commodity account granted to the debtor's own commodity
intermediary has priority over any security interest granted by the debtor to another secured party.
(e) Conflicting security interests granted by a broker, a
securities intermediary, or a commodity intermediary which are
perfected without control rank equally.
(f) In all other cases, priority between conflicting
security interests in investment property is governed by section
9-312(5), (6) and (7). Section 9-312(4) does not apply to
investment property.
(6) If a security certificate in registered form is
delivered to a secured party pursuant to agreement, a written
security agreement is not required for attachment or
enforceability of the security interest, delivery suffices for
perfection of the security interest, and the security interest
has priority over a conflicting security interest perfected by
means other than control, even if a necessary indorsement is
lacking.
§46-9-116. Security interest arising in purchase or delivery of
financial
asset.
(1) If a person buys a financial asset through a securities
intermediary in a transaction in which the buyer is obligated to pay the purchase price to the securities intermediary at the time
of the purchase and the securities intermediary credits the
financial asset to the buyer's securities account before the
buyer pays the securities intermediary, the securities
intermediary has a security interest in the buyer's security
entitlement securing the buyer's obligation to pay. A security
agreement is not required for attachment or enforceability of the
security interest and the security interest is automatically
perfected.
(2) If a certificated security, or other financial asset
represented by a writing which in the ordinary course of business
is transferred by delivery with any necessary indorsement or
assignment is delivered pursuant to an agreement between persons
in the business of dealing with such securities or financial
assets and the agreement calls for delivery versus payment, the
person delivering the certificate or other financial asset has a
security interest in the certificated security or other financial
asset securing the seller's right to receive payment. A security
agreement is not required for attachment or enforceability of the
security interest, and the security interest is automatically
perfected.
§46-9-203. Attachment and enforceability of security interest;
proceeds;
formal
requisit
es.
(1) Subject to the provisions of section 4-208 on the
security interest of a collecting bank, sections 9-115 and 9-116
on security interests in investment property, and section 9-113
on a security interest arising under the article on sales, a
security interest is not enforceable against the debtor or third
parties with respect to the collateral and does not attach
unless:
(a) The collateral is in the possession of the secured party
pursuant to agreement, the collateral is investment property and
the secured party has control pursuant to agreement, or the
debtor has signed a security agreement which contains a
description of the collateral and in addition, when the security
interest covers crops growing or to be grown or timber to be cut,
a description of the land concerned;
(b) Value has been given; and
(c) The debtor has rights in the collateral.
(2) A security interest attaches when it becomes enforceable against the debtor with respect to the collateral. Attachment
occurs as soon as all of the events specified in subsection (1)
of this section have taken place unless explicit agreement
postpones the time of attaching.
(3) Unless otherwise agreed a security agreement gives the
secured party the rights to proceeds provided by section 9-306.
(4) A transaction may be subject to this article and also to
article seven-a, chapter forty-seven of this code, relating to
small loans and in case of conflict between the provisions of
this article and article seven-a, chapter forty-seven of this
code or any other such statute, the provisions of said article 7A
or such other statute control. Failure to comply with any
applicable statute has only the effect which is specified
therein.
§46-9-301. Persons who take priority over unperfected security
interests; right of "lien creditor."
(1) Except as otherwise provided in subsection (2 of this
section), an unperfected security interest is subordinate to the
rights of:
(a) Persons entitled to priority under section 9-312;
(b) A person who becomes a lien creditor before the security interest is perfected;
(c) In the case of goods, instruments, documents, and
chattel paper, a person who is not a secured party and who is a
transferee in bulk or other buyer not in ordinary course of
business; or is a buyer of farm products in ordinary course of
business, to the extent that he gives value and receives delivery
of the collateral without knowledge of the security interest and
before it is perfected; and
(d) In the case of accounts, general intangibles and
investment property, a person who is not a secured party and who
is a transferee to the extent that he gives value without
knowledge of the security interest and before it is perfected.
(2) If the secured party files with respect to a purchase
money security interest before or within twenty days after the
debtor receives possession of the collateral, he takes priority
over the rights of a transferee in bulk or of a lien creditor
which arise between the time the security interest attaches and
the time of filing.
(3) A "lien creditor" means a creditor who has acquired a
lien on the property involved by attachment, levy or the like and
includes an assignee for benefit of creditors from the time of assignment, and a trustee in bankruptcy from the date of the
filing of the petition or a receiver in equity from the time of
appointment.
(4) A person who becomes a lien creditor while a security
interest is perfected takes subject to the security interest only
to the extent that it secures advances made before he becomes a
lien creditor or within forty-five days thereafter or made
without knowledge of the lien or pursuant to a commitment entered
into without knowledge of the lien.
§46-9-302. When filing is required to perfect security
interest;
security interests to which filing
provisions of this article do not
apply.
(1) A financing statement must be filed to perfect all
security interests except the following:
(a) A security interest in collateral in possession of the
secured party under section 9-305;
(b) A security interest temporarily perfected in
instruments, certificated securities or documents without
delivery under section 9-304 or in proceeds for a ten-day period
under section 9-306;
(c) A security interest created by an assignment of a beneficial interest in a trust or a decedent's estate;
(d) A purchase money security interest in consumer goods;
but filing is required for a motor vehicle required to be
registered; and fixture filing is required for priority over
conflicting interests in fixtures to the extent provided in
section 9-313;
(e) An assignment of accounts which does not alone or in
conjunction with other assignments to the same assignee transfer
a significant part of the outstanding accounts of the assignor;
(f) A security interest of a collecting bank (section 4-208)
or arising under the article on sales (see section 9-113) or
covered in subsection (3) of this section;
(g) An assignment for the benefit of all the creditors of
the transferor, and subsequent transfers by the assignee
thereunder;
(h) A security interest in investment property which is
perfected without filing under section 9-115 or section 9-116.
(2) If a secured party assigns a perfected security
interest, no filing under this article is required in order to
continue the perfected status of the security interest against
creditors of and transferees from the original debtor.
(3) The filing of a financing statement otherwise required
by this article is not necessary or effective to perfect a
security interest in property subject to:
(a) A statute or treaty of the United States which provides
for a national or international registration or a national or
international certificate of title or which specifies a place of
filing different from that specified in this article for filing
of the security interest; or
(b) The following statute of this state: Chapter
seventeen-a of this code; but during any period in which
collateral is inventory held for sale by a person who is in the
business of selling goods of that kind, the filing provisions of
this article (Part 4) apply to a security interest in that
collateral created by him as debtor; or
(c) A certificate of title statute of another jurisdiction
under the law of which indication of a security interest on the
certificate is required as a condition of perfection (subsection
(2) of section 9-103).
(4) Compliance with a statute or treaty described in
subsection (3) of this section is equivalent to the filing of a
financing statement under this article, and a security interest in property subject to the statute or treaty can be perfected
only by compliance therewith except as provided in section 9-103
on multiple state transactions. Duration and renewal of
perfection of a security interest perfected by compliance with
the statute or treaty are governed by the provisions of the
statute or treaty; in other respects the security interest is
subject to this article.
§46-9-304. Perfection of security interest in instruments,
documents, and goods covered by documents;
perfection by permissive filing; temporary
perfection without filing or transfer of
possession.
(1) A security interest in chattel paper or negotiable
documents may be perfected by filing. A security interest in
money or instruments (other than instruments which constitute
part of chattel paper) can be perfected only by the secured
party's taking possession, except as provided in subsections (4)
and (5) of this section and subsections (2) and (3) of section 9-
306 on proceeds.
(2) During the period that goods are in the possession of
the issuer of a negotiable document therefor, a security interest
in the goods is perfected by perfecting a security interest in the document, and any security interest in the goods otherwise
perfected during such period is subject thereto.
(3) A security interest in goods in the possession of a
bailee other than one who has issued a negotiable document
therefor is perfected by issuance of a document in the name of
the secured party or by the bailee's receipt of notification of
the secured party's interest or by filing as to the goods.
(4) A security interest in instruments, certificated
securities or negotiable documents is perfected without filing or
the taking of possession for a period of twenty-one days from the
time it attaches to the extent that it arises for new value given
under a written security agreement.
(5) A security interest remains perfected for a period of
twenty-one days without filing where a secured party having a
perfected security interest in an instrument, a certificated
security, a negotiable document or goods in possession of a
bailee other than one who has issued a negotiable document
therefor:
(a) Makes available to the debtor the goods or documents
representing the goods for the purpose of ultimate sale or
exchange or for the purpose of loading, unloading, storing, shipping, transshipping, manufacturing, processing or otherwise
dealing with them in a manner preliminary to their sale or
exchange, but priority between conflicting security interests in
the goods is subject to subsection (3) of section 9-312; or
(b) Delivers the instrument or certificated security to the
debtor for the purpose of ultimate sale or exchange or of
presentation, collection, renewal or registration of transfer.
(6) After the twenty-one-day period in subsections (4) and
(5) of this section perfection depends upon compliance with
applicable provisions of this article.
§46-9-305. When possession by secured party perfects security
interest without filing.
A security interest in letters of credit and advices of
credit (subsection (2) (a) of section 5-116), goods, instruments,
money, negotiable documents or chattel paper may be perfected by
the secured party's taking possession of the collateral. If such
collateral other than goods covered by a negotiable document is
held by a bailee, the secured party is deemed to have possession
from the time the bailee receives notification of the secured
party's interest. A security interest is perfected by possession
from the time possession is taken without relation back and continues only so long as possession is retained, unless
otherwise specified in this article. The security interest may
be otherwise perfected as provided in this article before or
after the period of possession by the secured party.
§46-9-306. "Proceeds"; secured party's rights on disposition of
collateral.
(1) "Proceeds" includes whatever is received upon the sale,
exchange, collection or other disposition of collateral or
proceeds. Insurance payable by reason of loss or damage to the
collateral is proceeds, except to the extent that it is payable
to a person other than a party to the security agreement. Any
payments or distributions made with respect to investment
property collateral are proceeds. Money, checks, deposit
accounts and the like are "cash proceeds". All other proceeds
are "noncash proceeds".
(2) Except where this article otherwise provides, a security
interest continues in collateral notwithstanding sale, exchange
or other disposition thereof unless the disposition was
authorized by the secured party in the security agreement or
otherwise, and also continues in any identifiable proceeds
including collections received by the debtor.
(3) The security interest in proceeds is a continuously
perfected security interest if the interest in the original
collateral was perfected but it ceases to be a perfected security
interest and becomes unperfected ten days after receipt of the
proceeds by the debtor unless
(a) A filed financing statement covers the original
collateral and the proceeds are collateral in which a security
interest may be perfected by filing in the office or offices
where the financing statement has been filed and, if the proceeds
are acquired with cash proceeds, the description of collateral in
the financing statement indicates the types of property
constituting the proceeds; or
(b) A filed financing statement covers the original
collateral and the proceeds are identifiable cash proceeds; or
(c) The original collateral was investment property and the
proceeds are identifiable cash proceeds; or
(d) The security interest in the proceeds is perfected
before the expiration of the ten-day period. Except as provided
in this section, a security interest in proceeds can be perfected
only by the methods or under the circumstances permitted in this
article for original collateral of the same type.
(4) In the event of insolvency proceedings instituted by or
against a debtor, a secured party with a perfected security
interest in proceeds has a perfected security interest only in
the following proceeds:
(a) In identifiable noncash proceeds and in separate deposit
accounts containing only proceeds;
(b) In identifiable cash proceeds in the form of money which
is neither commingled with other money nor deposited in a deposit
account prior to the insolvency proceedings;
(c) In identifiable cash proceeds in the form of checks and
the like which are not deposited in a deposit account prior to
the insolvency proceedings; and
(d) In all cash and deposit accounts of the debtor in which
proceeds have been commingled with other funds, but the perfected
security interest under this subdivision is
(i) Subject to any right of setoff; and
(ii) Limited to an amount not greater than the amount of any
cash proceeds received by the debtor within ten days before the
institution of the insolvency proceedings less the sum of: (I)
The payments to the secured party on account of cash proceeds
received by the debtor during such period; and (II) the cash proceeds received by the debtor during such period to which the
secured party is entitled under subdivisions (a) through (c) of
this subsection.
(5) If a sale of goods results in an account or chattel
paper which is transferred by the seller to a secured party, and
if the goods are returned to or are repossessed by the seller or
the secured party, the following rules determine priorities:
(a) If the goods were collateral at the time of sale for an
indebtedness of the seller which is still unpaid, the original
security interest attaches again to the goods and continues as
the perfected security interest if it was perfected at the time
when the goods were sold. If the security interest was
originally perfected by a filing which is still effective,
nothing further is required to continue the perfected status; in
any other case, the secured party must take possession of the
returned or repossessed goods or must file.
(b) An unpaid transferee of the chattel paper has a security
interest in the goods against the transferor. Such security
interest is prior to a security interest asserted under paragraph
(a) to the extent that the transferee of the chattel paper was
entitled to priority under section 9-308.
(c) An unpaid transferee of the account has a security
interest in the goods against the transferor. Such security
interest is subordinate to a security interest asserted under
subdivision (a) of this subsection.
(d) A security interest of an unpaid transferee asserted
under subdivision (b) or (c) of this subsection must be perfected
for protection against creditors of the transferor and purchasers
of the returned or repossessed goods.
§46-9-309. Protection of purchasers of instruments, documents
and securities.
Nothing in this article limits the rights of a holder in due
course of a negotiable instrument (section 3-302) or a holder to
whom a negotiable document of title has been duly negotiated
(section 7-501) or a protected purchaser of a security (section
8-303) and such holders or purchasers take priority over an
earlier security interest even though perfected. Filing under
this article does not constitute notice of the security interest
to such holders or purchasers.
§46-9-312. Priorities among conflicting security interests in
the same collateral.
(1) The rules of priority stated in other sections of this
part and in the following sections shall govern when applicable: Section 4-210 with respect to the security interests of
collecting banks in items being collected, accompanying documents
and proceeds; section 9-103 on security interests related to
other jurisdictions; section 9-114 on consignments; section 9-115
on security interests in investment property.
(2) A perfected security interest in crops for new value
given to enable the debtor to produce the crops during the
production season and given not more than three months before the
crops become growing crops by planting or otherwise takes
priority over an earlier perfected security interest to the
extent that such earlier interest secures obligations due more
than six months before the crops become growing crops by planting
or otherwise, even though the person giving new value had
knowledge of the earlier security interest.
(3) A perfected purchase money security interest in
inventory has priority over a conflicting security interest in
the same inventory and also has priority in identifiable cash
proceeds received on or before the delivery of the inventory to
a buyer if:
(a) The purchase money security interest is perfected at the
time the debtor receives possession of the inventory; and
(b) The purchase money secured party gives notification in
writing to the holder of the conflicting security interest if the
holder had filed a financing statement covering the same types of
inventory: (i) Before the date of the filing made by the purchase
money secured party; or (ii) before the beginning of the
twenty-one-day period where the purchase money security interest
is temporarily perfected without filing or possession (subsection
(5) of section 9-304); and
(c) The holder of the conflicting security interest receives
the notification within five years before the debtor receives
possession of the inventory; and
(d) The notification states that the person giving the
notice has or expects to acquire a purchase money security
interest in inventory of the debtor, describing such inventory by
item or type.
(4) A purchase money security interest in collateral other
than inventory has priority over a conflicting security interest
in the same collateral or its proceeds if the purchase money
security interest is perfected at the time the debtor receives
possession of the collateral or within twenty days thereafter.
(5) In all cases not governed by other rules stated in this section (including cases of purchase money security interests
which do not qualify for the special priorities set forth in
subsections (3) and (4) of this section), priority between
conflicting security interests in the same collateral shall be
determined according to the following rules:
(a) Conflicting security interests rank according to
priority in time of filing or perfection. Priority dates from
the time a filing is first made covering the collateral or the
time the security interest is first perfected, whichever is
earlier, provided that there is no period thereafter when there
is neither filing nor perfection.
(b) So long as conflicting security interests are
unperfected, the first to attach has priority.
(6) For the purposes of subsection (5) of this section a
date of filing or perfection as to collateral is also a date of
filing or perfection as to proceeds.
(7) If future advances are made while a security interest is
perfected by filing, the taking of possession, or under section
9-115 or section 9-116 on investment property, the security
interest has the same priority for the purposes of subsection (5)
or (8) of this section with respect to the future advances as it does with respect to the first advance. If a commitment is made
before or while the security interest is so perfected, the
security interest has the same priority with respect to advances
made pursuant thereto. In other cases a perfected security
interest has priority from the date the advance is made.
__________________________
(NOTE: The purpose of this bill is to revise those parts of
the Uniform Commercial Code (UCC) which relate to investment
securities. The bill revises article eight in its entirety and
also provides conforming amendments to articles one, four, five
and nine. The present law in this area was the product of a
major revision made necessary by the fact that prior provisions
did not adequately deal with the system of securities holding
through intermediaries that had developed in the past few
decades. Although the present law does address some of the
issues relating to securities intermediaries, these provisions
were engrafted onto a structure designed for securities practices
of an earlier time. The resulting legal uncertainties have
affected all participants in the investment securities industry.
This bill is intended to eliminate those uncertainties by
providing a modern legal structure for current securities holding
practices.
This bill provides rules for determining whether certain
obligations and interests are securities or financial assets;
acquisition of same; notice of adverse claims; control; when
indorsement, instruction or entitlement order are effective;
warranties in direct and indirect holding; choice of law;
clearing corporation rules; creditors' legal process;
inapplicability of statute of frauds; evidentiary rules
concerning certificated securities; liability to adverse
claimants; purchasers for value; matters of issue and issuer;
transfer of certificated and uncertificated securities;
registration; security entitlements; and transition provisions.)
JUDICIARY COMMITTEE AMENDMENTS
On pages____ and___ , by striking out the enacting section and
inserting in lieu thereof a new enacting section to read as
follows:
That sections one hundred five and two hundred six, article
one, chapter forty-six of the code of West Virginia, one thousand
nine hundred thirty-one, as amended, be amended and reenacted;
that section one hundred four, article four of said chapter be
amended and reenacted; that section one hundred fourteen, article
five of said chapter be amended and reenacted; that article eight
of said chapter be amended and reenacted; that sections one
hundred three, one hundred five, one hundred six, two hundred
three, three hundred one, three hundred two, three hundred four,
three hundred five, three hundred six, three hundred nine and
three hundred twelve, article nine of said chapter be amended and
reenacted; and that said article be further amended by adding
thereto two new sections, designated sections one hundred fifteen
and one hundred sixteen, all to read as follows:;
And,
On pages____ through___ , by striking out the title and
substituting therefor a new title, to read as follows:
Eng. Senate Bill No. 441--A Bill to amend and reenact
sections one hundred five and two hundred six, article one,
chapter forty-six of the code of West Virginia, one thousand nine
hundred thirty-one, as amended; to amend and reenact section one
hundred four, article four of said chapter; to amend and reenact
section one hundred fourteen, article five of said chapter; to
amend and reenact article eight of said chapter; to amend and
reenact sections one hundred three, one hundred five, one hundred
six, two hundred three; three hundred one, three hundred two,
three hundred four, three hundred five, three hundred six, three
hundred nine and three hundred twelve, article nine, of said
chapter; and to further amend said article by adding thereto two
new sections, designated sections one hundred fifteen and one
hundred sixteen, all relating to the uniform commercial code
(UCC); investment securities; territorial application of the UCC;
parties' power to choose applicable law; statute of frauds for
kinds of personal property not otherwise covered; bank deposits
and collections; definitions; letters of credit; issuer's duty
and privilege to honor; right to reimbursement; investment
securities; short title; definitions; rules for determining whether certain obligations and interests are securities or
financial assets; acquisition of security or financial asset or
interest therein; notice of adverse claim; control; whether
indorsement, instruction or entitlement order is effective;
warranties in direct holding; warranties in indirect holding;
applicability; choice of law; clearing corporation rules;
creditor's legal process; statute of frauds inapplicable;
evidentiary rules concerning certificated securities; securities
intermediary and others not liable to adverse claimant;
securities intermediary as purchaser for value; issuer; issuer's
responsibility and defenses; notice of defect or defense;
staleness as notice of defect or defense; effect of issuer's
restriction on transfer; effect of unauthorized signature on
security certificate; completion or alteration of security
certificate; rights and duties of issuer with respect to
registered owners; effect of signature of authenticating trustee,
registrar or transfer agent; issuer's lien; overissue; transfer
of certificated and uncertificated securities; delivery; rights
of purchaser; protected purchaser; indorsement; instruction;
effect of guaranteeing signature, indorsement or instruction;
purchaser's right to requisites for registration of transfer;
registration; duty of issuer to register transfer; assurance that
indorsement or instruction is effective; demand that issuer not
register transfer; wrongful registration; replacement of lost,
destroyed or wrongfully taken security certificate; obligation to
notify issuer of lost, destroyed or wrongfully taken security
certificate; authenticating trustee, transfer agent and
registrar; security entitlements; securities account; acquisition
of security entitlement from securities intermediary; assertion
of adverse claim against entitlement holder; property interest of
entitlement holder in financial asset held by securities
intermediary; duty of securities intermediary to maintain
financial asset; duty of securities intermediary with respect to
payments and distributions; duty of securities intermediary to
exercise rights as directed by entitlement holder; duty of
securities intermediary to comply with entitlement order; duty of
securities intermediary to change entitlement holder's position
to other form of security holding; specification of duties of
securities intermediary by other statute or regulation; manner of
performance of duties by securities intermediary and exercise of
rights of entitlement holder; rights of purchaser of security entitlement from entitlement holder; priority among security
interests and entitlement holders; savings clause; secured
transactions and sales of accounts and chattel paper; perfection
of security interests in multiple state transactions;
definitions; account and general intangibles defined; investment
property; security interest arising in purchase or delivery of
financial asset; attachment and enforceability of security
interest; proceeds; formal requisites; persons who take priority
over unperfected security interests; rights of lien creditor;
when filing is required to perfect security interest; security
interests to which filing provisions of this article do not
apply; perfection of security interest in instruments, documents
and goods covered by documents; perfection by permissive filing;
temporary perfection without filing or transfer of possession;
when possession by secured party perfects security interest
without filing; proceeds; secured party's rights on disposition
of collateral; protection of purchasers of instruments, documents
and securities; and priorities among conflicting security
interests in the same collateral.