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§ 8—101. Short title
This Article may be cited as the Uniform Commercial Code—Investment Securities. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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 record; 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 subdivision 8—501(b)(2) or (3)
of this title, 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 of this title, 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 the 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) [Reserved.]
(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 of this title, 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 of this article.
(18) “Uncertificated security” means a security that is not represented by a certificate.
(b) The following definitions in this article and other articles apply to this article:
| Appropriate person |
section 8—107 |
| Control |
section 8—106 |
| Controllable account |
section 9—102 |
| Controllable electronic record |
section 12—102 |
| Controllable payment intangible |
section 9—102 |
| 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 1 of this title 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997; amended 2007, No. 99 (Adj. Sess.), § 17; 2015; 2025, No. 17, § 8, eff. July 1, 2025.)
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§ 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
3, even though it also meets the requirements of that Article. However, a negotiable
instrument governed by Article 3 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 subdivision 9—102(a)(15), is not a security or
a financial asset.
(g) A document of title is not a financial asset unless subdivision 8—102(a)(9)(iii) of this title applies.
(h) A controllable account, controllable electronic record, or controllable payment intangible
is not a financial asset unless subdivision 8—102(a)(9)(iii) applies. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997; amended 1999, No. 106 (Adj. Sess.), § 17, eff. July 1, 2001; 2015, No. 51, § B.8, eff. June 3, 2015; 2025, No. 17, § 8, eff. July 1, 2025.)
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§ 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 of this title; or
(2) the person acquires a security entitlement to the security pursuant to section 8—501 of this title.
(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 of this article, 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 of this title.
(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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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 9 of this title is not notice of an
adverse claim to a financial asset. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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;
(2) the securities intermediary has agreed that it will comply with entitlement orders
originated by the purchaser without further consent by the entitlement holder; or
(3) another person, other than the transferor to the purchaser of an interest in the security
entitlement:
(A) has control of the security entitlement and acknowledges that it has control on behalf
of the purchaser; or
(B) obtains control of the security entitlement after having acknowledged that it will
obtain control of the security entitlement on behalf of the purchaser.
(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 subsection (c) or (d) of this section
has control, even if the registered owner in the case of subsection (c) of this section
or the entitlement holder in the case of 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 (c)(2) or (d)(2) 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.
(h) A person that has control under this section is not required to acknowledge that it
has control on behalf of a purchaser.
(i) If a person acknowledges that it has or will obtain control on behalf of a purchaser,
unless the person otherwise agrees or law other than this article or Article 9 otherwise
provides, the person does not owe any duty to the purchaser and is not required to
confirm the acknowledgment to any other person. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997; amended 1999, No. 106 (Adj. Sess.), § 18, eff. July 1, 2001; 2025, No. 17, § 8, eff. July 1, 2025.)
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§ 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 subdivision 8—106(c)(2)
or (d)(2) of this title; 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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 subsection 8—108(a)
or (b) of this title.
(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 subsection 8—108(a) or (b) of this title. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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 (a)(2) through (5) 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 governing
the securities account expressly provides that a particular jurisdiction is the securities
intermediary’s jurisdiction for purposes of this part, this article, or this act,
that jurisdiction is the securities intermediary’s jurisdiction.
(2) If subdivision (1) of this subsection does not apply and an agreement between the
securities intermediary and its entitlement holder expressly provides that the agreement
is governed by the law of a particular jurisdiction, that jurisdiction is the securities
intermediary’s jurisdiction.
(3) If neither subdivision (1) nor subdivision (2) of this subsection applies and an agreement
between the securities intermediary and its entitlement holder governing the securities
account expressly provides that the securities account is maintained at an office
in a particular jurisdiction, that jurisdiction is the securities intermediary’s jurisdiction.
(4) If none of the preceding subdivisions applies, the securities intermediary’s jurisdiction
is the jurisdiction in which the office identified in an account statement as the
office serving the entitlement holder’s account is located.
(5) If none of the preceding subdivisions applies, the securities intermediary’s jurisdiction
is the jurisdiction in which the chief executive office of the securities intermediary
is located.
(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.
(g) The local law of the issuer’s jurisdiction or the securities intermediary’s jurisdiction
governs a matter or transaction specified in subsection (a) or (b) of this section
even if the matter or transaction does not bear any relation to the jurisdiction. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997; amended 1999, No. 106 (Adj. Sess.), § 19, eff. July 1, 2001; 2025, No. 17, § 8, eff. July 1, 2025.)
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§ 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 article and affects another party who does not
consent to the rule. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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;
(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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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 of this title, 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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 is (i)
registered in the name of the purchaser, (ii) payable to the order of the purchaser,
or (iii) specially indorsed to the purchaser by an effective indorsement and has not
been indorsed to the securities intermediary or in blank.
(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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997; amended 1999, No. 106 (Adj. Sess.), § 20, eff. July 1, 2001.)
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§ 8—302. Rights of purchaser
(a) Except as otherwise provided in subsections (b) and (c) of this section, a purchaser
of a certificated or uncertificated security 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997; amended 1999, No. 106 (Adj. Sess.), § 21, eff. July 1, 2001.)
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§ 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) A protected purchaser also acquires its interest in the security free of any adverse
claim. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997; amended 2025, No. 17, § 8, eff. July 1, 2025.)
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§ 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 of this title and not an obligation that the security will be honored by the issuer. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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 of this title and not an obligation that the security will be honored by the issuer. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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 of this title);
(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 of this title;
(6) a demand that the issuer not register transfer has not become effective under section 8—403 of this title, or the issuer has complied with subsection 8—403(b) of this title but no legal process or indemnity bond is obtained as provided in subsection 8—403(d) of this title; 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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 subdivision 8—107(a)(4) or (a)(5) of this title, 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 60 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
considers appropriate. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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 the instruction
for registration of transfer of the 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 (b)(3) of this section may not exceed 30 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 8—404. Wrongful registration
(a) Except as otherwise provided in section 8—406 of this title, 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 subsection 8—403(a) of this title and the issuer did not comply with subsection 8—403(b) of this title;
(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 of this title.
(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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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 of this title. 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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 of this title or a claim to a new security certificate under section 8—405 of this title. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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 of this title for value and without notice of the adverse claim. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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 of this title.
(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 of this title.
(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 of this title 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 of this title. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 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 of this title 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 of this title 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 of this title do not require a securities intermediary to take any action that is prohibited by
other statute, regulation, or rule. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)
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§ 8—510. Rights of purchaser of security entitlement from entitlement holder
(a) In a case not covered by the priority rules in Article 9 of this title or the rules
stated in subdivision (c) of this section, 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 of this title, 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 9 of this title, 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. Except as otherwise provided in subdivision (d) of this section,
purchasers who have control rank according to priority in time of:
(1) the purchaser’s becoming the person for whom the securities account, in which the
security entitlement is carried, is maintained, if the purchaser obtained control
under subdivision 8—106(d)(1) of this title;
(2) the securities intermediary’s agreement to comply with the purchaser’s entitlement
orders with respect to security entitlements carried or to be carried in the securities
account in which the security entitlement is carried, if the purchaser obtained control
under subdivision 8—106(d)(2) of this title; or
(3) if the purchaser obtained control through another person under subdivision 8—106(d)(3) of this title, the time on which priority would be based under this subsection if the other person
were the secured party.
(d) A securities intermediary as purchaser has priority over a conflicting purchaser who
has control unless otherwise agreed by the securities intermediary. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997; amended 1999, No. 106 (Adj. Sess.), § 22, eff. July 1, 2001.)
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§ 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. (Added 1995, No. 92 (Adj. Sess.), § 1, eff. Jan. 1, 1997.)