PRINTER'S NO. 2335
No. 1826 Session of 1989
INTRODUCED BY BORTNER, CALTAGIRONE, MOEHLMANN, McVERRY, G. SNYDER, YANDRISEVITS, HAGARTY, McNALLY AND HECKLER, JUNE 30, 1989
REFERRED TO COMMITTEE ON JUDICIARY, JUNE 30, 1989
AN ACT 1 Amending Title 13 (Commercial Code) of the Pennsylvania 2 Consolidated Statutes, conforming the text of the title to 3 the current official text of the Uniform Commercial Code 4 relating to uncertificated securities. 5 The General Assembly of the Commonwealth of Pennsylvania 6 hereby enacts as follows: 7 Section 1. Short title.--This act shall be known and may be 8 cited as the 1977 UCC Investment Securities and Related Sections 9 Amendments Act. 10 Section 2. Legislative findings.--The General Assembly finds 11 and determines: 12 (1) That the 1977 Amendments to Division 8 of the 13 Uniform Commercial Code relating to uncertificated securities 14 have been adopted by the states of Arkansas, California, 15 Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, 16 Illinois, Indiana, Kansas, Kentucky, Maine, Maryland, 17 Massachusetts, Michigan, Minnesota, Montana, Nevada, New 18 Hampshire, New Mexico, New York, North Dakota, Ohio,
1 Oklahoma, Oregon, Rhode Island, South Dakota, Tennessee, 2 Texas, Virginia, Washington, West Virginia, Wisconsin and 3 Wyoming and the District of Columbia. 4 (2) The public interest requires that Pennsylvania 5 conform its law to the 1977 uniform text of the Uniform 6 Commercial Code relating to uncertificated securities. 7 Section 3. Amendment of Title 13.--Sections 1201 8 (definitions of "bearer," "delivery" and "holder"), 5114(b)(1), 9 8102, 8103, 8104, 8105, 8106, 8107, 8201, 8202, 8203, 8204, 10 8205, 8206, 8207, 8208, 8301, 8302, 8303, 8304, 8305, 8306, 11 8307, 8308, 8309, 8310, 8311, 8312, 8313, 8314, 8315, 8316, 12 8317, 8318, 8319, 8320, 8401, 8402, 8403, 8404, 8405 and 8406 13 and the heading of Chapter 83 of Title 13 of the Pennsylvania 14 Consolidated Statutes are amended and sections 8108, 8321, 8407 15 and 8408 are added to read: 16 § 1201. General definitions. 17 Subject to additional definitions contained in the subsequent 18 provisions of this title which are applicable to specific 19 provisions of this title, the following words and phrases when 20 used in this title shall have, unless the context clearly 21 indicates otherwise, the meanings given to them in this section: 22 * * * 23 "Bearer." The person in possession of an instrument, 24 document of title, or certificated security payable to bearer or 25 indorsed in blank. 26 * * * 27 "Delivery." With respect to instruments, documents of title, 28 chattel paper or certificated securities, means voluntary 29 transfer of possession. 30 * * * 19890H1826B2335 - 2 -
1 "Holder." A person who is in possession of a document of 2 title or an instrument or [an] a certificated investment 3 security drawn, issued or indorsed to him or to his order or to 4 bearer or in blank. 5 * * * 6 § 5114. Duty and privilege of issuer to honor; right to 7 reimbursement. 8 * * * 9 (b) Nonconforming document or fraud.--Unless otherwise 10 agreed when documents appear on their face to comply with the 11 terms of a credit but a required document does not in fact 12 conform to the warranties made on negotiation or transfer of a 13 document of title (section 7507) or of a certificated security 14 (section 8306) or is forged or fraudulent or there is fraud in 15 the transaction: 16 (1) the issuer must honor the draft or demand for 17 payment if honor is demanded by a negotiating bank or other 18 holder of the draft or demand which has taken the draft or 19 demand under the credit and under circumstances which would 20 make it a holder in due course (section 3302) and in an 21 appropriate case would make it a person to whom a document of 22 title has been duly negotiated (section 7502) or a bona fide 23 purchaser of a certificated security (section 8302); and 24 * * * 25 § 8102. Definitions and index of definitions. 26 (a) Definitions.--The following words and phrases when used 27 in this division shall have, unless the context clearly 28 indicates otherwise, the meanings given to them in this 29 subsection: 30 "Certificated security." 19890H1826B2335 - 3 -
1 (1) A share, participation or other interest in property 2 of or an enterprise of the issuer or an obligation of the 3 issuer which is: 4 (i) represented by an instrument issued in bearer or 5 registered form; 6 (ii) of a type commonly dealt in on securities 7 exchanges or markets or commonly recognized in any area 8 in which it is issued or dealt in as a medium for 9 investment; and 10 (iii) either one of a class or series or by its 11 terms divisible into a class or series of shares, 12 participations, interests or obligations. 13 (2) If a partnership interest in a limited partnership 14 is evidenced by a certificate of partnership interest, the 15 certificate is a certificated security. 16 "Clearing corporation." A corporation registered as a 17 "clearing agency" under the Federal securities laws or a 18 corporation: 19 (1) at least 90% of [the] whose capital stock [of which] 20 is held by or for one or more [persons (other than 21 individuals)] organizations, none of which, other than a 22 national securities exchange or association, holds in excess 23 of 20% of the capital stock of the corporation, and each of 24 [whom] which is: 25 (i) [is] subject to supervision or regulation 26 pursuant to the provisions of Federal or State banking 27 laws or State insurance laws; 28 (ii) [is] a broker or dealer or investment company 29 registered under the [Securities Exchange Act of 1934 or 30 the Investment Company Act of 1940] Federal securities 19890H1826B2335 - 4 -
1 laws; or 2 (iii) [is] a national securities exchange or 3 association registered under [a statute of the United 4 States such as the Securities Exchange Act of 1934] the 5 Federal securities laws; 6 and [none of whom, other than a national securities exchange 7 or association, holds in excess of 20% of the capital stock 8 of such corporation; and] 9 (2) any remaining capital stock of which is held by 10 individuals who have purchased [such capital stock] it at or 11 prior to the time of their taking office as directors of 12 [such] the corporation and who have purchased only so much of 13 such capital stock as [may be] is necessary to permit them to 14 qualify as [such] directors. 15 "Custodian bank." [Any] A bank or trust company [which] that 16 is supervised and examined by State or Federal authority having 17 supervision over banks and [which] is acting as custodian for a 18 clearing corporation. 19 ["Security." 20 (1) A "security" is an instrument which: 21 (i) is issued in bearer or registered form; 22 (ii) is of a type commonly dealt in upon securities 23 exchanges or markets or commonly recognized in any area 24 in which it is issued or dealt in as a medium for 25 investment; 26 (iii) is either one of a class or series or by its 27 terms is divisible into a class or series of instruments; 28 and 29 (iv) evidences a share, participation or other 30 interest in property or in an enterprise or evidences an 19890H1826B2335 - 5 -
1 obligation of the issuer.] 2 "Security." A security is either a certificated or an 3 uncertificated security: 4 (1) If a security is certificated, the terms "security" 5 and "certificated security" may mean either the intangible 6 interest, the instrument representing that interest, or both, 7 as the context requires. 8 (2) A writing [which] that is a certificated security is 9 governed by this division and not by Division 3 (relating to 10 commercial paper) even though it also meets the requirements 11 of that division. This division does not apply to money. 12 (3) If a certificated security has been retained by or 13 surrendered to the issuer or its transfer agent for reasons 14 other than registration of transfer, other temporary purpose, 15 payment, exchange or acquisition by the issuer, that security 16 shall be treated as an uncertificated security for purposes 17 of this division. 18 (4) A certificated security is in "registered form" 19 [when] if: 20 (i) it specifies a person entitled to the security 21 or to the rights it [evidences] represents; and [when] 22 (ii) its transfer may be registered upon books 23 maintained for that purpose by or on behalf of [an] the 24 issuer or the security so states. 25 [(4)] (5) A certificated security is in "bearer form" 26 [when] if it runs to bearer according to its terms and not by 27 reason of any indorsement. 28 "Subsequent purchaser." A person who takes other than by 29 original issue. 30 "Uncertificated security." 19890H1826B2335 - 6 -
1 (1) A share, participation or other interest in property 2 or an enterprise of the issuer or an obligation of the issuer 3 which is: 4 (i) not represented by an instrument and the 5 transfer of which is registered upon books maintained for 6 that purpose by or on behalf of the issuer; 7 (ii) of a type commonly dealt in on securities 8 exchanges or markets; and 9 (iii) either one of a class or series or by its 10 terms divisible into a class or series of shares, 11 participations, interests or obligations. 12 (2) Any partnership interest in a limited partnership 13 which is not evidenced by a certificated security is an 14 uncertificated security only if the partnership interest is 15 approved for trading on a national securities exchange 16 registered under the Federal securities laws or for quotation 17 in the automated quotation system of a national securities 18 association registered under the Federal securities laws. 19 (b) Index of other definitions.--Other definitions applying 20 to this division or to specified chapters thereof and the 21 sections in which they appear are: 22 "Adverse claim." Section [8301] 8302. 23 "Bona fide purchaser." Section 8302. 24 "Broker." Section 8303. 25 "Debtor." Section 9105. 26 "Financial intermediary." Section 8313. 27 "Guarantee of the signature." Section 8402. 28 "Initial transaction statement." Section 8408. 29 "Instruction." Section 8308. 30 "Intermediary bank." Section 4105. 19890H1826B2335 - 7 -
1 "Issuer." Section 8201. 2 "Overissue." Section 8104. 3 "Secured party." Section 9105. 4 "Security agreement." Section 9105. 5 (c) Applicability of general definitions and principles.--In 6 addition Division 1 (relating to general provisions) contains 7 general definitions and principles of construction and 8 interpretation applicable throughout this division. 9 § 8103. Lien of issuer. 10 A lien upon a security in favor of an issuer thereof is valid 11 against a purchaser only if: 12 (1) the security if certificated and the right of the 13 issuer to [such] the lien is noted conspicuously [on the 14 security.] thereon; or 15 (2) the security is uncertificated and a notation of the 16 right of the issuer to the lien is contained in the initial 17 transaction statement sent to the purchaser or, if his 18 interest is transferred to him other than by registration of 19 transfer, pledge or release, the initial transaction 20 statement sent to the registered owner or the registered 21 pledgee. 22 § 8104. Effect of overissue; "overissue." 23 (a) General rule.--The provisions of this division which 24 validate a security or compel its issue or reissue do not apply 25 to the extent that validation, issue or reissue would result in 26 overissue; but, if: 27 (1) [if] an identical security which does not constitute 28 an overissue is reasonably available for purchase, the person 29 entitled to issue or validation may compel the issuer to 30 purchase [and deliver such a] the security [to] for him and 19890H1826B2335 - 8 -
1 either to deliver a certificated security or to register the 2 transfer of an uncertificated security to him against 3 surrender of [the] any certificated security [, if any, 4 which] he holds; or 5 (2) [if] a security is not so available for purchase, 6 the person entitled to issue or validation may recover from 7 the issuer the price he or the last purchaser for value paid 8 for it with interest from the date of his demand. 9 (b) Definition of "overissue".--"Overissue" means the issue 10 of securities in excess of the amount [which] the issuer has 11 corporate power to issue. 12 § 8105. [Securities] Certificated securities negotiable; 13 statements and instructions not negotiable; 14 presumptions. 15 (a) [Securities] Certificated securities negotiable.-- 16 [Securities] Certificated securities governed by this division 17 are negotiable instruments. 18 (b) Statements not negotiable.--Statements (section 8408), 19 notices or the like sent by the issuer of uncertificated 20 securities and instructions (section 8308) are neither 21 negotiable instruments nor certificated securities. 22 (c) Presumptions and burden of proof.--In any action on a 23 security: 24 (1) unless specifically denied in the pleadings, each 25 signature on [the] a certificated security [or], in a 26 necessary indorsement, on an initial transaction statement or 27 on an instruction is admitted; 28 (2) [when] if the effectiveness of a signature is put in 29 issue, the burden of establishing it is on the party claiming 30 under the signature, but the signature is presumed to be 19890H1826B2335 - 9 -
1 genuine or authorized; 2 (3) [when] if signatures on a certificated security are 3 admitted or established, production of the [instrument] 4 security entitles a holder to recover on it unless the 5 defendant establishes a defense or a defect going to the 6 validity of the security; [and] 7 (4) if signatures on an initial transaction statement 8 are admitted or established, the facts stated in the 9 statement are presumed to be true as of the time of its 10 issuance; and 11 (5) after it is shown that a defense or defect exists 12 the plaintiff has the burden of establishing that he or some 13 person under whom he claims is a person against whom the 14 defense or defect is ineffective (section 8202 [(relating to 15 responsibility and defenses of issuer; notice of defect or 16 defense)]). 17 § 8106. Applicability. 18 The law (including the conflict of laws rules) of the 19 jurisdiction of organization of the issuer governs the validity 20 of a security, the effectiveness of registration by the issuer, 21 and the rights and duties of the issuer with respect to: 22 (1) registration of transfer [are governed by the law 23 (including the conflict of laws rules) of the jurisdiction of 24 organization of the issuer.] of a certificated security; 25 (2) registration of transfer, pledge or release of an 26 uncertificated security; and 27 (3) sending of statements of uncertificated securities. 28 § 8107. Securities [deliverable] transferable; action for 29 price. 30 (a) Securities [deliverable] transferable.--Unless otherwise 19890H1826B2335 - 10 -
1 agreed and subject to any applicable law or regulation 2 respecting short sales, a person obligated to [deliver] transfer 3 securities may [deliver] transfer any certificated security of 4 the specified issue in bearer form or registered in the name of 5 the transferee, or indorsed to him or in blank, or he may 6 transfer an equivalent uncertificated security to the transferee 7 or a person designated by the transferee. 8 (b) Action for price of securities.--[When] If the buyer 9 fails to pay the price as it comes due under a contract of sale, 10 the seller may recover the price of: 11 (1) [of] certificated securities accepted by the buyer; 12 [and] 13 (2) uncertificated securities that have been transferred 14 to the buyer or a person designated by the buyer; and 15 (3) [of] other securities if efforts at their resale 16 would be unduly burdensome or if there is no readily 17 available market for their resale. 18 § 8108. Registration of pledge and release of uncertificated 19 securities. 20 A security interest in an uncertificated security may be 21 evidenced by the registration of pledge to the secured party or 22 a person designated by him. There can be no more than one 23 registered pledge of an uncertificated security at any time. The 24 registered owner of an uncertificated security is the person in 25 whose name the security is registered, even if the security is 26 subject to a registered pledge. The rights of a registered 27 pledgee of an uncertificated security under this division are 28 terminated by the registration of release. 29 § 8201. "Issuer." 30 (a) General rule.--With respect to obligations on or 19890H1826B2335 - 11 -
1 defenses to a security, "issuer" includes a person who: 2 (1) places or authorizes the placing of his name on a 3 certificated security (otherwise than as authenticating 4 trustee, registrar, transfer agent or the like) to evidence 5 that it represents a share, participation or other interest 6 in his property or in an enterprise or to evidence his duty 7 to perform an obligation [evidenced] represented by the 8 certificated security; 9 (2) creates shares, participations or other interests in 10 his property or in an enterprise or undertakes obligations, 11 which shares, participations, interests or obligations are 12 uncertificated securities; 13 (3) directly or indirectly creates fractional interests 14 in his rights or property, which fractional interests are 15 [evidenced] represented by certificated securities; or 16 [(3)] (4) becomes responsible for or in place of any 17 other person described as an issuer in this section. 18 (b) Guarantor.--With respect to obligations on or defenses 19 to a security, a guarantor is an issuer to the extent of his 20 guaranty, whether or not his obligation is noted on [the] a 21 certificated security or on statements of uncertificated 22 securities sent pursuant to section 8408 (relating to statements 23 of uncertificated securities). 24 (c) Person for whom transfer books maintained.--With respect 25 to registration of a transfer, pledge or release (Chapter 84), 26 "issuer" means a person on whose behalf transfer books are 27 maintained. 28 § 8202. Responsibility and defenses of issuer; notice of defect 29 or defense. 30 (a) Terms included in security.--Even against a purchaser 19890H1826B2335 - 12 -
1 for value and without notice, the terms of a security include: 2 (1) if the security is certificated, those stated on the 3 security [and]; 4 (2) if the security is uncertificated, those contained 5 in the initial transaction statement sent to such purchaser, 6 or, if his interest is transferred to him other than by 7 registration of transfer, pledge or release, the initial 8 transaction statement sent to the registered owner or 9 registered pledgee; and 10 (3) those made part of the security by reference, on the 11 certificated security or in the initial transaction 12 statement, to another instrument, indenture or document or to 13 a constitution, statute, ordinance, rule, regulation, order 14 or the like, to the extent that the terms [so] referred to do 15 not conflict with the [stated] terms stated on the 16 certificated security or contained in the statement. 17 [Such a] A reference under paragraph (3) does not of itself 18 charge a purchaser for value with notice of a defect going to 19 the validity of the security even though the certificated 20 security or statement expressly states that a person accepting 21 it admits [such] notice. 22 (b) Defect affecting validity of security.-- 23 [(1)] A certificated security in the hands of a 24 purchaser for value or an uncertificated security as to which 25 an initial transaction statement has been sent to a purchaser 26 for value, other than [one] a security issued by a government 27 or governmental agency or unit, even though issued with a 28 defect going to its validity, is valid [in the hands of a] 29 with respect to the purchaser [for value and] if he is 30 without notice of the particular defect unless the defect 19890H1826B2335 - 13 -
1 involves a violation of constitutional provisions, in which 2 case the security is valid [in the hands of] with respect to 3 a subsequent purchaser for value and without notice of the 4 defect. 5 [(2) The rule of paragraph (1)] This subsection applies 6 to an issuer [which] that is a government or governmental 7 agency or unit only if either there has been substantial 8 compliance with the legal requirements governing the issue or 9 the issuer has received a substantial consideration for the 10 issue as a whole or for the particular security and a stated 11 purpose of the issue is one for which the issuer has power to 12 borrow money or issue the security. 13 (c) Lack of genuineness as complete defense.--Except as 14 [otherwise] provided in the case of certain unauthorized 15 signatures [on issue] (section 8205), lack of genuineness of a 16 certificated security or an initial transaction statement is a 17 complete defense, even against a purchaser for value and without 18 notice. 19 (d) Defenses ineffective against purchaser for value without 20 notice.--All other defenses of the issuer of a certificated or 21 uncertificated security, including nondelivery and conditional 22 delivery of [the] a certificated security, are ineffective 23 against a purchaser for value who has taken without notice of 24 the particular defense. 25 (e) Right to cancel certain contracts unaffected.--Nothing 26 in this section shall be construed to affect the right of a 27 party to a "when, as and if issued" or a "when distributed" 28 contract to cancel the contract in the event of a material 29 change in the character of the security [which] that is the 30 subject of the contract or in the plan or arrangement pursuant 19890H1826B2335 - 14 -
1 to which [such] the security is to be issued or distributed. 2 § 8203. Staleness as notice of defects or defenses. 3 (a) General rule.--After an act or event [which creates] 4 creating a right to immediate performance of the principal 5 obligation [evidenced] represented by [the] a certificated 6 security or [which] that sets a date on or after which the 7 security is to be presented or surrendered for redemption or 8 exchange, a purchaser is charged with notice of any defect in 9 its issue or defense of the issuer if: 10 (1) [if] the act or event is one requiring the payment 11 of money [or], the delivery of certificated securities, the 12 registration of transfer of uncertificated securities, or 13 [both] any of these on presentation or surrender of the 14 certificated security [and such], the funds or securities are 15 available on the date set for payment or exchange, and he 16 takes the security more than one year after that date; and 17 (2) [if] the act or event is not covered by paragraph 18 (1) and he takes the security more than two years after the 19 date set for surrender or presentation or the date on which 20 [such] performance became due. 21 (b) Exception.--A call [which] that has been revoked is not 22 within subsection (a). 23 § 8204. Effect of restrictions by issuer on transfer. 24 [Unless noted conspicuously on the security a] A restriction 25 on transfer of a security imposed by the issuer, even though 26 otherwise lawful, is ineffective [except] against [a] any person 27 [with] without actual knowledge of it unless: 28 (1) the security is certificated and the restriction is 29 noted conspicuously thereon; or 30 (2) the security is uncertificated and a notation of the 19890H1826B2335 - 15 -
1 restriction is contained in the initial transaction statement 2 sent to the person or, if his interest is transferred to him 3 other than by registration of transfer, pledge or release, 4 the initial transaction statement sent to the registered 5 owner or the registered pledgee. 6 § 8205. Effect of unauthorized signature on [issue] 7 certificated security or initial transaction 8 statement. 9 An unauthorized signature placed on a certificated security 10 prior to or in the course of issue or placed on an initial 11 transaction statement is ineffective [except that], but the 12 signature is effective in favor of a purchaser for value [and] 13 of the certificated security or a purchaser for value of an 14 uncertificated security to whom such initial transaction 15 statement has been sent, if the purchaser is without notice of 16 the lack of authority [if] and the signing has been done by: 17 (1) an authenticating trustee, registrar, transfer agent 18 or other person entrusted by the issuer with the signing of 19 the security [or], of similar securities or [their] of 20 initial transaction statements or the immediate preparation 21 for signing of any of them; or 22 (2) an employee of the issuer, or of any of the 23 foregoing, entrusted with responsible handling of the 24 security or initial transaction statement. 25 § 8206. Completion or alteration of [instrument] certificated 26 security or initial transaction statement. 27 (a) Completion of certificated security [containing 28 necessary signatures.--Where a].--If a certificated security 29 contains the signatures necessary to its issue or transfer but 30 is incomplete in any other respect: 19890H1826B2335 - 16 -
1 (1) any person may complete it by filling in the blanks 2 as authorized; and 3 (2) even though the blanks are incorrectly filled in, 4 the security as completed is enforceable by a purchaser who 5 took it for value and without notice of [such] the 6 incorrectness. 7 (b) Enforceability of improperly altered certificated 8 security.--A complete certificated security [which] that has 9 been improperly altered, even though fraudulently, remains 10 enforceable but only according to its original terms. 11 (c) Completion of initial transaction statement.--If an 12 initial transaction statement contains the signatures necessary 13 to its validity, but is incomplete in any other respect: 14 (1) any person may complete it by filling in the blanks 15 as authorized; and 16 (2) even though the blanks are incorrectly filled in, 17 the statement as completed is effective in favor of the 18 person to whom it is sent if he purchased the security 19 referred to therein for value and without notice of the 20 incorrectness. 21 (d) Effectiveness of improperly altered initial transaction 22 statement.--A complete initial transaction statement that has 23 been improperly altered, even though fraudulently, is effective 24 in favor of a purchaser to whom it has been sent, but only 25 according to its original terms. 26 § 8207. Rights and duties of issuer with respect to registered 27 owners and registered pledges. 28 (a) [General rule] Registered owner of certificated 29 security.--Prior to due presentment for registration of transfer 30 of a certificated security in registered form, the issuer or 19890H1826B2335 - 17 -
1 indenture trustee may treat the registered owner as the person 2 exclusively entitled to vote, to receive notifications and 3 otherwise to exercise all the rights and powers of an owner. 4 (b) Registered owner of uncertificated security.--Subject to 5 the provisions of subsections (c), (d) and (f), the issuer or 6 indenture trustee may treat the registered owner of an 7 uncertificated security as the person exclusively entitled to 8 vote, to receive notifications and otherwise to exercise all the 9 rights and powers of an owner. 10 (c) Registered owner of uncertificated security subject to 11 registered pledge.--The registered owner of an uncertificated 12 security that is subject to a registered pledge is not entitled 13 to registration of transfer prior to the due presentment to the 14 issuer of a release instruction. The exercise of conversion 15 rights with respect to a convertible uncertificated security is 16 a transfer within the meaning of this section. 17 (d) Transfer instructions from registered pledgee of 18 uncertificated security.--Upon due presentment of a transfer 19 instruction from the registered pledgee of an uncertificated 20 security, the issuer shall: 21 (1) register the transfer of the security to the new 22 owner free of pledge, if the instruction specifies a new 23 owner (who may be the registered pledgee) and does not 24 specify a pledgee; 25 (2) register the transfer of the security to the new 26 owner subject to the interest of the existing pledgee, if the 27 instruction specifies a new owner and the existing pledgee; 28 or 29 (3) register the release of the security from the 30 existing pledge and register the pledge of the security to 19890H1826B2335 - 18 -
1 the other pledgee, if the instruction specifies the existing 2 owner and another pledgee. 3 (e) Continuity of perfection of security interest.-- 4 Continuity of perfection of a security interest is not broken by 5 registration of transfer under subsection (d)(2) or by 6 registration of release and pledge under subsection (d)(3), if 7 the security interest is assigned. 8 (f) Uncertificated security subject to registered pledge.-- 9 If an uncertificated security is subject to a registered pledge: 10 (1) any uncertificated securities issued in exchange for 11 or distributed with respect to the pledged security shall be 12 registered subject to the pledge; 13 (2) any certificated securities issued in exchange for 14 or distributed with respect to the pledged security shall be 15 delivered to the registered pledgee; and 16 (3) any money paid in exchange for or in redemption of 17 part or all of the security shall be paid to the registered 18 pledgee. 19 (g) Liability of registered owner for calls, etc., 20 unaffected.--Nothing in this division shall be construed to 21 affect the liability of the registered owner of a security for 22 calls, assessments or the like. 23 § 8208. Effect of signature of authenticating trustee, 24 registrar or transfer agent. 25 (a) General rule.--A person placing his signature upon a 26 certificated security or an initial transaction statement as 27 authenticating trustee, registrar, transfer agent or the like 28 warrants to a purchaser for value of the certificated security 29 or a purchaser for value of an uncertificated security to whom 30 the initial transaction statement has been sent, if the 19890H1826B2335 - 19 -
1 purchaser is without notice of the particular defect, that: 2 (1) the certificated security or initial transaction 3 statement is genuine; 4 (2) his own participation in the issue or registration 5 of the transfer, pledge or release of the security is within 6 his capacity and within the scope of the [authorization] 7 authority received by him from the issuer; and 8 (3) he has reasonable grounds to believe that the 9 security is in the form and within the amount the issuer is 10 authorized to issue. 11 (b) Limitation.--Unless otherwise agreed, a person by so 12 placing his signature does not assume responsibility for the 13 validity of the security in other respects. 14 CHAPTER 83 15 [PURCHASE] TRANSFER 16 § 8301. Rights acquired by purchaser[; "adverse claim"; title 17 acquired by bona fide purchaser]. 18 (a) Rights acquired by purchaser.--Upon [delivery] transfer 19 of a security to a purchaser (section 8313), the purchaser 20 acquires the rights in the security which his transferor had or 21 had actual authority to convey [except that a purchaser who has 22 himself been a party to any fraud or illegality affecting the 23 security or who as a prior holder had notice of an adverse claim 24 cannot improve his position by taking from a later bona fide 25 purchaser. "Adverse claim" includes a claim that a transfer was 26 or would be wrongful or that a particular adverse person is the 27 owner of or has an interest in the security.] unless the rights 28 of the purchaser are limited by section 8302(d) (relating to 29 limitation on rights acquired from bona fide purchaser). 30 [(b) Rights acquired by bona fide purchaser.--A bona fide 19890H1826B2335 - 20 -
1 purchaser in addition to acquiring the rights of a purchaser 2 also acquires the security free of any adverse claim. 3 (c)] (b) Rights acquired by [purchaser] transferee of 4 limited interest.--A [purchaser] transferee of a limited 5 interest acquires rights only to the extent of the interest 6 [purchased] transferred. The creation or release of a security 7 interest in a security is the transfer of a limited interest in 8 that security. 9 § 8302. "Bona fide purchaser"; "adverse claim"; title acquired 10 by bona fide purchaser. 11 (a) Bona fide purchaser.--A "bona fide purchaser" is a 12 purchaser for value in good faith and without notice of any 13 adverse claim: 14 (1) who takes delivery of a certified security in bearer 15 form or [of one] in registered form, issued [to him] or 16 indorsed to him or in blank[.]; 17 (2) to whom the transfer, pledge or release of an 18 uncertificated security is registered on the books of the 19 issuer; or 20 (3) to whom a security is transferred under the 21 provisions of section 8313(a)(3), (4)(i) or (7) (relating to 22 when transfer to purchaser occurs; financial intermediary as 23 bona fide purchaser; "financial intermediary"). 24 (b) Adverse claim.--"Adverse claim" includes a claim that a 25 transfer was or would be wrongful or that a particular adverse 26 person is the owner of or has an interest in the security. 27 (c) Rights acquired by bona fide purchaser.--A bona fide 28 purchaser in addition to acquiring the rights of a purchaser 29 (section 8301) also acquires his interest in the security free 30 of any adverse claim. 19890H1826B2335 - 21 -
1 (d) Limitation on rights acquired from bona fide 2 purchaser.--Notwithstanding section 8301(a) (relating to rights 3 acquired by purchaser), the transferee of a particular 4 certificated security who has been a party to any fraud or 5 illegality affecting the security, or who as a prior holder of 6 that certificated security had notice of an adverse claim, 7 cannot improve his position by taking from a bona fide 8 purchaser. 9 § 8303. "Broker." 10 "Broker" means a person engaged for all or part of his time 11 in the business of buying and selling securities, who in the 12 transaction concerned acts for, [or] buys a security from, or 13 sells a security to, a customer. Nothing in this division 14 determines the capacity in which a person acts for purposes of 15 any other statute or rule to which [such] the person is subject. 16 § 8304. Notice to purchaser of adverse claims. 17 (a) [General rule] Notice to purchaser of certificated 18 security.--A purchaser (including a broker for the seller or 19 buyer, but excluding an intermediary bank) of a certificated 20 security is charged with notice of adverse claims if: 21 (1) the security, whether in bearer or registered form, 22 has been indorsed "for collection" or "for surrender" or for 23 some other purpose not involving transfer; or 24 (2) the security is in bearer form and has on it an 25 unambiguous statement that it is the property of a person 26 other than a transferor. The mere writing of a name on a 27 security is not such a statement. 28 (b) Notice to purchaser of uncertificated security.--A 29 purchaser (including a broker for the seller or buyer, but 30 excluding an intermediary bank) to whom the transfer, pledge or 19890H1826B2335 - 22 -
1 release of an uncertificated security is registered is charged 2 with notice of adverse claims as to which the issuer has a duty 3 under section 8403(d) (relating to duty of issuer as to adverse 4 claims, uncertificated security) at the time of registration and 5 which are noted in the initial transaction statement sent to the 6 purchaser or, if his interest is transferred to him other than 7 by registration of transfer, pledge or release, the initial 8 transaction statement sent to the registered owner or the 9 registered pledgee. 10 [(b)] (c) Duty of inquiry in fiduciary transactions.--The 11 fact that the purchaser (including a broker for the seller or 12 buyer) of a certificated or uncertificated security has notice 13 that the security is held for a third person or is registered in 14 the name of or indorsed by a fiduciary does not create a duty of 15 inquiry into the rightfulness of the transfer or constitute 16 constructive notice of adverse claims. [If, however,] However, 17 if the purchaser (excluding an intermediary bank) has knowledge 18 that the proceeds are being used or [that] the transaction is 19 for the individual benefit of the fiduciary or otherwise in 20 breach of duty, the purchaser is charged with notice of adverse 21 claims. 22 § 8305. Staleness as notice of adverse claims. 23 An act or event [which] that creates a right to immediate 24 performance of the principal obligation [evidenced] represented 25 by [the] a certificated security or [which] sets a date on or 26 after which [the] a certificated security is to be presented or 27 surrendered for redemption or exchange does not [of] itself 28 constitute any notice of adverse claims except in the case of a 29 [purchase] transfer: 30 (1) after one year from any date set for [such] 19890H1826B2335 - 23 -
1 presentment or surrender for redemption or exchange; or 2 (2) after six months from any date set for payment of 3 money against presentation or surrender of the security if 4 funds are available for payment on that date. 5 § 8306. Warranties on presentment and transfer of certificated 6 securities; warranties of originators of 7 instructions. 8 (a) Warranties of [presenter to issuer] person presenting 9 certificated security.--A person who presents a certificated 10 security for registration of transfer or for payment or exchange 11 warrants to the issuer that he is entitled to the registration, 12 payment or exchange. But a purchaser for value and without 13 notice of adverse claims who receives a new, reissued or 14 reregistered certificated security on registration of transfer 15 or receives an initial transaction statement confirming the 16 registration of transfer of an equivalent uncertificated 17 security to him warrants only that he has no knowledge of any 18 unauthorized signature (section 8311) in a necessary 19 indorsement. 20 (b) Warranties of person transferring a certificated 21 security to purchaser for value.--A person by transferring a 22 certificated security to a purchaser for value warrants only 23 that: 24 (1) his transfer is effective and rightful; 25 (2) the security is genuine and has not been materially 26 altered; and 27 (3) he knows of no fact which might impair the validity 28 of the security. 29 (c) Warranties of intermediary delivering certificated 30 security.--[Where] If a certificated security is delivered by an 19890H1826B2335 - 24 -
1 intermediary known to be entrusted with delivery of the security 2 on behalf of another or with collection of a draft or other 3 claim against [such] delivery, the intermediary by [such] 4 delivery warrants only his own good faith and authority, even 5 though he has purchased or made advances against the claim to be 6 collected against the delivery. 7 (d) Warranties of pledgee or other holder for security.--A 8 pledgee or other holder for security who redelivers [the] a 9 certificated security received, or after payment and on order of 10 the debtor delivers that security to a third person, makes only 11 the warranties of an intermediary under subsection (c). 12 (e) Warranties of person originating instruction; issuer.--A 13 person who originates an instruction warrants to the issuer 14 that: 15 (1) he is an appropriate person to originate the 16 instruction; and 17 (2) at the time the instruction is presented to the 18 issuer, he will be entitled to the registration of transfer, 19 pledge or release. 20 (f) Warranties of person originating instruction; signature 21 guarantor.--A person who originates an instruction warrants to 22 any person specially guaranteeing his signature (section 23 8312(c)) that: 24 (1) he is an appropriate person to originate the 25 instruction; and 26 (2) at the time the instruction is presented to the 27 issuer: 28 (i) he will be entitled to the registration of 29 transfer, pledge or release; and 30 (ii) the transfer, pledge or release requested in 19890H1826B2335 - 25 -
1 the instruction will be registered by the issuer free 2 from all liens, security interests, restrictions and 3 claims other than those specified in the instruction. 4 (g) Other warranties of person originating instruction.--A 5 person who originates an instruction warrants to a purchaser for 6 value and to any person guaranteeing the instruction (section 7 8312(f)) that: 8 (1) he is an appropriate person to originate the 9 instruction; 10 (2) the uncertificated security referred to therein is 11 valid; and 12 (3) at the time the instruction is presented to the 13 issuer: 14 (i) the transferor will be entitled to the 15 registration of transfer, pledge or release; 16 (ii) the transfer, pledge or release requested in 17 the instruction will be registered by the issuer free 18 from all liens, security interests, restrictions and 19 claims other than those specified in the instruction; and 20 (iii) the requested transfer, pledge or release will 21 be rightful. 22 (h) Warranties of person who originates instruction of 23 release or transfer.--If a secured party is the registered 24 pledgee or the registered owner of an uncertificated security, a 25 person who originates an instruction of release or transfer to 26 the debtor or, after payment and on order of the debtor, a 27 transfer instruction to a third person, warrants to the debtor 28 or the third person only that he is an appropriate person to 29 originate the instruction and, at the time the instruction is 30 presented to the issuer, the transferor will be entitled to the 19890H1826B2335 - 26 -
1 registration of release or transfer. If a transfer instruction 2 to a third person who is a purchaser for value is originated on 3 order of the debtor, the debtor makes to the purchaser the 4 warranties of subsection (g)(2) and (3)(ii) and (iii). 5 (i) Warranties of person who transfers uncertificated 6 security to purchaser for value.--A person who transfers an 7 uncertificated security to a purchaser for value and does not 8 originate an instruction in connection with the transfer 9 warrants only that: 10 (1) his transfer is effective and rightful; and 11 (2) the uncertificated security is valid. 12 [(e)] (j) Warranties, rights and privileges of broker.--A 13 broker gives to his customer and to the issuer and a purchaser 14 the applicable warranties provided in this section and has the 15 rights and privileges of a purchaser under this section. The 16 warranties of and in favor of the broker acting as an agent are 17 in addition to applicable warranties given by and in favor of 18 his customer. 19 § 8307. Effect of delivery without indorsement; right to compel 20 indorsement. 21 [Where] If a certificated security in registered form has 22 been delivered to a purchaser without a necessary indorsement he 23 may become a bona fide purchaser only as of the time the 24 indorsement is supplied, but against the transferor the transfer 25 is complete upon delivery and the purchaser has a specifically 26 enforceable right to have any necessary indorsement supplied. 27 § 8308. [Indorsement, how made; special indorsement; indorser 28 not a guarantor; partial assignment] Indorsements; 29 instructions. 30 (a) Manner of indorsement.--An indorsement of a certificated 19890H1826B2335 - 27 -
1 security in registered form is made when an appropriate person
2 signs on it or on a separate document an assignment or transfer
3 of the security or a power to assign or transfer it or [when
4 the] his signature [of such person] is written without more upon
5 the back of the security.
6 (b) Blank and special indorsements.--An indorsement may be
7 in blank or special. An indorsement in blank includes an
8 indorsement to bearer. A special indorsement specifies [the
9 person] to whom the security is to be transferred, or who has
10 power to transfer it. A holder may convert a blank indorsement
11 into a special indorsement.
12 [(c) Definition of "appropriate person".--An "appropriate
13 person" in subsection (a) means:
14 (1) the person specified by the security or by special
15 indorsement to be entitled to the security;
16 (2) where the person so specified is described as a
17 fiduciary but is no longer serving in the described
18 capacity,--either that person or his successor;
19 (3) where the security or indorsement so specifies more
20 than one person as fiduciaries and one or more are no longer
21 serving in the described capacity,--the remaining fiduciary
22 or fiduciaries, whether or not a successor has been appointed
23 or qualified;
24 (4) where the person so specified is an individual and
25 is without capacity to act by virtue of death, incompetence,
26 infancy or otherwise, --his executor, administrator, guardian
27 or like fiduciary;
28 (5) where the security or indorsement so specifies more
29 than one person as tenants by the entirety or with right of
30 survivorship and by reason of death all cannot sign,--the
19890H1826B2335 - 28 -
1 survivor or survivors; 2 (6) a person having power to sign under applicable law 3 or controlling instrument; or 4 (7) to the extent that any of the foregoing persons may 5 act through an agent,--his authorized agent. 6 (d) Indorser not a guarantor.--Unless otherwise agreed the 7 indorser by his indorsement assumes no obligation that the 8 security will be honored by the issuer. 9 (e) Effect of partial indorsement.--An indorsement 10 purporting to be only of part of a security representing units 11 intended by the issuer to be separately transferable is 12 effective to the extent of the indorsement.] 13 (c) Effect of partial indorsement.--An indorsement 14 purporting to be only of part of a certificated security 15 representing units intended by the issuer to be separately 16 transferable is effective to the extent of the indorsement. 17 (d) Definition of "instruction."--An "instruction" is an 18 order to the issuer of an uncertificated security requesting 19 that the transfer, pledge or release from pledge of the 20 uncertificated security specified therein be registered. 21 (e) Instruction originated by appropriate person.--An 22 instruction originated by an appropriate person is: 23 (1) a writing signed by an appropriate person; or 24 (2) a communication to the issuer in any form agreed 25 upon in a writing signed by the issuer and an appropriate 26 person. 27 If an instruction has been originated by an appropriate person 28 but is incomplete in any other respect, any person may complete 29 it as authorized, and the issuer may rely on it as completed 30 even though it has been completed incorrectly. 19890H1826B2335 - 29 -
1 (f) Definition of "appropriate person" in certain cases.--An 2 "appropriate person" in subsection (a) means the person 3 specified by the certificated security or by special indorsement 4 to be entitled to the security. 5 (g) Definition of "appropriate person" in other cases.--"An 6 appropriate person" in subsection (e) means: 7 (1) for an instruction to transfer or pledge an 8 uncertificated security which is then not subject to a 9 registered pledge, the registered owner; or 10 (2) for an instruction to transfer or release an 11 uncertificated security which is then subject to a registered 12 pledge, the registered pledgee. 13 (h) Definition of "appropriate person" in additional 14 cases.--In addition to the persons designated in subsections (f) 15 and (g), "an appropriate person" in subsections (a) and (e) 16 includes: 17 (1) if the person designated is described as a fiduciary 18 but is no longer serving in the described capacity, either 19 that person or his successor; 20 (2) if the persons designated are described as more than 21 one person as fiduciaries and one or more are no longer 22 serving in the described capacity, the remaining fiduciary or 23 fiduciaries, whether or not a successor has been appointed or 24 qualified; 25 (3) if the person designated is an individual and is 26 without capacity to act by virtue of death, incompetence, 27 infancy, or otherwise, his executor, administrator, guardian 28 or like fiduciary; 29 (4) if the persons designated are described as more than 30 one person as tenants by the entirety or with right of 19890H1826B2335 - 30 -
1 survivorship and by reason of death all cannot sign, the 2 survivor or survivors; 3 (5) a person having power to sign under applicable law 4 or controlling instrument; and 5 (6) to the extent that the person designated or any of 6 the foregoing persons may act through an agent, his 7 authorized agent. 8 (i) Indorser not a guarantor.--Unless otherwise agreed, the 9 indorser of a certificated security by his indorsement or the 10 originator of an instruction by his origination assumes no 11 obligation that the security will be honored by the issuer but 12 only the obligations provided in section 8306 (relating to 13 warranties on presentment and transfer of certificated 14 securities; warranties of originators of instructions). 15 [(f)] (j) Status of appropriate person.--Whether the person 16 signing is appropriate is determined as of the date of signing 17 and an indorsement made by or an instruction originated by [such 18 a person] him does not become unauthorized for the purposes of 19 this division by virtue of any subsequent change of 20 circumstances. 21 [(g)] (k) Effect of noncompliance by fiduciary on his 22 indorsement.--Failure of a fiduciary to comply with a 23 controlling instrument or with the law of the state having 24 jurisdiction of the fiduciary relationship, including any law 25 requiring the fiduciary to obtain court approval of the 26 transfer, pledge or release, does not render his indorsement or 27 an instruction originated by him unauthorized for the purposes 28 of this division. 29 § 8309. Effect of indorsement without delivery. 30 An indorsement of a certificated security, whether special or 19890H1826B2335 - 31 -
1 in blank, does not constitute a transfer until delivery of the 2 certificated security on which it appears or, if the indorsement 3 is on a separate document, until delivery of both the document 4 and the certificated security. 5 § 8310. Indorsement of certificated security in bearer form. 6 An indorsement of a certificated security in bearer form may 7 give notice of adverse claims (section 8304) but does not 8 otherwise affect any right to registration the holder [may 9 possess] possesses. 10 § 8311. Effect of unauthorized indorsement or instruction. 11 Unless the owner or pledgee has ratified an unauthorized 12 indorsement or instruction or is otherwise precluded from 13 asserting its ineffectiveness: 14 (1) he may assert its ineffectiveness against the issuer 15 or any purchaser, other than a purchaser for value and 16 without notice of adverse claims, who has in good faith 17 received a new, reissued or reregistered certificated 18 security on registration of transfer or received an initial 19 transaction statement confirming the registration of 20 transfer, pledge or release of an equivalent uncertificated 21 security to him; and 22 (2) an issuer who registers the transfer of a 23 certificated security upon the unauthorized indorsement or 24 who registers the transfer, pledge or release of an 25 uncertificated security upon the unauthorized instruction is 26 subject to liability for improper registration (section 27 8404). 28 § 8312. Effect of guaranteeing signature, [or] indorsement or 29 instruction. 30 (a) Warranties of signature guarantor.--Any person 19890H1826B2335 - 32 -
1 guaranteeing a signature of an indorser of a certificated 2 security warrants that at the time of signing: 3 (1) the signature was genuine; 4 (2) the signer was an appropriate person to indorse 5 (section 8308); and 6 (3) the signer had legal capacity to sign. 7 [But the guarantor does not otherwise warrant the rightfulness 8 of the particular transfer.] 9 (b) Warranties of person guaranteeing signature of 10 originator of instruction.--Any person guaranteeing a signature 11 of the originator of an instruction warrants that at the time of 12 signing: 13 (1) the signature was genuine; 14 (2) the signer was an appropriate person to originate 15 the instruction (section 8308) if the person specified in the 16 instruction as the registered owner or registered pledgee of 17 the uncertificated security was, in fact, the registered 18 owner or registered pledgee of such security, as to which 19 fact the signature guarantor makes no warranty; 20 (3) the signer had legal capacity to sign; and 21 (4) the taxpayer identification number, if any, 22 appearing on the instruction as that of the registered owner 23 or registered pledgee was the taxpayer identification number 24 of the signer or of the owner or pledgee for whom the signer 25 was acting. 26 (c) Warranties of person specially guaranteeing signature of 27 originator of an instruction.--Any person specially guaranteeing 28 the signature of the originator of an instruction makes not only 29 the warranties of a signature guarantor (subsection (b)) but 30 also warrants that at the time the instruction is presented to 19890H1826B2335 - 33 -
1 the issuer; 2 (1) the person specified in the instruction as the 3 registered owner or registered pledgee of the uncertificated 4 security will be the registered owner or registered pledgee; 5 and 6 (2) the transfer, pledge or release of the 7 uncertificated security requested in the instruction will be 8 registered by the issuer free from all liens, security 9 interests, restrictions and claims other than those specified 10 in the instruction. 11 (d) Limitations on warranties.--The guarantor under 12 subsections (a) and (b) or the special guarantor under 13 subsection (c) does not otherwise warrant the rightfulness of 14 the particular transfer, pledge or release. 15 [(b)] (e) Warranties of indorsement guarantor.--Any person 16 [may guarantee] guaranteeing an indorsement of a certificated 17 security [and by so doing warrants not only the signature 18 (subsection (a))] makes not only the warranties of a signature 19 guarantor under subsection (a) but also warrants the 20 rightfulness of the particular transfer in all respects. [But no 21 issuer may require a guarantee of indorsement as a condition to 22 registration of transfer.] 23 (f) Warranties of person guaranteeing certain 24 instructions.--Any person guaranteeing an instruction requesting 25 the transfer, pledge or release of an uncertificated security 26 makes not only the warranties of a special signature guarantor 27 under subsection (c) but also warrants the rightfulness of the 28 particular transfer, pledge or release in all respects. 29 (g) Matters which issuer may not require.--No issuer may 30 require a special guarantee of signature (subsection (c)), a 19890H1826B2335 - 34 -
1 guarantee of indorsement (subsection (e)) or a guarantee of 2 instruction (subsection (f)) as a condition to registration of 3 transfer, pledge or release. 4 [(c)] (h) Persons protected by warranties.--The foregoing 5 warranties are made to any person taking or dealing with the 6 security in reliance on the guarantee, and the guarantor is 7 liable to [such] the person for any loss resulting from breach 8 of the warranties. 9 § 8313. When [delivery] transfer to purchaser occurs; [broker 10 of purchaser] financial intermediary as [holder] bona 11 fide purchaser; "financial intermediary". 12 (a) When [delivery] transfer to purchaser occurs.-- 13 [Delivery] Transfer of a security or a limited interest 14 (including a security interest) therein to a purchaser occurs 15 [when] only: 16 (1) at the time he or a person designated by him 17 acquires possession of a certificated security; 18 (2) at the time the transfer, pledge or release of an 19 uncertificated security is registered to him or a person 20 designated by him; 21 [(2)] (3) at the time his [broker] financial 22 intermediary acquires possession of a certificated security 23 specially indorsed to or issued in the name of the purchaser; 24 [(3) his broker] (4) at the time a financial 25 intermediary, not a clearing corporation, sends him 26 confirmation of the purchase and also by book entry or 27 otherwise identifies [a specific security in the possession 28 of the broker] as belonging to the purchaser[;]: 29 (i) a specific certificated security in the 30 possession of the financial intermediary; 19890H1826B2335 - 35 -
1 (ii) a quantity of securities that constitute or are 2 part of a fungible bulk of certificated securities in the 3 financial intermediary's possession or of uncertificated 4 securities registered in the name of the financial 5 intermediary; or 6 (iii) a quantity of securities that constitute or 7 are part of a fungible bulk of securities shown on the 8 account of the financial intermediary on the books of 9 another financial intermediary; 10 [(4)] (5) with respect to an identified certificated 11 security to be delivered while still in the possession of a 12 third person [when], not a financial intermediary, at the 13 time that person acknowledges that he holds for the 14 purchaser; [or] 15 (6) with respect to a specific uncertificated security 16 the pledge or transfer of which has been registered to a 17 third person, not a financial intermediary, at the time that 18 person acknowledges that he holds for the purchaser; 19 [(5)] (7) at the time appropriate entries to the account 20 of the purchaser or a person designated by him on the books 21 of a clearing corporation are made under section 8320 22 (relating to transfer or pledge within [a] central depository 23 system)[.]; 24 (8) with respect to the transfer of a security interest 25 where the debtor has signed a security agreement containing a 26 description of the security, at the time a written 27 notification, which, in the case of the creation of the 28 security interest, is signed by the debtor (which may be a 29 copy of the security agreement) or which, in the case of the 30 release or assignment of the security interest created 19890H1826B2335 - 36 -
1 pursuant to this paragraph, is signed by the secured party, 2 is received by: 3 (i) a financial intermediary on whose books the 4 interest of the transferor in the security appears; 5 (ii) a third person, not a financial intermediary, 6 in possession of the security, if it is certificated; 7 (iii) a third person, not a financial intermediary, 8 who is the registered owner of the security, if it is 9 uncertificated and not subject to a registered pledge; or 10 (iv) a third person, not a financial intermediary, 11 who is the registered pledgee of the security, if it is 12 uncertificated and subject to a registered pledge; 13 (9) with respect to the transfer of a security interest 14 where the transferor has signed a security agreement 15 containing a description of the security, at the time new 16 value is given by the secured party; or 17 (10) with respect to the transfer of a security interest 18 where the secured party is a financial intermediary and the 19 security has already been transferred to the financial 20 intermediary under paragraph (1), (2), (3), (4) or (7), at 21 the time the transferor has signed a security agreement 22 containing a description of the security and value is given 23 by the secured party. 24 (b) Rights of purchaser in security held by [broker] 25 financial intermediary.--The purchaser is the owner of a 26 security held for him by [his broker,] a financial intermediary, 27 but [is not the holder] cannot be a bona fide purchaser of a 28 security so held except [as] in the circumstances specified in 29 subsection (a)[(2)](3),(4)(i) and [(5)] (7). [Where] If a 30 security so held is part of a fungible bulk, as in the 19890H1826B2335 - 37 -
1 circumstances specified in subsection (a)(4)(ii) and (iii), the 2 purchaser is the owner of a proportionate property interest in 3 the fungible bulk. 4 (c) Notice of adverse claim to security held by [broker] 5 financial intermediary.--Notice of an adverse claim received by 6 the [broker] financial intermediary or by the purchaser after 7 the [broker] financial intermediary takes delivery of a 8 certificated security as a holder for value or after the 9 transfer, pledge or release of an uncertificated security has 10 been registered free of the claim to a financial intermediary 11 who has given value is not effective either as to the [broker] 12 financial intermediary or as to the purchaser. However, as 13 between the [broker] financial intermediary and the purchaser, 14 the purchaser may demand [delivery] transfer of an equivalent 15 security as to which no notice of [an] adverse claim has been 16 received. 17 (d) Definition of "financial intermediary".--A "financial 18 intermediary" is a bank, broker, clearing corporation or other 19 person (or the nominee of any of them) which in the ordinary 20 course of its business maintains security accounts for its 21 customers and is acting in that capacity. A financial 22 intermediary may have a security interest in securities held in 23 account for its customer. 24 § 8314. Duty to [deliver] transfer, when completed. 25 (a) Sale through broker.--Unless otherwise agreed [where], 26 if a sale of a security is made on an exchange or otherwise 27 through brokers: 28 (1) the selling customer fulfills his duty to [deliver 29 when he] transfer at the time he; 30 (i) places [such] a certificated security in the 19890H1826B2335 - 38 -
1 possession of the selling broker or of a person 2 designated by the broker [or if requested causes an 3 acknowledgement to be made to the selling broker that it 4 is held for him; and]; 5 (ii) causes an uncertificated security to be 6 registered in the name of the selling broker or a person 7 designated by the broker; 8 (iii) if requested, causes an acknowledgment to be 9 made to the selling broker that a certificated or 10 uncertificated security is held for the broker; or 11 (iv) places in the possession of the selling broker 12 or of a person designated by the broker a transfer 13 instruction for an uncertificated security, providing the 14 issuer does not refuse to register the requested transfer 15 if the instruction is presented to the issuer for 16 registration within 30 days thereafter; and 17 (2) the selling broker, including a correspondent broker 18 acting for a selling customer, fulfills his duty to [deliver 19 by placing the] transfer at the time he; 20 (i) places a certificated security [or a like 21 security] in the possession of the buying broker or a 22 person designated by [him or by effecting] the buying 23 broker; 24 (ii) causes an uncertificated security to be 25 registered in the name of the buying broker or a person 26 designated by the buying broker; 27 (iii) places in the possession of the buying broker 28 or of a person designated by the buying broker a transfer 29 instruction for an uncertificated security, providing the 30 issuer does not refuse to register the requested transfer 19890H1826B2335 - 39 -
1 if the instruction is presented to the issuer for 2 registration within 30 days thereafter; or 3 (iv) effects clearance of the sale in accordance 4 with the rules of the exchange on which the transaction 5 took place. 6 (b) Other sales.--Except as [otherwise] provided in this 7 section and unless otherwise agreed, the duty of a transferor to 8 [deliver] transfer a security under a contract of purchase is 9 not fulfilled until he: 10 (1) places [the] a certificated security in form to be 11 negotiated by the purchaser in the possession of the 12 purchaser or of a person designated by [him or at the request 13 of the purchaser causes an acknowledgment to be made to the 14 purchaser that it is held for him.] the purchaser; 15 (2) causes an uncertificated security to be registered 16 in the name of the purchaser or a person designated by the 17 purchaser; or 18 (3) if the purchaser requests, causes an acknowledgment 19 to be made to the purchaser that a certificated or 20 uncertificated security is held for the purchaser. 21 (c) Sales to brokers.--Unless made on an exchange, a sale to 22 a broker purchasing for his own account is within [this] 23 subsection (b) and not within subsection (a). 24 § 8315. Action against [purchaser] transferee based upon 25 wrongful transfer. 26 (a) General rule.--Any person against whom the transfer of a 27 security is wrongful for any reason, including his incapacity, 28 [may] as against anyone except a bona fide purchaser, may: 29 (1) reclaim possession of the certificated security [or] 30 wrongfully transferred; 19890H1826B2335 - 40 -
1 (2) obtain possession of any new certificated security 2 [evidencing] representing all or part of the same rights 3 [or]; 4 (3) compel the origination of an instruction to transfer 5 to him or a person designated by him an uncertificated 6 security constituting all or part of the same rights; or 7 (4) have damages. 8 (b) Unauthorized [endorsement] indorsements.--If the 9 transfer is wrongful because of an unauthorized indorsement of a 10 certificated security, the owner may also reclaim or obtain 11 possession of the security or a new certificated security, even 12 from a bona fide purchaser, if the ineffectiveness of the 13 purported indorsement can be asserted against him under the 14 provisions of this division on unauthorized indorsements 15 (section 8311). 16 (c) Remedies available.--The right to obtain or reclaim 17 possession of a certificated security or to compel the 18 origination of a transfer instruction may be specifically 19 enforced and [its] the transfer of a certificated or 20 uncertificated security enjoined and [the] a certificated 21 security impounded pending the litigation. 22 § 8316. Right of purchaser to requisites for registration of 23 transfer, pledge or release on books. 24 Unless otherwise agreed, the transferor [must] of a 25 certificated security or the transferor, pledgor or pledgee of 26 an uncertificated security on due demand must supply his 27 purchaser with any proof of his authority to transfer, pledge or 28 release or with any other requisite [which may be] necessary to 29 obtain registration of the transfer, pledge or release of the 30 security; but, if the transfer, pledge or release is not for 19890H1826B2335 - 41 -
1 value, a transferor, pledgor or pledgee need not do so unless 2 the purchaser furnishes the necessary expenses. Failure within a 3 reasonable time to comply with a demand made [within a 4 reasonable time] gives the purchaser the right to reject or 5 rescind the transfer, pledge or release. 6 § 8317. [Attachment or levy upon security] Rights of creditor. 7 (a) [Seizure required.--No] General rule for certificated 8 securities.--Subject to the exceptions in subsections (c) and 9 (d), no attachment or levy upon a certificated security or any 10 share or other interest [evidenced] represented thereby which is 11 outstanding [shall be] is valid until the security is actually 12 seized by the officer making the attachment or levy, but a 13 certificated security which has been surrendered to the issuer 14 may be [attached or levied upon at the source.] reached by a 15 creditor by legal process at the chief executive office of the 16 issuer in the United States. 17 (b) General rule for uncertificated securities.--An 18 uncertificated security registered in the name of the debtor may 19 not be reached by a creditor except by legal process at the 20 chief executive office of the issuer in the United States. 21 (c) Reaching interest of debtor when secured party is not 22 financial intermediary.--The interest of a debtor in a 23 certificated security that is in the possession of a secured 24 party not a financial intermediary or in an uncertificated 25 security registered in the name of a secured party not a 26 financial intermediary (or in the name of a nominee of the 27 secured party) may be reached by a creditor by legal process 28 upon the secured party. 29 (d) Reaching interest of debtor when secured party is 30 financial intermediary.--The interest of a debtor in a 19890H1826B2335 - 42 -
1 certificated security that is in the possession of or registered 2 in the name of a financial intermediary or in an uncertificated 3 security registered in the name of a financial intermediary may 4 be reached by a creditor by legal process upon the financial 5 intermediary on whose books the interest of the debtor appears. 6 (e) Effect of lien upon transfer of security to third 7 party.--Unless otherwise provided by law, the lien of a creditor 8 upon the interest of a debtor in a security obtained pursuant to 9 subsection (c) or (d) is not a restraint on the transfer of the 10 security, free of the lien, to a third party for new value; but, 11 in the event of a transfer, the lien applies to the proceeds of 12 the transfer in the hands of the secured party or financial 13 intermediary, subject to any claims having priority. 14 [(b)] (f) Remedies available.--A creditor whose debtor is 15 the owner of a security [shall be] is entitled to [such] aid 16 from courts of appropriate jurisdiction, by injunction or 17 otherwise, in reaching [such] the security or in satisfying the 18 claim by means [thereof as is] allowed at law or in equity in 19 regard to property [which] that cannot readily be [attached or 20 levied upon] reached by ordinary legal process. 21 § 8318. No conversion by good faith [delivery] conduct. 22 An agent or bailee who in good faith (including observance of 23 reasonable commercial standards if he is in the business of 24 buying, selling or otherwise dealing with securities) has 25 received certificated securities and sold, pledged or delivered 26 them or has sold or caused the transfer or pledge of 27 uncertificated securities over which he had control according to 28 the instructions of his principal is not liable for conversion 29 or for participation in breach of fiduciary duty although the 30 principal had no right [to dispose of them] so to deal with the 19890H1826B2335 - 43 -
1 securities. 2 § 8319. Statute of frauds. 3 A contract for the sale of securities is not enforceable by 4 way of action or defense unless: 5 (1) there is some writing signed by the party against 6 whom enforcement is sought or by his authorized agent or 7 broker sufficient to indicate that a contract has been made 8 for sale of a stated quantity of described securities at a 9 defined or stated price; 10 (2) delivery of [the] a certificated security or 11 transfer instruction has been accepted, or transfer of an 12 uncertificated security has been registered and the 13 transferee has failed to send written objection to the issuer 14 within ten days after receipt of the initial transaction 15 statement confirming the registration, or payment has been 16 made, but the contract is enforceable under this paragraph 17 only to the extent of [such] the delivery, registration or 18 payment; 19 (3) within a reasonable time a writing in confirmation 20 of the sale or purchase and sufficient against the sender 21 under paragraph (1) has been received by the party against 22 whom enforcement is sought and he has failed to send written 23 objection to its contents within ten days after its receipt; 24 or 25 (4) the party against whom enforcement is sought admits 26 in his pleadings, testimony or otherwise in court that a 27 contract was made for the sale of a stated quantity of 28 described securities at a defined or stated price. 29 § 8320. Transfer or pledge within [a] central depository 30 system. 19890H1826B2335 - 44 -
1 (a) Manner of effecting transfer [or], pledge or release.-- 2 [If a security:] In addition to other methods, a transfer, 3 pledge or release of a security or any interest therein may be 4 effected by the making of appropriate entries on the books of a 5 clearing corporation reducing the account of the transferor, 6 pledgor or pledgee and increasing the account of the transferee, 7 pledgee or pledgor by the amount of the obligation, or the 8 number of shares or rights transferred, pledged or released, if 9 the security is shown on the account of a transferor, pledgor or 10 pledgee on the books of the clearing corporation, is subject to 11 the control of the clearing corporation and: 12 (1) if certificated: 13 (i) is in the custody of [a] the clearing 14 corporation [or of], another clearing corporation, a 15 custodian bank or a nominee of [either subject to the 16 instructions of the clearing corporation;] any of them; 17 and 18 [(2)] (ii) is in bearer form or indorsed in blank by 19 an appropriate person or registered in the name of the 20 clearing corporation [or], a custodian bank or a nominee 21 of [either; and] any of them; or 22 (2) if uncertificated, is registered in the name of the 23 clearing corporation, another clearing corporation, a 24 custodian bank or a nominee of any of them. 25 [(3) is shown on the account of a transferor or pledgor 26 on the books of the clearing corporation; 27 then, in addition to other methods, a transfer or pledge of the 28 security or any interest therein may be effected by the making 29 of appropriate entries on the books of the clearing corporation 30 reducing the account of the transferor or pledgor and increasing 19890H1826B2335 - 45 -
1 the account of the transferee or pledgee by the amount of the 2 obligation or the number of shares or rights transferred or 3 pledged.] 4 (b) Requisites for book entries.--Under this section entries 5 may be made with respect to like securities or interests therein 6 as a part of a fungible bulk and may refer merely to a quantity 7 of a particular security without reference to the name of the 8 registered owner, certificate or bond number or the like and, in 9 appropriate cases, may be on a net basis taking into account 10 other transfers [or], pledges or releases of the same security. 11 (c) Effect of transfer [or], pledge or release.--A transfer 12 [or pledge] under this section [has the effect of a delivery of 13 a security in bearer form or duly indorsed in blank (section 14 8301 (relating to rights acquired by purchaser; "adverse claim"; 15 title acquired by bona fide purchaser)) representing the amount 16 of the obligation or the number of shares or rights transferred 17 or pledged.] is effective (section 8313) and the purchaser 18 acquires the rights of the transferor (section 8301). A pledge 19 or release under this section is the transfer of a limited 20 interest. If a pledge or the creation of a security interest is 21 intended, [the making of entries has the effect of a taking of 22 delivery by the pledgee or a secured party (section 9304 23 (relating to perfection of security interest in instruments, 24 documents and goods covered by documents) and section 9305 25 (relating to when possession by secured party perfects security 26 interest without filing)).] the security interest is perfected 27 at the time when both value is given by the pledgee and the 28 appropriate entries are made (section 8321). A transferee or 29 pledgee under this section [is a holder] may be a bona fide 30 purchaser (section 8302). 19890H1826B2335 - 46 -
1 (d) Transfer or pledge not a registration.--A transfer or 2 pledge under this section [does] is not [constitute] a 3 registration of transfer under Chapter 84 (relating to 4 registration). 5 (e) Effect of inappropriate entries.--That entries made on 6 the books of the clearing corporation as provided in subsection 7 (a) are not appropriate does not affect the validity or effect 8 of the entries [nor] or the liabilities or obligations of the 9 clearing corporation to any person adversely affected thereby. 10 § 8321. Enforceability, attachment, perfection and termination 11 of security interests. 12 (a) Enforceability and attachment.--A security interest in a 13 security is enforceable and can attach only if it is transferred 14 to the secured party or a person designated by him pursuant to a 15 provision of section 8313(a) (relating to when transfer to 16 purchaser occurs). 17 (b) Perfection.--A security interest so transferred pursuant 18 to agreement by a transferor who has rights in the security to a 19 transferee who has given value is a perfected security interest, 20 but a security interest that has been transferred solely under 21 section 8313(a)(9) becomes unperfected after 21 days unless, 22 within that time, the requirements for transfer under any other 23 provision of section 8313(a) are satisfied. 24 (c) Other provisions.--A security interest in a security is 25 subject to the provisions of Division 9 (relating to secured 26 transactions sales of accounts; contract rights and chattel 27 paper), but: 28 (1) no filing is required to perfect the security 29 interest; and 30 (2) no written security agreement signed by the debtor 19890H1826B2335 - 47 -
1 is necessary to make the security interest enforceable, 2 except as otherwise provided in section 8313(a)(8), (9) or 3 (10). 4 The secured party has the rights and duties provided under 5 section 9207 (relating to rights and duties when collateral in 6 possession of secured party), to the extent they are applicable, 7 whether or not the security is certificated, and, if 8 certificated, whether or not it is in his possession. 9 (d) Termination and temporary perfection.--Unless otherwise 10 agreed, a security interest in a security is terminated by 11 transfer to the debtor or a person designated by him pursuant to 12 a provision of section 8313(a). If a security is thus 13 transferred, the security interest, if not terminated, becomes 14 unperfected unless the security is certificated and is delivered 15 to the debtor for the purpose of ultimate sale or exchange or 16 presentation, collection, renewal or registration of transfer. 17 In that case, the security interest becomes unperfected after 21 18 days unless, within that time, the security (or securities for 19 which it has been exchanged) is transferred to the secured party 20 or a person designated by him pursuant to a provision of section 21 8313(a). 22 § 8401. Duty of issuer to register transfer, pledge or release. 23 (a) General rule.--[Where] If a certificated security in 24 registered form is presented to the issuer with a request to 25 register transfer or an instruction is presented to the issuer 26 with a request to register transfer, pledge or release, the 27 issuer [is under a duty to] shall register the transfer, pledge 28 or release as requested if: 29 (1) the security is indorsed or the instruction was 30 originated by the appropriate person or persons (section 19890H1826B2335 - 48 -
1 8308); 2 (2) reasonable assurance is given that those 3 indorsements or instructions are genuine and effective 4 (section 8402); 5 (3) the issuer has no duty [to inquire into] as to 6 adverse claims or has discharged [any such] the duty (section 7 8403); 8 (4) any applicable law relating to the collection of 9 taxes has been complied with; and 10 (5) the transfer, pledge or release is in fact rightful 11 or is to a bona fide purchaser. 12 (b) Liability for failure or delay in [registering transfer] 13 registration.--[Where] If an issuer is under a duty to register 14 a transfer, pledge or release of a security, the issuer is also 15 liable to the person presenting [it] a certificated security or 16 an instruction for registration or his principal for loss 17 resulting from any unreasonable delay in registration or from 18 failure or refusal to register the transfer, pledge or release. 19 § 8402. Assurance that indorsements and instructions are 20 effective. 21 (a) Assurances that issuer may require.--The issuer may 22 require the following assurance that each necessary indorsement 23 of a certificated security or each instruction (section 8308) is 24 genuine and effective: 25 (1) In all cases, a guarantee of the signature (section 26 8312(a) or (b)) of the person indorsing a certificated 27 security or originating an instruction, including, in the 28 case of an instruction, a warranty of the taxpayer 29 identification number or, in the absence thereof, other 30 reasonable assurance of identity. 19890H1826B2335 - 49 -
1 (2) [Where] If the indorsement is made or the 2 instruction is originated by an agent, appropriate assurance 3 of authority to sign. 4 (3) [Where] If the indorsement is made or the 5 instruction is originated by a fiduciary, appropriate 6 evidence of appointment or incumbency. 7 (4) [Where] If there is more than one fiduciary, 8 reasonable assurance that all who are required to sign have 9 done so. 10 (5) [Where] If the indorsement is made or the 11 instruction is originated by a person not covered by any of 12 the foregoing, assurance appropriate to the case 13 corresponding as nearly as may be to the foregoing. 14 (b) Guarantee of the signature.--A "guarantee of the 15 signature" in subsection (a) means a guarantee signed by or on 16 behalf of a person reasonably believed by the issuer to be 17 responsible. The issuer may adopt standards with respect to 18 responsibility [provided such standards] if they are not 19 manifestly unreasonable. 20 (c) Appropriate evidence of appointment or incumbency.-- 21 "Appropriate evidence of appointment or incumbency" in 22 subsection (a) means: 23 (1) in the case of a fiduciary appointed or qualified by 24 a court, a certificate issued by or under the direction or 25 supervision of that court or an officer thereof and dated 26 within 60 days before the date of presentation for transfer, 27 pledge or release; or 28 (2) in any other case, a copy of a document showing the 29 appointment or a certificate issued by or on behalf of a 30 person reasonably believed by the issuer to be responsible 19890H1826B2335 - 50 -
1 or, in the absence of [such a] that document or certificate, 2 other evidence reasonably deemed by the issuer to be 3 appropriate. The issuer may adopt standards with respect to 4 [such] the evidence [provided such standards] if they are not 5 manifestly unreasonable. The issuer is not charged with 6 notice of the contents of any document obtained pursuant to 7 this paragraph [(2)] except to the extent that the contents 8 relate directly to the appointment or incumbency. 9 (d) Additional assurances that issuer may require.--The 10 issuer may elect to require reasonable assurance beyond that 11 specified in this section, but if it does so and, for a purpose 12 other than that specified in subsection (c)(2), both requires 13 and obtains a copy of a will, trust, indenture, articles of 14 copartnership, bylaws or other controlling instrument, it is 15 charged with notice of all matters contained therein affecting 16 the transfer, pledge or release. 17 § 8403. [Limited duty of inquiry] Duty of issuer as to adverse 18 claims. 19 (a) [General rule] Duty of issuer as to certificated 20 security.--An issuer to whom a certificated security is 21 presented for registration [is under a duty to] shall inquire 22 into adverse claims if: 23 (1) a written notification of an adverse claim is 24 received at a time and in a manner [which affords] affording 25 the issuer a reasonable opportunity to act on it prior to the 26 issuance of a new, reissued or re-registered certificated 27 security, and the notification identifies the claimant, the 28 registered owner and the issue of which the security is a 29 part, and provides an address for communications directed to 30 the claimant; or 19890H1826B2335 - 51 -
1 (2) the issuer is charged with notice of an adverse 2 claim from a controlling instrument [which] it has elected to 3 require under section 8402(d) (relating to additional 4 assurances that issuer may require). 5 (b) [Method of inquiry] Discharge of duty as to certificated 6 security.--The issuer may discharge any duty of inquiry by any 7 reasonable means, including notifying an adverse claimant by 8 registered or certified mail at the address furnished by him or, 9 if there be no such address, at his residence or regular place 10 of business that the certificated security has been presented 11 for registration of transfer by a named person, and that the 12 transfer will be registered unless within 30 days from the date 13 of mailing the notification, either: 14 (1) an appropriate restraining order, injunction or 15 other process issues from a court of competent jurisdiction; 16 or 17 (2) there is filed with the issuer an indemnity bond 18 sufficient in the judgment of the issuer to protect the 19 issuer and any transfer agent, registrar or other agent of 20 the issuer involved from any loss [which] it or they may 21 suffer by complying with the adverse claim [is filed with the 22 issuer]. 23 (c) When inquiry unnecessary.--Unless an issuer is charged 24 with notice of an adverse claim from a controlling instrument 25 which it has elected to require under section 8402(d) or 26 receives notification of an adverse claim under subsection (a), 27 [where] if a certificated security presented for registration is 28 indorsed by the appropriate person or persons the issuer is 29 under no duty to inquire into adverse claims. In particular: 30 (1) an issuer registering a certificated security in the 19890H1826B2335 - 52 -
1 name of a person who is a fiduciary or who is described as a 2 fiduciary is not bound to inquire into the existence, extent, 3 or correct description of the fiduciary relationship; and 4 thereafter the issuer may assume without inquiry that the 5 newly registered owner continues to be the fiduciary until 6 the issuer receives written notice that the fiduciary is no 7 longer acting as such with respect to the particular 8 security; 9 (2) an issuer registering transfer on an indorsement by 10 a fiduciary is not bound to inquire whether the transfer is 11 made in compliance with a controlling instrument or with the 12 law of the state having jurisdiction of the fiduciary 13 relationship, including any law requiring the fiduciary to 14 obtain court approval of the transfer; and 15 (3) the issuer is not charged with notice of the 16 contents of any court record or file or other recorded or 17 unrecorded document even though the document is in its 18 possession and even though the transfer is made on the 19 indorsement of a fiduciary to the fiduciary himself or to his 20 nominee. 21 (d) Duty of issuer as to uncertificated security.--An issuer 22 is under no duty as to adverse claims with respect to an 23 uncertificated security except: 24 (1) claims embodied in a restraining order, injunction 25 or other legal process served upon the issuer if the process 26 was served at a time and in a manner affording the issuer a 27 reasonable opportunity to act on it in accordance with the 28 requirements of subsection (e); 29 (2) claims of which the issuer has received a written 30 notification from the registered owner or the registered 19890H1826B2335 - 53 -
1 pledgee if the notification was received at a time and in a 2 manner affording the issuer a reasonable opportunity to act 3 on it in accordance with the requirements of subsection (e); 4 (3) claims (including restrictions on transfer not 5 imposed by the issuer) to which the registration of transfer 6 to the present registered owner was subject and were so noted 7 in the initial transaction statement sent to him; and 8 (4) claims as to which an issuer is charged with notice 9 from a controlling instrument it has elected to require under 10 section 8402(d). 11 (e) Discharge of duty as to uncertificated security.--If the 12 issuer of an uncertificated security is under a duty as to an 13 adverse claim, he discharges that duty by: 14 (1) Including a notation of the claim in any statements 15 sent with respect to the security under section 8408(c), (f) 16 and (g) (relating to statements of uncertificated 17 securities). 18 (2) Refusing to register the transfer or pledge of the 19 security unless the nature of the claim does not preclude 20 transfer or pledge subject thereto. 21 (f) Notation of adverse claim.--If the transfer or pledge of 22 the security is registered subject to an adverse claim, a 23 notation of the claim must be included in the initial 24 transaction statement and all subsequent statements sent to the 25 transferee and pledgee under section 8408. 26 (g) Exceptions to duty of issuer.--Notwithstanding 27 subsections (d) and (e), if an uncertificated security was 28 subject to a registered pledge at the time the issuer first came 29 under a duty as to a particular adverse claim, the issuer has no 30 duty as to that claim if transfer of the security is requested 19890H1826B2335 - 54 -
1 by the registered pledgee or an appropriate person acting for 2 the registered pledgee unless: 3 (1) the claim was embodied in legal process which 4 expressly provides otherwise; 5 (2) the claim was asserted in a written notification 6 from the registered pledgee; 7 (3) the claim was one as to which the issuer was charged 8 with notice from a controlling instrument it required under 9 section 8402(d) (relating to additional assurances that 10 issuer may require) in connection with the pledgee's request 11 for transfer; or 12 (4) the transfer requested is to the registered owner. 13 § 8404. Liability and nonliability for registration. 14 (a) General rule.--Except as [otherwise] provided in any law 15 relating to the collection of taxes, the issuer is not liable to 16 the owner, pledgee or any other person suffering loss as a 17 result of the registration of a transfer, pledge or release of a 18 security if: 19 (1) there were on or with [the] a certificated security 20 the necessary indorsements or the issuer has received an 21 instruction originated by an appropriate person (section 22 8308); and 23 (2) the issuer had no duty [to inquire into] as to 24 adverse claims or has discharged [any such] the duty (section 25 8403). 26 (b) Transfer to person not entitled.--[Where] If an issuer 27 has registered a transfer of a certificated security to a person 28 not entitled to it, the issuer on demand [must] shall deliver a 29 like security to the true owner unless: 30 (1) the registration was pursuant to subsection (a); 19890H1826B2335 - 55 -
1 (2) the owner is precluded from asserting any claim for 2 registering the transfer under section 8405(a) (relating to 3 lost, destroyed and stolen certificated securities); or 4 (3) [such] the delivery would result in overissue, in 5 which case the liability of the issuer is governed by section 6 8104 (relating to effect of overissue). 7 (c) Improper registration.--If an issuer has improperly 8 registered a transfer, pledge or release of an uncertificated 9 security, the issuer on demand from the injured party shall 10 restore the records as to the injured party to the condition 11 that would have obtained if the improper registration had not 12 been made unless: 13 (1) the registration was pursuant to subsection (a); or 14 (2) the registration would result in overissue, in which 15 case the liability of the issuer is governed by section 8104. 16 § 8405. Lost, destroyed and stolen certificated securities. 17 (a) Failure of owner to notify issuer.--[Where] If a 18 certificated security has been lost, apparently destroyed or 19 wrongfully taken, and the owner fails to notify the issuer of 20 that fact within a reasonable time after he has notice of it and 21 the issuer registers a transfer of the security before receiving 22 [such a] notification, the owner is precluded from asserting 23 against the issuer any claim for registering the transfer under 24 section 8404 (relating to liability and nonliability for 25 registration) or any claim to a new security under this section. 26 (b) When owner entitled to new security.--[Where] If the 27 owner of a certificated security claims that the security has 28 been lost, destroyed or wrongfully taken, the issuer [must] 29 shall issue a new certificated security or, at the option of the 30 issuer, an equivalent uncertificated security in place of the 19890H1826B2335 - 56 -
1 original security if the owner: 2 (1) so requests before the issuer has notice that the 3 security has been acquired by a bona fide purchaser; 4 (2) files with the issuer a sufficient indemnity bond; 5 and 6 (3) satisfies any other reasonable requirements imposed 7 by the issuer. 8 (c) Rights and duties of issuer when original certificated 9 security presented for transfer.--If, after the issue of [the] a 10 new certificated or uncertificated security, a bona fide 11 purchaser of the original certificated security presents it for 12 registration of transfer, the issuer [must] shall register the 13 transfer, unless registration would result in overissue, in 14 which event the liability of the issuer is governed by section 15 8104 (relating to effect of overissue). In addition to any 16 rights on the indemnity bond, the issuer may recover the new 17 certificated security from the person to whom it was issued or 18 any person taking under him except a bona fide purchaser or may 19 cancel the uncertificated security unless a bona fide purchaser 20 or any person taking under a bona fide purchaser is then the 21 registered owner or registered pledgee thereof. 22 § 8406. Duty of authenticating trustee, transfer agent or 23 registrar. 24 (a) General rule.--[Where] If a person acts as 25 authenticating trustee, transfer agent, registrar, or other 26 agent for an issuer in the registration of transfers of its 27 certificated securities or in the registration of transfers, 28 pledges and releases of its uncertificated securities, in the 29 issue of new securities or in the cancellation of surrendered 30 securities: 19890H1826B2335 - 57 -
1 (1) he is under a duty to the issuer to exercise good 2 faith and due diligence in performing his functions; and 3 (2) [he has] with regard to the particular functions he 4 performs, he has the same obligation to the holder or owner 5 of [the] a certificated security or to the owner or pledgee 6 of an uncertificated security and has the same rights and 7 privileges as the issuer has in regard to those functions. 8 (b) Notice to agent is notice to issuer.--Notice to an 9 authenticating trustee, transfer agent, registrar or other 10 [such] agent is notice to the issuer with respect to the 11 functions performed by the agent. 12 § 8407. Exchangeability of securities. 13 (a) Applicability of section.--No issuer is subject to the 14 requirements of this section unless it regularly maintains a 15 system for issuing the class of securities involved under which 16 both certificated and uncertificated securities are regularly 17 issued to the category of owners, which includes the person in 18 whose name the new security is to be registered. 19 (b) Duty to issue uncertificated security for certificated 20 security.--Upon surrender of a certificated security with all 21 necessary indorsements and presentation of a written request by 22 the person surrendering the security, the issuer, if he has no 23 duty as to adverse claims or has discharged the duty (section 24 8403), shall issue to the person or a person designated by him 25 an equivalent uncertificated security subject to all liens, 26 restrictions and claims that were noted on the certificated 27 security. 28 (c) Duty to issue certificated security for uncertificated 29 security.--Upon receipt of a transfer instruction originated by 30 an appropriate person who so requests, the issuer of an 19890H1826B2335 - 58 -
1 uncertificated security shall cancel the uncertificated security 2 and issue an equivalent certificated security on which must be 3 noted conspicuously any liens and restrictions of the issuer and 4 any adverse claims as to which the issuer has a duty under 5 section 8403(d) (relating to duty of issuer as to adverse 6 claims) to which the uncertificated security was subject. The 7 certificated security shall be registered in the name of and 8 delivered to: 9 (1) the registered owner, if the uncertificated security 10 was not subject to a registered pledge; or 11 (2) the registered pledgee, if the uncertificated 12 security was subject to a registered pledge. 13 § 8408. Statements of uncertificated securities. 14 (a) Initial transaction statement for transfer.--Within two 15 business days after the transfer of an uncertificated security 16 has been registered, the issuer shall send to the new registered 17 owner and, if the security has been transferred subject to a 18 registered pledge, to the registered pledgee a written statement 19 containing: 20 (1) a description of the issue of which the 21 uncertificated security is a part; 22 (2) the number of shares or units transferred; 23 (3) the name and address and any taxpayer identification 24 number of the new registered owner and, if the security has 25 been transferred subject to a registered pledge, the name and 26 address and any taxpayer identification number of the 27 registered pledgee; 28 (4) a notation of any liens and restrictions of the 29 issuer and any adverse claims (as to which the issuer has a 30 duty under section 8403(d) (relating to duty of issuer as to 19890H1826B2335 - 59 -
1 adverse claims)) to which the uncertificated security is or 2 may be subject at the time of registration or a statement 3 that there are none of those liens, restrictions or adverse 4 claims; and 5 (5) the date the transfer was registered. 6 (b) Initial transaction statement for pledge.--Within two 7 business days after the pledge of an uncertificated security has 8 been registered, the issuer shall send to the registered owner 9 and the registered pledgee a written statement containing: 10 (1) a description of the issue of which the 11 uncertificated security is a part; 12 (2) the number of shares or units pledged; 13 (3) the name and address and any taxpayer identification 14 number of the registered owner and the registered pledgee; 15 (4) a notation of any liens and restrictions of the 16 issuer and any adverse claims (as to which the issuer has 17 duty under section 8403(d)) to which the uncertificated 18 security is or may be subject at the time of registration or 19 a statement that there are none of those liens, restrictions 20 or adverse claims; and 21 (5) the date the pledge was registered. 22 (c) Initial transaction statement for release.--Within two 23 business days after the release from pledge of an uncertificated 24 security has been registered, the issuer shall send to the 25 registered owner and the pledgee whose interest was released a 26 written statement containing: 27 (1) a description of the issue of which the 28 uncertificated security is a part; 29 (2) the number of shares or units released from pledge; 30 (3) the name and address and any taxpayer identification 19890H1826B2335 - 60 -
1 number of the registered owner and the pledgee whose interest 2 was released; 3 (4) a notation of any liens and restrictions of the 4 issuer and any adverse claims (as to which the issuer has a 5 duty under section 8403(d)) to which the uncertificated 6 security is or may be subject at the time of registration or 7 a statement that there are none of those liens, restrictions 8 or adverse claims; and 9 (5) the date the release was registered. 10 (d) What constitutes initial transaction statement.--An 11 "initial transaction statement" is the statement sent to: 12 (1) the new registered owner and, if applicable, to the 13 registered pledgee pursuant to subsection (a); 14 (2) the registered pledgee pursuant to subsection (b); 15 or 16 (3) the registered owner pursuant to subsection (c). 17 Each initial transaction statement shall be signed by or on 18 behalf of the issuer and must be identified as "initial 19 transaction statement." 20 (e) Statement of transfer.--Within two business days after 21 the transfer of an uncertificated security has been registered, 22 the issuer shall send to the former registered owner and the 23 former registered pledgee, if any, a written statement 24 containing: 25 (1) a description of the issue of which the 26 uncertificated security is a part; 27 (2) the number of shares or units transferred; 28 (3) the name and address and any taxpayer identification 29 number of the former registered owner and of any former 30 registered pledgee; and 19890H1826B2335 - 61 -
1 (4) the date the transfer was registered. 2 (f) Periodic statement of registered owner.--At periodic 3 intervals no less frequent than annually and at any time upon 4 the reasonable written request of the registered owner, the 5 issuer shall send to the registered owner of each uncertificated 6 security a dated written statement containing: 7 (1) a description of the issue of which the 8 uncertificated security is a part; 9 (2) the name and address and any taxpayer identification 10 number of the registered owner; 11 (3) the number of shares or units of the uncertificated 12 security registered in the name of the registered owner on 13 the date of the statement; 14 (4) the name and address and any taxpayer identification 15 number of any registered pledgee and the number of shares or 16 units subject to the pledge; and 17 (5) a notation of any liens and restrictions of the 18 issuer and any adverse claims (as to which the issuer has a 19 duty under section 8403(d)) to which the uncertificated 20 security is or may be subject or a statement that there are 21 none of those liens, restrictions or adverse claims. 22 (g) Periodic statement to registered pledgee.--At periodic 23 intervals no less frequent than annually and at any time upon 24 the reasonable written request of the registered pledgee, the 25 issuer shall send to the registered pledgee of each 26 uncertificated security a dated written statement containing: 27 (1) a description of the issue of which the 28 uncertificated security is a part; 29 (2) the name and address and any taxpayer identification 30 number of the registered owner; 19890H1826B2335 - 62 -
1 (3) the name and address and any taxpayer identification 2 number of the registered pledgee; 3 (4) the number of shares or units subject to the pledge; 4 and 5 (5) a notation of any liens and restrictions of the 6 issuer and any adverse claims (as to which the issuer has a 7 duty under section 8403(d)) to which the uncertificated 8 security is or may be subject or a statement that there are 9 none of those liens, restrictions or adverse claims. 10 (h) Limitation on duty to such statements.--If the issuer 11 sends the statements described in subsections (f) and (g) at 12 periodic intervals no less frequent than quarterly, the issuer 13 is not obliged to send additional statements upon request unless 14 the owner or pledgee requesting them pays to the issuer the 15 reasonable cost of furnishing them. 16 (i) Legend required on statements.--Each statement sent 17 pursuant to this section must bear a conspicuous legend reading 18 substantially as follows: "This statement is merely a record of 19 the rights of the addressee as of the time of its issuance. 20 Delivery of this statement of itself, confers no rights on the 21 recipient. This statement is neither a negotiable instrument nor 22 a security." 23 Section 4. Section 9103(c) and (f) of Title 13, amended 24 December 21, 1988 (P.L.1444, No.177), are amended to read: 25 § 9103. Perfection of security interests in multiple state 26 transactions. 27 * * * 28 (c) Accounts, general intangibles and mobile goods.-- 29 (1) This subsection applies to accounts (other than an 30 account described in subsection (e) relating to minerals) and 19890H1826B2335 - 63 -
1 general intangibles (other than uncertificated securities) 2 and to goods which are mobile and which are of a type 3 normally used in more than one jurisdiction, such as motor 4 vehicles, trailers, rolling stock, airplanes, shipping 5 containers, road building and construction machinery and 6 commercial harvesting machinery and the like, if the goods 7 are equipment or are inventory leased or held for lease by 8 the debtor to others and are not covered by a certificate of 9 title described in subsection (b). 10 * * * 11 (f) Uncertificated securities.-- 12 [(1) Except as provided in paragraph (2), the] The law 13 (including the conflict of laws rules) of the jurisdiction of 14 organization of the issuer governs the perfection and the 15 effect of perfection or nonperfection of a security interest 16 in uncertificated securities. 17 [(2) In the case of a registered corporation as defined 18 in 15 Pa.C.S. § 2502 (relating to registered corporation 19 status), which has a class of uncertificated securities 20 listed on the New York Stock Exchange or the American Stock 21 Exchange, the law (including the conflict of laws rules) of 22 the jurisdiction in which those exchanges are located governs 23 the perfection and the effect of perfection or nonperfection 24 of a security interest in such uncertificated securities.] 25 Section 5. Sections 9105 (definition of "instrument"), 26 9203(a), 9302(a)(6), 9304(a), (d), (e) and (f), 9305, 9309 and 27 9312(g) are amended to read: 28 § 9105. Definitions and index of definitions. 29 (a) Definitions.--The following words and phrases when used 30 in this division shall have, unless the context clearly 19890H1826B2335 - 64 -
1 indicates otherwise, the meanings given to them in this 2 subsection: 3 * * * 4 "Instrument." A negotiable instrument (defined in section 5 3104), or a certificated security (defined in section 8102) or 6 any other writing which evidences a right to the payment of 7 money and is not itself a security agreement or lease and is of 8 a type which is in ordinary course of business transferred by 9 delivery with any necessary indorsement or assignment. 10 * * * 11 § 9203. Attachment and enforceability of security interest; 12 proceeds, formal requisites. 13 (a) Enforceability.--Subject to the provisions of section 14 4208 on the security interest of a collecting bank, section 8321 15 on security interests in securities and section 9113 on a 16 security interest arising under the division on sales, a 17 security interest is not enforceable against the debtor or third 18 parties with respect to the collateral and does not attach 19 unless: 20 (1) the collateral is in the possession of the secured 21 party pursuant to agreement, or the debtor has signed a 22 security agreement which contains a description of the 23 collateral and in addition, when the security interest covers 24 crops growing or to be grown or timber to be cut, a 25 description of the land concerned; 26 (2) value has been given; and 27 (3) the debtor has rights in the collateral. 28 * * * 29 § 9302. When filing is required to perfect security interest; 30 security interests to which filing provisions of 19890H1826B2335 - 65 -
1 division do not apply. 2 (a) General rule.--A financing statement must be filed to 3 perfect all security interests except the following: 4 * * * 5 (6) a security interest of a collecting bank (section 6 4208) or in securities (section 8321) or arising under 7 Division 2 (relating to sales) (see section 9113) or covered 8 in subsection (c); and 9 * * * 10 § 9304. Perfection of security interest in instruments, 11 documents and goods covered by documents; perfection 12 by permissive filing; temporary perfection without 13 filing or transfer of possession. 14 (a) Chattel paper, negotiable documents, money and 15 instruments.--A security interest in chattel paper or negotiable 16 documents may be perfected by filing. A security interest in 17 money or instruments (other than certificated securities or 18 instruments which constitute part of chattel paper) can be 19 perfected only by the secured party's taking possession, except 20 as provided in subsections (d) and (e) and section 9306(b) and 21 (c) (relating to "proceeds"; rights of secured party on 22 disposition of collateral). 23 * * * 24 (d) Temporary perfection for new value given.--A security 25 interest in instruments (other than certificated securities) or 26 negotiable documents is perfected without filing or the taking 27 of possession for a period of 21 days from the time it attaches 28 to the extent that it arises for new value given under a written 29 security agreement. 30 (e) Temporary perfection on transfer of possession.--A 19890H1826B2335 - 66 -
1 security interest remains perfected for a period of 21 days 2 without filing where a secured party having a perfected security 3 interest in an instrument (other than a certificated security), 4 a negotiable document or goods in possession of a bailee other 5 than one who has issued a negotiable document therefor: 6 (1) makes available to the debtor the goods or documents 7 representing the goods for the purpose of ultimate sale or 8 exchange or for the purpose of loading, unloading, storing, 9 shipping, transshipping, manufacturing, processing or 10 otherwise dealing with them in a manner preliminary to their 11 sale or exchange, but priority between conflicting security 12 interests in the goods is subject to section 9312(c) 13 (relating to priorities among conflicting security interests 14 in same collateral); or 15 (2) delivers the instrument to the debtor for the 16 purpose of ultimate sale or exchange or of presentation, 17 collection, renewal or registration of transfer. 18 (f) Expiration of period of temporary perfection.--After the 19 21-day period in subsections (d) and (e) perfection depends upon 20 compliance with applicable provisions of this division. 21 § 9305. When possession by secured party perfects security 22 interest without filing. 23 A security interest in letters of credit and advices of 24 credit (section 5116(b)(1)), goods, instruments (other than 25 certificated securities), money, negotiable documents or chattel 26 paper may be perfected by the secured party's taking possession 27 of the collateral. If such collateral other than goods covered 28 by a negotiable document is held by a bailee, the secured party 29 is deemed to have possession from the time the bailee receives 30 notification of the interest of the secured party. A security 19890H1826B2335 - 67 -
1 interest is perfected by possession from the time possession is 2 taken without relation back and continues only so long as 3 possession is retained, unless otherwise specified in this 4 division. 5 The security interest may be otherwise perfected as provided 6 in this division before or after the period of possession by the 7 secured party. 8 § 9309. Protection of purchasers of instruments and documents. 9 Nothing in this division limits the rights of a holder in due 10 course of a negotiable instrument (section 3302) or a holder to 11 whom a negotiable document of title has been duly negotiated 12 (section 7501) or a bona fide purchaser of a security (section 13 [8301] 8302) and such holders or purchasers take priority over 14 an earlier security interest even though perfected. Filing under 15 this division does not constitute notice of the security 16 interest to such holders or purchasers. 17 § 9312. Priorities among conflicting security interests in same 18 collateral. 19 * * * 20 (g) Future advances.--If future advances are made while a 21 security interest is perfected by filing or the taking of 22 possession or under section 8321 (relating to enforceability, 23 attachment, perfection and termination of security interests), 24 the security interest has the same priority for the purposes of 25 subsection (e) with respect to the future advances as it does 26 with respect to the first advance. If a commitment is made 27 before or while the security interest is so perfected, the 28 security interest has the same priority with respect to advances 29 made pursuant thereto. In other cases a perfected security 30 interest has priority from the date the advance is made. 19890H1826B2335 - 68 -
1 Section 6. Effective date.--This act shall take effect in 90 2 days. E5L13CM/19890H1826B2335 - 69 -