House Bill No. 5080
House Bill No. 5080
PUBLIC ACT NO. 97-182
AN ACT REVISING ARTICLE 8 OF THE UNIFORM
COMMERCIAL CODE CONCERNING INVESTMENT SECURITIES.
Be it enacted by the Senate and House of
Representatives in General Assembly convened:
Section 1. Section 42a-8-101 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[This article shall be known and may be cited
as "Uniform Commercial Code Investment
Securities".] THIS ARTICLE MAY BE CITED AS UNIFORM
COMMERCIAL CODE--INVESTMENT SECURITIES.
Sec. 2. Section 42a-8-102 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[(1) In this article unless the context
otherwise requires: (a) A "certificated security"
is a share, participation, or other interest in
property of or an enterprise of the issuer or an
obligation of the issuer which is (i) represented
by an instrument issued in bearer or registered
form; (ii) of a type commonly dealt in on
securities exchanges or markets or commonly
recognized in any area in which it is issued or
dealt in as a medium for investment; and (iii)
either one of a class or series or by its terms
divisible into a class or series of shares,
participations, interests or obligations. (b) An
"uncertificated security" is a share,
participation, or other interest in property or an
enterprise of the issuer or an obligation of the
issuer which is (i) not represented by an
instrument and the transfer of which is registered
upon books maintained for that purpose by or on
behalf of the issuer; (ii) of a type commonly
dealt in on securities exchanges or markets; and
(iii) either one of a class or series or by its
terms divisible into a class or series of shares,
participations, interests or obligations. (c) A
"security" is either a certificated or an
uncertificated security. If a security is
certificated, the terms "security" and
"certificated security" may mean either the
intangible interest, the instrument representing
that interest, or both as the context requires. A
writing that is a certificated security is
governed by this article and not by article 3 even
though it also meets the requirements of that
article. This article does not apply to money. If
a certificated security has been retained by or
surrendered to the issuer or its transfer agent
for reasons other than registration of transfer,
other temporary purpose, payment, exchange or
acquisition by the issuer, that security shall be
treated as an uncertificated security for purposes
of this article. (d) A certificated security is in
"registered form" if (i) it specifies a person
entitled to the security or to the rights it
represents and (ii) its transfer may be registered
upon books maintained for that purpose by or on
behalf of the issuer, or the security so states.
(e) A certificated security is in "bearer form" if
it runs to bearer according to its terms and not
by reason of any endorsement.
(2) A "subsequent purchaser" is a person who
takes other than by original issue.
(3) A "clearing corporation" is a corporation
registered as a "clearing agency" under the
federal securities laws or a corporation (a) at
least ninety per cent of whose capital stock is
held by or for one or more organizations, none of
which, other than a national securities exchange
or association, holds in excess of twenty per cent
of the capital stock of the corporation, and each
of which is (i) subject to supervision or
regulation pursuant to the provisions of federal
or state banking laws or state insurance laws,
(ii) a broker or dealer or investment company
registered under the federal securities laws, or
(iii) a national securities exchange or
association registered under the federal
securities laws; and (b) any remaining capital
stock of which is held by individuals who have
purchased it at or prior to the time of their
taking office as directors of the corporation and
who have purchased only so much of such capital
stock as is necessary to permit them to qualify as
directors.
(4) A "custodian bank" is a bank or trust
company that is supervised and examined by state
or federal authority having supervision over banks
and is acting as custodian for a clearing
corporation.
(5) Other definitions applying to this
article or to specified parts thereof and the
sections in which they appear are:
"Adverse claim". Section 42a-8-302.
"Bona fide purchaser". Section 42a-8-302.
"Broker". Section 42a-8-303.
"Debtor". Section 42a-9-105.
"Financial intermediary". Section 42a-8-313.
"Guarantee of the signature". Section
42a-8-402.
"Initial transaction statement". Section
42a-8-408.
"Instruction". Section 42a-8-308.
"Intermediary bank". Section 42a-4-105.
"Issuer". Section 42a-8-201.
"Overissue". Section 42a-8-104.
"Secured party". Section 42a-9-105.
"Security agreement". Section 42a-9-105.
(6) In addition article 1 contains general
definitions and principles of construction and
interpretation applicable throughout this
article.]
(a) IN THIS ARTICLE:
(1) "ADVERSE CLAIM" MEANS A CLAIM THAT A
CLAIMANT HAS A PROPERTY INTEREST IN A FINANCIAL
ASSET AND THAT IT IS A VIOLATION OF THE RIGHTS OF
THE CLAIMANT FOR ANOTHER PERSON TO HOLD, TRANSFER
OR DEAL WITH THE FINANCIAL ASSET.
(2) "BEARER FORM", AS APPLIED TO A
CERTIFICATED SECURITY, MEANS A FORM IN WHICH THE
SECURITY IS PAYABLE TO THE BEARER OF THE SECURITY
CERTIFICATE ACCORDING TO ITS TERMS BUT NOT BY
REASON OF AN ENDORSEMENT.
(3) "BROKER" MEANS A PERSON DEFINED AS A
BROKER OR DEALER UNDER THE FEDERAL SECURITIES
LAWS, BUT WITHOUT EXCLUDING A BANK ACTING IN THAT
CAPACITY.
(4) "CERTIFICATED SECURITY" MEANS A SECURITY
THAT IS REPRESENTED BY A CERTIFICATE.
(5) "CLEARING CORPORATION" MEANS:
(i) A PERSON THAT IS REGISTERED AS A
"CLEARING AGENCY" UNDER THE FEDERAL SECURITIES
LAWS;
(ii) A FEDERAL RESERVE BANK; OR
(iii) ANY OTHER PERSON THAT PROVIDES
CLEARANCE OR SETTLEMENT SERVICES WITH RESPECT TO
FINANCIAL ASSETS THAT WOULD REQUIRE IT TO REGISTER
AS A CLEARING AGENCY UNDER THE FEDERAL SECURITIES
LAWS BUT FOR AN EXCLUSION OR EXEMPTION FROM THE
REGISTRATION REQUIREMENT, IF ITS ACTIVITIES AS A
CLEARING CORPORATION, INCLUDING PROMULGATION OF
RULES, ARE SUBJECT TO REGULATION BY A FEDERAL OR
STATE GOVERNMENTAL AUTHORITY.
(6) "COMMUNICATE" MEANS TO:
(i) SEND A SIGNED WRITING; OR
(ii) TRANSMIT INFORMATION BY ANY MECHANISM
AGREED UPON BY THE PERSONS TRANSMITTING AND
RECEIVING THE INFORMATION.
(7) "ENDORSEMENT" MEANS A SIGNATURE THAT
ALONE OR ACCOMPANIED BY OTHER WORDS IS MADE ON A
SECURITY CERTIFICATE IN REGISTERED FORM OR ON A
SEPARATE DOCUMENT FOR THE PURPOSE OF ASSIGNING,
TRANSFERRING OR REDEEMING THE SECURITY OR GRANTING
A POWER TO ASSIGN, TRANSFER OR REDEEM IT.
(8) "ENTITLEMENT HOLDER" MEANS A PERSON
IDENTIFIED IN THE RECORDS OF A SECURITIES
INTERMEDIARY AS THE PERSON HAVING A SECURITY
ENTITLEMENT AGAINST THE SECURITIES INTERMEDIARY.
IF A PERSON ACQUIRES A SECURITY ENTITLEMENT BY
VIRTUE OF SECTION 42a-8-501(b)(2) OR (3), THAT
PERSON IS THE ENTITLEMENT HOLDER.
(9) "ENTITLEMENT ORDER" MEANS A NOTIFICATION
COMMUNICATED TO A SECURITIES INTERMEDIARY
DIRECTING TRANSFER OR REDEMPTION OF A FINANCIAL
ASSET TO WHICH THE ENTITLEMENT HOLDER HAS A
SECURITY ENTITLEMENT.
(10)) "FINANCIAL ASSET", EXCEPT AS OTHERWISE
PROVIDED IN SECTION 42a-8-103, MEANS: (i) A
SECURITY; (ii) AN OBLIGATION OF A PERSON OR A
SHARE, PARTICIPATION OR OTHER INTEREST IN A PERSON
OR IN PROPERTY OR AN ENTERPRISE OF A PERSON, WHICH
IS, OR IS OF A TYPE, DEALT IN OR TRADED ON
FINANCIAL MARKETS, OR WHICH IS RECOGNIZED IN ANY
AREA IN WHICH IT IS ISSUED OR DEALT IN AS A MEDIUM
FOR INVESTMENT; OR (iii) ANY PROPERTY THAT IS HELD
BY A SECURITIES INTERMEDIARY FOR ANOTHER PERSON IN
A SECURITIES ACCOUNT IF THE SECURITIES
INTERMEDIARY HAS EXPRESSLY AGREED WITH THE OTHER
PERSON THAT THE PROPERTY IS TO BE TREATED AS A
FINANCIAL ASSET UNDER THIS ARTICLE. AS CONTEXT
REQUIRES, THE TERM MEANS EITHER THE INTEREST
ITSELF OR THE MEANS BY WHICH A PERSON'S CLAIM TO
IT IS EVIDENCED, INCLUDING A CERTIFICATED OR
UNCERTIFICATED SECURITY, A SECURITY CERTIFICATE,
OR A SECURITY ENTITLEMENT.
(11) "GOOD FAITH", FOR PURPOSES OF THE
OBLIGATION OF GOOD FAITH IN THE PERFORMANCE OR
ENFORCEMENT OF CONTRACTS OR DUTIES WITHIN THIS
ARTICLE, MEANS HONESTY IN FACT AND THE OBSERVANCE
OF REASONABLE COMMERCIAL STANDARDS OF FAIR
DEALING.
(12) "INSTRUCTION" MEANS A NOTIFICATION
COMMUNICATED TO THE ISSUER OF AN UNCERTIFICATED
SECURITY WHICH DIRECTS THAT THE TRANSFER OF THE
SECURITY BE REGISTERED OR THAT THE SECURITY BE
REDEEMED.
(13) "REGISTERED FORM", AS APPLIED TO A
CERTIFICATED SECURITY, MEANS A FORM IN WHICH:
(i) THE SECURITY CERTIFICATE SPECIFIES A
PERSON ENTITLED TO THE SECURITY; AND
(ii) A TRANSFER OF THE SECURITY MAY BE
REGISTERED UPON BOOKS MAINTAINED FOR THAT PURPOSE
BY OR ON BEHALF OF THE ISSUER, OR THE SECURITY
CERTIFICATE SO STATES.
(14) "SECURITIES INTERMEDIARY" MEANS:
(i) A CLEARING CORPORATION; OR
(ii) A PERSON, INCLUDING A BANK OR BROKER,
THAT IN THE ORDINARY COURSE OF ITS BUSINESS
MAINTAINS SECURITIES ACCOUNTS FOR OTHERS AND IS
ACTING IN THAT CAPACITY.
(15) "SECURITY", EXCEPT AS OTHERWISE PROVIDED
IN SECTION 42a-8-103, MEANS AN OBLIGATION OF AN
ISSUER OR A SHARE, PARTICIPATION, OR OTHER
INTEREST IN AN ISSUER OR IN PROPERTY OR AN
ENTERPRISE OF AN ISSUER:
(i) WHICH IS REPRESENTED BY A SECURITY
CERTIFICATE IN BEARER OR REGISTERED FORM, OR THE
TRANSFER OF WHICH MAY BE REGISTERED UPON BOOKS
MAINTAINED FOR THAT PURPOSE BY OR ON BEHALF OF THE
ISSUER;
(ii) WHICH IS ONE OF A CLASS OR SERIES OR BY
ITS TERMS IS DIVISIBLE INTO A CLASS OR SERIES OF
SHARES, PARTICIPATIONS, INTERESTS OR OBLIGATIONS;
AND
(iii) WHICH:
(A) IS, OR IS OF A TYPE, DEALT IN OR TRADED
ON SECURITIES EXCHANGES OR SECURITIES MARKETS; OR
(B) IS A MEDIUM FOR INVESTMENT AND BY ITS
TERMS EXPRESSLY PROVIDES THAT IT IS A SECURITY
GOVERNED BY THIS ARTICLE.
(16) "SECURITY CERTIFICATE" MEANS A
CERTIFICATE REPRESENTING A SECURITY.
(17) "SECURITY ENTITLEMENT" MEANS THE RIGHTS
AND PROPERTY INTEREST OF AN ENTITLEMENT HOLDER
WITH RESPECT TO A FINANCIAL ASSET SPECIFIED IN
PART 5.
(18) "UNCERTIFICATED SECURITY" MEANS A
SECURITY THAT IS NOT REPRESENTED BY A CERTIFICATE.
(b) OTHER DEFINITIONS APPLYING TO THIS
ARTICLE AND THE SECTIONS IN WHICH THEY APPEAR ARE:
"APPROPRIATE PERSON". SECTION 42a-8-107.
"CONTROL". SECTION 42a-8-106.
"DELIVERY". SECTION 42a-8-301.
"INVESTMENT COMPANY SECURITY". SECTION
42a-8-103.
"ISSUER". SECTION 42a-8-201.
"OVERISSUE". SECTION 26 OF THIS ACT.
"PROTECTED PURCHASER". SECTION 42a-8-303.
"SECURITIES ACCOUNT". SECTION 41 OF THIS ACT.
(c) IN ADDITION, ARTICLE 1 CONTAINS GENERAL
DEFINITIONS AND PRINCIPLES OF CONSTRUCTION AND
INTERPRETATION APPLICABLE THROUGHOUT THIS ARTICLE.
(d) THE CHARACTERIZATION OF A PERSON,
BUSINESS OR TRANSACTION FOR PURPOSES OF THIS
ARTICLE DOES NOT DETERMINE THE CHARACTERIZATION OF
THE PERSON, BUSINESS OR TRANSACTION FOR PURPOSES
OF ANY OTHER LAW, REGULATION OR RULE.
Sec. 3. Section 42a-8-103 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[A lien upon a security in favor of an issuer
thereof is valid against a purchaser only if: (a)
The security is certificated and the right of the
issuer to the lien is noted conspicuously thereon;
or (b) the security is uncertificated and a
notation of the right of the issuer to the lien is
contained in the initial transaction statement
sent to the purchaser or, if his interest is
transferred to him other than by registration of
transfer, pledge or release, the initial
transaction statement sent to the registered owner
or the registered pledgee.]
(a) A SHARE OR SIMILAR EQUITY INTEREST ISSUED
BY A CORPORATION, BUSINESS TRUST, JOINT STOCK
COMPANY OR SIMILAR ENTITY IS A SECURITY.
(b) AN "INVESTMENT COMPANY SECURITY" IS A
SECURITY. "INVESTMENT COMPANY SECURITY" MEANS A
SHARE OR SIMILAR EQUITY INTEREST ISSUED BY AN
ENTITY THAT IS REGISTERED AS AN INVESTMENT COMPANY
UNDER THE FEDERAL INVESTMENT COMPANY LAWS, IN
INTEREST IN A UNIT INVESTMENT TRUST THAT IS SO
REGISTERED, OR FACE-AMOUNT CERTIFICATE ISSUED BY A
FACE-AMOUNT CERTIFICATE COMPANY THAT IS SO
REGISTERED. INVESTMENT COMPANY SECURITY DOES NOT
INCLUDE AN INSURANCE POLICY OR ENDOWMENT POLICY OR
ANNUITY CONTRACT ISSUED BY AN INSURANCE COMPANY.
(c) AN INTEREST IN A PARTNERSHIP OR LIMITED
LIABILITY COMPANY IS NOT A SECURITY UNLESS IT IS
DEALT IN OR TRADED ON SECURITIES EXCHANGES OR IN
SECURITIES MARKETS, ITS TERMS EXPRESSLY PROVIDE
THAT IT IS A SECURITY GOVERNED BY THIS ARTICLE OR
IT IS AN INVESTMENT COMPANY SECURITY. HOWEVER, AN
INTEREST IN A PARTNERSHIP OR LIMITED LIABILITY
COMPANY IS A FINANCIAL ASSET IF IT IS HELD IN A
SECURITIES ACCOUNT.
(d) A WRITING THAT IS A SECURITY CERTIFICATE
IS GOVERNED BY THIS ARTICLE AND NOT BY ARTICLE 3,
EVEN THOUGH IT ALSO MEETS THE REQUIREMENTS OF THAT
ARTICLE. HOWEVER, A NEGOTIABLE INSTRUMENT GOVERNED
BY ARTICLE 3 IS A FINANCIAL ASSET IF IT IS HELD IN
A SECURITIES ACCOUNT.
(e) AN OPTION OR SIMILAR OBLIGATION ISSUED BY
A CLEARING CORPORATION TO ITS PARTICIPANTS IS NOT
A SECURITY, BUT IS A FINANCIAL ASSET.
(f) A COMMODITY CONTRACT, AS DEFINED IN
SECTION 55 OF THIS ACT, IS NOT A SECURITY OR A
FINANCIAL ASSET.
Sec. 4. Section 42a-8-104 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[(1) The provisions of this article which
validate a security or compel its issue or reissue
do not apply to the extent that validation, issue
or reissue would result in overissue; but if: (a)
An identical security which does not constitute an
overissue is reasonably available for purchase,
the person entitled to issue or validation may
compel the issuer to purchase the security for him
and either to deliver a certificated security or
to register the transfer of an uncertificated
security to him, against surrender of any
certificated security he holds; or (b) a security
is not so available for purchase, the person
entitled to issue or validation may recover from
the issuer the price he or the last purchaser for
value paid for it with interest from the date of
his demand.
(2) "Overissue" means the issue of securities
in excess of the amount the issuer has corporate
power to issue.]
(a) A PERSON ACQUIRES A SECURITY OR AN
INTEREST THEREIN, UNDER THIS ARTICLE, IF:
(1) THE PERSON IS A PURCHASER TO WHOM A
SECURITY IS DELIVERED PURSUANT TO SECTION
42a-8-301; OR
(2) THE PERSON ACQUIRES A SECURITY
ENTITLEMENT TO THE SECURITY PURSUANT TO SECTION 41
OF THIS ACT.
(b) A PERSON ACQUIRES A FINANCIAL ASSET,
OTHER THAN A SECURITY, OR AN INTEREST THEREIN,
UNDER THIS ARTICLE, IF THE PERSON ACQUIRES A
SECURITY ENTITLEMENT TO THE FINANCIAL ASSET.
(c) A PERSON WHO ACQUIRES A SECURITY
ENTITLEMENT TO A SECURITY OR OTHER FINANCIAL ASSET
HAS THE RIGHTS SPECIFIED IN PART 5, BUT IS A
PURCHASER OF ANY SECURITY, SECURITY ENTITLEMENT,
OR OTHER FINANCIAL ASSET HELD BY THE SECURITIES
INTERMEDIARY ONLY TO THE EXTENT PROVIDED IN
SECTION 43 OF THIS ACT.
(d) UNLESS THE CONTEXT SHOWS THAT A DIFFERENT
MEANING IS INTENDED, A PERSON WHO IS REQUIRED BY
OTHER LAW, REGULATION, RULE OR AGREEMENT TO
TRANSFER, DELIVER, PRESENT, SURRENDER, EXCHANGE OR
OTHERWISE PUT IN THE POSSESSION OF ANOTHER PERSON
A SECURITY OR FINANCIAL ASSET SATISFIES THAT
REQUIREMENT BY CAUSING THE OTHER PERSON TO ACQUIRE
AN INTEREST IN THE SECURITY OR FINANCIAL ASSET
PURSUANT TO SUBSECTION (a) OR (b) OF THIS SECTION.
Sec. 5. Section 42a-8-105 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[(1) Certificated securities governed by this
article are negotiable instruments.
(2) Statements (section 42a-8-408), notices
or the like, sent by the issuer of uncertificated
securities and instructions (section 42a-8-308)
are neither negotiable instruments nor
certificated securities.
(3) In any action on a security: (a) Unless
specifically denied in the pleadings, each
signature on a certificated security, in a
necessary endorsement, on an initial transaction
statement or on an instruction, is admitted; (b)
if the effectiveness of a signature is put in
issue the burden of establishing it is on the
party claiming under the signature but the
signature is presumed to be genuine or authorized;
(c) if signatures on a certificated security are
admitted or established, production of the
security entitles a holder to recover on it unless
the defendant establishes a defense or a defect
going to the validity of the security; (d) if
signatures on an initial transaction statement are
admitted or established, the facts stated in the
statement are presumed to be true as of the time
of its issuance; and (e) after it is shown that a
defense or defect exists, the plaintiff has the
burden of establishing that he or some person
under whom he claims is a person against whom the
defense or defect is ineffective.]
(a) A PERSON HAS NOTICE OF AN ADVERSE CLAIM
IF:
(1) THE PERSON KNOWS OF THE ADVERSE CLAIM;
(2) THE PERSON IS AWARE OF FACTS SUFFICIENT
TO INDICATE THAT THERE IS A SIGNIFICANT
PROBABILITY THAT THE ADVERSE CLAIM EXISTS AND
DELIBERATELY AVOIDS INFORMATION THAT WOULD
ESTABLISH THE EXISTENCE OF THE ADVERSE CLAIM; OR
(3) THE PERSON HAS A DUTY, IMPOSED BY STATUTE
OR REGULATION, TO INVESTIGATE WHETHER AN ADVERSE
CLAIM EXISTS, AND THE INVESTIGATION SO REQUIRED
WOULD ESTABLISH THE EXISTENCE OF THE ADVERSE
CLAIM.
(b) HAVING KNOWLEDGE THAT A FINANCIAL ASSET
OR INTEREST THEREIN IS OR HAS BEEN TRANSFERRED BY
A REPRESENTATIVE IMPOSES NO DUTY OF INQUIRY INTO
THE RIGHTFULNESS OF A TRANSACTION AND IS NOT
NOTICE OF AN ADVERSE CLAIM. HOWEVER, A PERSON WHO
KNOWS THAT A REPRESENTATIVE HAS TRANSFERRED A
FINANCIAL ASSET OR INTEREST THEREIN IN A
TRANSACTION THAT IS, OR WHOSE PROCEEDS ARE BEING
USED, FOR THE INDIVIDUAL BENEFIT OF THE
REPRESENTATIVE OR OTHERWISE IN BREACH OF DUTY HAS
NOTICE OF AN ADVERSE CLAIM.
(c) AN ACT OR EVENT THAT CREATES A RIGHT TO
IMMEDIATE PERFORMANCE OF THE PRINCIPAL OBLIGATION
REPRESENTED BY A SECURITY CERTIFICATE OR SETS A
DATE ON OR AFTER WHICH THE CERTIFICATE IS TO BE
PRESENTED OR SURRENDERED FOR REDEMPTION OR
EXCHANGE DOES NOT ITSELF CONSTITUTE NOTICE OF AN
ADVERSE CLAIM EXCEPT IN THE CASE OF A TRANSFER
MORE THAN:
(1) ONE YEAR AFTER A DATE SET FOR PRESENTMENT
OR SURRENDER FOR REDEMPTION OR EXCHANGE; OR
(2) SIX MONTHS AFTER A DATE SET FOR PAYMENT
OF MONEY AGAINST PRESENTATION OR SURRENDER OF THE
CERTIFICATE, IF MONEY WAS AVAILABLE FOR PAYMENT ON
THAT DATE.
(d) A PURCHASER OF A CERTIFICATED SECURITY
HAS NOTICE OF AN ADVERSE CLAIM IF THE SECURITY
CERTIFICATE:
(1) WHETHER IN BEARER OR REGISTERED FORM, HAS
BEEN ENDORSED "FOR COLLECTION" OR "FOR SURRENDER"
OR FOR SOME OTHER PURPOSE NOT INVOLVING TRANSFER;
OR
(2) IS IN BEARER FORM AND HAS ON IT AN
UNAMBIGUOUS STATEMENT THAT IT IS THE PROPERTY OF A
PERSON OTHER THAN THE TRANSFEROR, BUT THE MERE
WRITING OF A NAME ON THE CERTIFICATE IS NOT SUCH A
STATEMENT.
(e) FILING OF A FINANCING STATEMENT UNDER
ARTICLE 9 IS NOT NOTICE OF AN ADVERSE CLAIM TO A
FINANCIAL ASSET.
Sec. 6. Section 42a-8-106 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[The law, including the conflict of laws
rules, of the jurisdiction of organization of the
issuer governs the validity of a security, the
effectiveness of registration by the issuer and
the rights and duties of the issuer with respect
to: (a) Registration of transfer of a certificated
security; (b) registration of transfer, pledge, or
release of an uncertificated security; and (c)
sending of statements of uncertificated
securities.]
(a) A PURCHASER HAS "CONTROL" OF A
CERTIFICATED SECURITY IN BEARER FORM IF THE
CERTIFICATED SECURITY IS DELIVERED TO THE
PURCHASER.
(b) A PURCHASER HAS "CONTROL" OF A
CERTIFICATED SECURITY IN REGISTERED FORM IF THE
CERTIFICATED SECURITY IS DELIVERED TO THE
PURCHASER, AND:
(1) THE CERTIFICATE IS ENDORSED TO THE
PURCHASER OR IN BLANK BY AN EFFECTIVE ENDORSEMENT;
OR
(2) THE CERTIFICATE IS REGISTERED IN THE NAME
OF THE PURCHASER, UPON ORIGINAL ISSUE OR
REGISTRATION OF TRANSFER BY THE ISSUER.
(c) A PURCHASER HAS "CONTROL" OF AN
UNCERTIFICATED SECURITY IF:
(1) THE UNCERTIFICATED SECURITY IS DELIVERED
TO THE PURCHASER; OR
(2) THE ISSUER HAS AGREED THAT IT WILL COMPLY
WITH INSTRUCTIONS ORIGINATED BY THE PURCHASER
WITHOUT FURTHER CONSENT BY THE REGISTERED OWNER.
(d) A PURCHASER HAS "CONTROL" OF A SECURITY
ENTITLEMENT IF:
(1) THE PURCHASER BECOMES THE ENTITLEMENT
HOLDER; OR
(2) THE SECURITIES INTERMEDIARY HAS AGREED
THAT IT WILL COMPLY WITH ENTITLEMENT ORDERS
ORIGINATED BY THE PURCHASER WITHOUT FURTHER
CONSENT BY THE ENTITLEMENT HOLDER.
(e) IF AN INTEREST IN A SECURITY ENTITLEMENT
IS GRANTED BY THE ENTITLEMENT HOLDER TO THE
ENTITLEMENT HOLDER'S OWN SECURITIES INTERMEDIARY,
THE SECURITIES INTERMEDIARY HAS CONTROL.
(f) A PURCHASER WHO HAS SATISFIED THE
REQUIREMENTS OF SUBSECTION (c)(2) OR (d)(2) OF
THIS SECTION HAS CONTROL EVEN IF THE REGISTERED
OWNER IN THE CASE OF SUBSECTION (c)(2) OF THIS
SECTION OR THE ENTITLEMENT HOLDER IN THE CASE OF
SUBSECTION (d)(2) OF THIS SECTION RETAINS THE
RIGHT TO MAKE SUBSTITUTIONS FOR THE UNCERTIFICATED
SECURITY OR SECURITY ENTITLEMENT, TO ORIGINATE
INSTRUCTIONS OR ENTITLEMENT ORDERS TO THE ISSUER
OR SECURITIES INTERMEDIARY, OR OTHERWISE TO DEAL
WITH THE UNCERTIFICATED SECURITY OR SECURITY
ENTITLEMENT.
(g) AN ISSUER OR A SECURITIES INTERMEDIARY
MAY NOT ENTER INTO AN AGREEMENT OF THE KIND
DESCRIBED IN SUBSECTION (c)(2) OR (d)(2) OF THIS
SECTION WITHOUT THE CONSENT OF THE REGISTERED
OWNER OR ENTITLEMENT HOLDER, BUT AN ISSUER OR A
SECURITIES INTERMEDIARY IS NOT REQUIRED TO ENTER
INTO SUCH AN AGREEMENT EVEN THOUGH THE REGISTERED
OWNER OR ENTITLEMENT HOLDER SO DIRECTS. AN ISSUER
OR SECURITIES INTERMEDIARY THAT HAS ENTERED INTO
SUCH AN AGREEMENT IS NOT REQUIRED TO CONFIRM THE
EXISTENCE OF THE AGREEMENT TO ANOTHER PARTY UNLESS
REQUESTED TO DO SO BY THE REGISTERED OWNER OR
ENTITLEMENT HOLDER.
Sec. 7. Section 42a-8-107 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[(1) Unless otherwise agreed and subject to
any applicable law or regulation respecting short
sales, a person obligated to transfer securities
may transfer any certificated security of the
specified issue in bearer form or registered in
the name of the transferee or endorsed to him or
in blank, or he may transfer an equivalent
uncertificated security to the transferee or a
person designated by the transferee.
(2) If the buyer fails to pay the price as it
comes due under a contract of sale, the seller may
recover the price of: (a) Certificated securities
accepted by the buyer; (b) uncertificated
securities that have been transferred to the buyer
or a person designated by the buyer; and (c) other
securities if efforts at their resale would be
unduly burdensome or if there is no readily
available market for their resale.]
(a) "APPROPRIATE PERSON" MEANS:
(1) WITH RESPECT TO AN ENDORSEMENT, THE
PERSON SPECIFIED BY A SECURITY CERTIFICATE OR BY
AN EFFECTIVE SPECIAL ENDORSEMENT TO BE ENTITLED TO
THE SECURITY;
(2) WITH RESPECT TO AN INSTRUCTION, THE
REGISTERED OWNER OF AN UNCERTIFICATED SECURITY;
(3) WITH RESPECT TO AN ENTITLEMENT ORDER, THE
ENTITLEMENT HOLDER;
(4) IF THE PERSON DESIGNATED IN SUBDIVISION
(1), (2) OR (3) OF THIS SUBSECTION IS DECEASED,
THE DESIGNATED PERSON'S SUCCESSOR TAKING UNDER
OTHER LAW OR THE DESIGNATED PERSON'S PERSONAL
REPRESENTATIVE ACTING FOR THE ESTATE OF THE
DECEDENT; OR
(5) IF THE PERSON DESIGNATED IN SUBDIVISION
(1), (2) OR (3) OF THIS SUBSECTION LACKS CAPACITY,
THE DESIGNATED PERSON'S GUARDIAN, CONSERVATOR, OR
OTHER SIMILAR REPRESENTATIVE WHO HAS POWER UNDER
OTHER LAW TO TRANSFER THE SECURITY OR FINANCIAL
ASSET.
(b) AN ENDORSEMENT, INSTRUCTION OR
ENTITLEMENT ORDER IS EFFECTIVE IF:
(1) IT IS MADE BY THE APPROPRIATE PERSON;
(2) IT IS MADE BY A PERSON WHO HAS POWER
UNDER THE LAW OF AGENCY TO TRANSFER THE SECURITY
OR FINANCIAL ASSET ON BEHALF OF THE APPROPRIATE
PERSON, INCLUDING, IN THE CASE OF AN INSTRUCTION
OR ENTITLEMENT ORDER, A PERSON WHO HAS CONTROL
UNDER SECTION 42a-8-106(c)(2) OR 42a-8-106(d)(2);
OR
(3) THE APPROPRIATE PERSON HAS RATIFIED IT OR
IS OTHERWISE PRECLUDED FROM ASSERTING ITS
INEFFECTIVENESS.
(c) AN ENDORSEMENT, INSTRUCTION OR
ENTITLEMENT ORDER MADE BY A REPRESENTATIVE IS
EFFECTIVE EVEN IF:
(1) THE REPRESENTATIVE HAS FAILED TO COMPLY
WITH A CONTROLLING INSTRUMENT OR WITH THE LAW OF
THE STATE HAVING JURISDICTION OF THE
REPRESENTATIVE RELATIONSHIP, INCLUDING ANY LAW
REQUIRING THE REPRESENTATIVE TO OBTAIN COURT
APPROVAL OF THE TRANSACTION; OR
(2) THE REPRESENTATIVE'S ACTION IN MAKING THE
ENDORSEMENT, INSTRUCTION OR ENTITLEMENT ORDER OR
USING THE PROCEEDS OF THE TRANSACTION IS OTHERWISE
A BREACH OF DUTY.
(d) IF A SECURITY IS REGISTERED IN THE NAME
OF OR SPECIALLY ENDORSED TO A PERSON DESCRIBED AS
A REPRESENTATIVE, OR IF A SECURITIES ACCOUNT IS
MAINTAINED IN THE NAME OF A PERSON DESCRIBED AS A
REPRESENTATIVE, AN ENDORSEMENT, INSTRUCTION OR
ENTITLEMENT ORDER MADE BY THE PERSON IS EFFECTIVE
EVEN THOUGH THE PERSON IS NO LONGER SERVING IN THE
DESCRIBED CAPACITY.
(e) EFFECTIVENESS OF AN ENDORSEMENT,
INSTRUCTION OR ENTITLEMENT ORDER IS DETERMINED AS
OF THE DATE THE ENDORSEMENT, INSTRUCTION OR
ENTITLEMENT ORDER IS MADE, AND AN ENDORSEMENT,
INSTRUCTION OR ENTITLEMENT ORDER DOES NOT BECOME
INEFFECTIVE BY REASON OF ANY LATER CHANGE OF
CIRCUMSTANCES.
Sec. 8. (NEW) (a) A person who transfers a
certificated security to a purchaser for value
warrants to the purchaser, and an endorser, if the
transfer is by endorsement, warrants to any
subsequent purchaser, that:
(1) The certificate is genuine and has not
been materially altered;
(2) The transferor or endorser does not know
of any fact that might impair the validity of the
security;
(3) There is no adverse claim to the
security;
(4) The transfer does not violate any
restriction on transfer;
(5) If the transfer is by endorsement, the
endorsement is made by an appropriate person, or
if the endorsement is by an agent, the agent has
actual authority to act on behalf of the
appropriate person; and
(6) The transfer is otherwise effective and
rightful.
(b) A person who originates an instruction
for registration of transfer of an uncertificated
security to a purchaser for value warrants to the
purchaser that:
(1) The instruction is made by an appropriate
person, or if the instruction is by an agent, the
agent has actual authority to act on behalf of the
appropriate person;
(2) The security is valid;
(3) There is no adverse claim to the
security; and
(4) At the time the instruction is presented
to the issuer:
(i) The purchaser will be entitled to the
registration of transfer;
(ii) The transfer will be registered by the
issuer free from all liens, security interests,
restrictions and claims other than those specified
in the instruction;
(iii) The transfer will not violate any
restriction on transfer; and
(iv) The requested transfer will otherwise be
effective and rightful.
(c) A person who transfers an uncertificated
security to a purchaser for value and does not
originate an instruction in connection with the
transfer warrants that:
(1) The uncertificated security is valid;
(2) There is no adverse claim to the
security;
(3) The transfer does not violate any
restriction on transfer; and
(4) The transfer is otherwise effective and
rightful.
(d) A person who endorses a security
certificate warrants to the issuer that:
(1) There is no adverse claim to the
security; and
(2) The endorsement is effective.
(e) A person who originates an instruction
for registration of transfer of an uncertificated
security warrants to the issuer that:
(1) The instruction is effective; and
(2) At the time the instruction is presented
to the issuer the purchaser will be entitled to
the registration of transfer.
(f) A person who presents a certificated
security for registration of transfer or for
payment or exchange warrants to the issuer that
the person is entitled to the registration,
payment or exchange, but a purchaser for value and
without notice of adverse claims to whom transfer
is registered warrants only that the person has no
knowledge of any unauthorized signature in a
necessary endorsement.
(g) If a person acts as agent of another in
delivering a certificated security to a purchaser,
the identity of the principal was known to the
person to whom the certificate was delivered, and
the certificate delivered by the agent was
received by the agent from the principal or
received by the agent from another person at the
direction of the principal, the person delivering
the security certificate warrants only that the
delivering person has authority to act for the
principal and does not know of any adverse claim
to the certificated security.
(h) A secured party who redelivers a security
certificate received, or after payment and on
order of the debtor delivers the security
certificate to another person, makes only the
warranties of an agent under subsection (g) of
this section.
(i) Except as otherwise provided in
subsection (g) of this section, a broker acting
for a customer makes to the issuer and to a
purchaser the warranties provided in subsections
(a) to (f), inclusive, of this section. A broker
that delivers a security certificate to its
customer, or causes its customer to be registered
as the owner of an uncertificated security, makes
to the customer the warranties provided in
subsection (a) or (b) of this section, and has the
rights and privileges of a purchaser under this
section. The warranties of and in favor of the
broker acting as an agent are in addition to
applicable warranties given by and in favor of the
customer.
Sec. 9. (NEW) (a) A person who originates an
entitlement order to a securities intermediary
warrants to the securities intermediary that:
(1) The entitlement order is made by an
appropriate person, or if the entitlement order is
by an agent, the agent has actual authority to act
on behalf of the appropriate person; and
(2) There is no adverse claim to the security
entitlement.
(b) A person who delivers a security
certificate to a securities intermediary for
credit to a securities account or originates an
instruction with respect to an uncertificated
security directing that the uncertificated
security be credited to a securities account makes
to the securities intermediary the warranties
specified in section 42a-8-108(a) or 42a-8-108(b)
of the general statutes.
(c) If a securities intermediary delivers a
security certificate to its entitlement holder or
causes its entitlement holder to be registered as
the owner of an uncertificated security, the
securities intermediary makes to the entitlement
holder the warranties specified in section
42a-8-108(a) or 42a-8-108(b) of the general
statutes.
Sec. 10. (NEW) (a) The local law of the
issuer's jurisdiction, as specified in subsection
(d) of this section, governs:
(1) The validity of a security;
(2) The rights and duties of the issuer with
respect to registration of transfer;
(3) The effectiveness of registration of
transfer by the issuer;
(4) Whether the issuer owes any duties to an
adverse claimant to a security; and
(5) Whether an adverse claim can be asserted
against a person to whom transfer of a
certificated or uncertificated security is
registered or person who obtains control of an
uncertificated security.
(b) The local law of the securities
intermediary's jurisdiction, as specified in
subsection (e) of this section, governs:
(1) Acquisition of a security entitlement
from the securities intermediary;
(2) The rights and duties of the securities
intermediary and entitlement holder arising out of
a security entitlement;
(3) Whether the securities intermediary owes
any duties to an adverse claimant to a security
entitlement; and
(4) Whether an adverse claim can be asserted
against a person who acquires a security
entitlement from the securities intermediary or a
person who purchases a security entitlement or
interest therein from an entitlement holder.
(c) The local law of the jurisdiction in
which a security certificate is located at the
time of delivery governs whether an adverse claim
can be asserted against a person to whom the
security certificate is delivered.
(d) "Issuer's jurisdiction" means the
jurisdiction under which the issuer of the
security is organized or, if permitted by the law
of that jurisdiction, the law of another
jurisdiction specified by the issuer. An issuer
organized under the law of this state may specify
the law of another jurisdiction as the law
governing the matters specified in subdivisions
(2) to (5), inclusive, of subsection (a) of this
section.
(e) The following rules determine a
"securities intermediary's jurisdiction" for
purposes of this section:
(1) If an agreement between the securities
intermediary and its entitlement holder specifies
that it is governed by the law of a particular
jurisdiction, that jurisdiction is the securities
intermediary's jurisdiction.
(2) If an agreement between the securities
intermediary and its entitlement holder does not
specify the governing law as provided in
subdivision (1) of this subsection, but expressly
specifies that the securities account is
maintained at an office in a particular
jurisdiction, that jurisdiction is the securities
intermediary's jurisdiction.
(3) If an agreement between the securities
intermediary and its entitlement holder does not
specify a jurisdiction as provided in subdivision
(1) or (2) of this subsection, the securities
intermediary's jurisdiction is the jurisdiction in
which located the office identified in an account
statement as the office serving the entitlement
holder's account.
(4) If an agreement between the securities
intermediary and its entitlement holder does not
specify a jurisdiction as provided in subdivision
(1) or (2) of this subsection and an account
statement does not identify an office serving the
entitlement holder's account as provided in
subdivision (3) of this subsection, the securities
intermediary's jurisdiction is the jurisdiction in
which is located the chief executive office of the
securities intermediary.
(f) A securities intermediary's jurisdiction
is not determined by the physical location of
certificates representing financial assets, or by
the jurisdiction in which is organized the issuer
of the financial asset with respect to which an
entitlement holder has a security entitlement, or
by the location of facilities for data processing
or other record keeping concerning the account.
Sec. 11. (NEW) A rule adopted by a clearing
corporation governing rights and obligations among
the clearing corporation and its participants in
the clearing corporation is effective even if the
rule conflicts with this act and affects another
party who does not consent to the rule.
Sec. 12. (NEW) (a) The interest of a debtor
in a certificated security may be reached by a
creditor only by actual seizure of the security
certificate by the officer making the attachment
or levy, except as otherwise provided in
subsection (d) of this section. However, a
certificated security for which the certificate
has been surrendered to the issuer may be reached
by a creditor by legal process upon the issuer.
(b) The interest of a debtor in an
uncertificated security may be reached by a
creditor only by legal process upon the issuer at
its chief executive office in the United States,
except as otherwise provided in subsection (d) of
this section.
(c) The interest of a debtor in a security
entitlement may be reached by a creditor only by
legal process upon the securities intermediary
with whom the debtor's securities account is
maintained, except as otherwise provided in
subsection (d) of this section.
(d) The interest of a debtor in a
certificated security for which the certificate is
in the possession of a secured party, or in an
uncertificated security registered in the name of
a secured party, or a security entitlement
maintained in the name of a secured party, may be
reached by a creditor by legal process upon the
secured party.
(e) A creditor whose debtor is the owner of a
certificated security, uncertificated security or
security entitlement is entitled to aid from a
court of competent jurisdiction, by injunction or
otherwise, in reaching the certificated security,
uncertificated security or security entitlement or
in satisfying the claim by means allowed at law or
in equity in regard to property that cannot
readily be reached by other legal process.
Sec. 13. (NEW) A contract or modification of
a contract for the sale or purchase of a security
is enforceable whether or not there is a writing
signed or record authenticated by a party against
whom enforcement is sought, even if the contract
or modification is not capable of performance
within one year of its making.
Sec. 14. (NEW) The following rules apply in
an action on a certificated security against the
issuer:
(1) Unless specifically denied in the
pleadings, each signature on a security
certificate or in a necessary endorsement is
admitted.
(2) If the effectiveness of a signature is
put in issue, the burden of establishing
effectiveness is on the party claiming under the
signature, but the signature is presumed to be
genuine or authorized.
(3) If signatures on a security certificate
are admitted or established, production of the
certificate entitles a holder to recover on it
unless the defendant establishes a defense or a
defect going to the validity of the security.
(4) If it is shown that a defense or defect
exists, the plaintiff has the burden of
establishing that the plaintiff or some person
under whom the plaintiff claims is a person
against whom the defense or defect cannot be
asserted.
Sec. 15. (NEW) A securities intermediary that
has transferred a financial asset pursuant to an
effective entitlement order, or a broker or other
agent or bailee that has dealt with a financial
asset at the direction of its customer or
principal, is not liable to a person having an
adverse claim to the financial asset, unless the
securities intermediary, or broker or other agent
or bailee:
(1) Took the action after it had been served
with an injunction, restraining order or other
legal process enjoining it from doing so, issued
by a court of competent jurisdiction; or
(2) Acted in collusion with the wrongdoer in
violating the rights of the adverse claimant; or
(3) In the case of a security certificate
that has been stolen, acted with notice of the
adverse claim.
Sec. 16. (NEW) A securities intermediary that
receives a financial asset and establishes a
security entitlement to the financial asset in
favor of an entitlement holder is a purchaser for
value of the financial asset. A securities
intermediary that acquires a security entitlement
to a financial asset from another securities
intermediary acquires the security entitlement for
value if the securities intermediary acquiring the
security entitlement establishes a security
entitlement to the financial asset in favor of an
entitlement holder.
Sec. 17. Section 42a-8-201 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[(1) With respect to obligations on or
defenses to a security, "issuer" includes a person
who: (a) Places or authorizes the placing of his
name on a certificated security, otherwise than as
authenticating trustee, registrar, transfer agent
or the like, to evidence that it represents a
share, participation or other interest in his
property or in an enterprise or to evidence his
duty to perform an obligation represented by the
certificated security; (b) creates shares,
participations or other interests in his property
or in an enterprise or undertakes obligations,
which shares, participations, interests or
obligations are uncertificated securities; (c)
directly or indirectly creates fractional
interests in his rights or property, which
fractional interests are represented by
certificated securities; or (d) becomes
responsible for or in place of any other person
described as an issuer in this section.
(2) With respect to obligations on or
defenses to a security, a guarantor is an issuer
to the extent of his guaranty, whether or not his
obligation is noted on a certificated security or
on statements of uncertificated securities sent
pursuant to section 42a-8-408.
(3) With respect to registration of transfer,
pledge or release as provided by part 4 of this
article, "issuer" means a person on whose behalf
transfer books are maintained.]
(a) WITH RESPECT TO AN OBLIGATION ON OR A
DEFENSE TO A SECURITY, AN "ISSUER" INCLUDES A
PERSON THAT:
(1) PLACES OR AUTHORIZES THE PLACING OF ITS
NAME ON A SECURITY CERTIFICATE, OTHER THAN AS
AUTHENTICATING TRUSTEE, REGISTRAR, TRANSFER AGENT,
OR THE LIKE, TO EVIDENCE A SHARE, PARTICIPATION OR
OTHER INTEREST IN ITS PROPERTY OR IN AN
ENTERPRISE, OR TO EVIDENCE ITS DUTY TO PERFORM AN
OBLIGATION REPRESENTED BY THE CERTIFICATE;
(2) CREATES A SHARE, PARTICIPATION OR OTHER
INTEREST IN ITS PROPERTY OR IN AN ENTERPRISE, OR
UNDERTAKES AN OBLIGATION, THAT IS AN
UNCERTIFICATED SECURITY;
(3) DIRECTLY OR INDIRECTLY CREATES A
FRACTIONAL INTEREST IN ITS RIGHTS OR PROPERTY, IF
THE FRACTIONAL INTEREST IS REPRESENTED BY A
SECURITY CERTIFICATE; OR
(4) BECOMES RESPONSIBLE FOR, OR IN PLACE OF,
ANOTHER PERSON DESCRIBED AS AN ISSUER IN THIS
SECTION.
(b) WITH RESPECT TO AN OBLIGATION ON OR
DEFENSE TO A SECURITY, A GUARANTOR IS AN ISSUER TO
THE EXTENT OF ITS GUARANTY, WHETHER OR NOT ITS
OBLIGATION IS NOTED ON A SECURITY CERTIFICATE.
(c) WITH RESPECT TO A REGISTRATION OF A
TRANSFER, ISSUER MEANS A PERSON ON WHOSE BEHALF
TRANSFER BOOKS ARE MAINTAINED.
Sec. 18. Section 42a-8-202 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[(1) Even against a purchaser for value and
without notice, the terms of a security include:
(a) If the security is certificated, those stated
on the security; (b) if the security is
uncertificated, those contained in the initial
transaction statement sent to such purchaser, or
if his interest is transferred to him other than
by registration of transfer, pledge or release,
the initial transaction statement sent to the
registered owner or registered pledgee; and (c)
those made part of the security by reference, on
the certificated security or in the initial
transaction statement, to another instrument,
indenture or document or to a constitution,
statute, ordinance, rule, regulation, order or the
like to the extent that the terms referred to do
not conflict with the terms stated on the
certificated security or contained in the
statement. A reference under this paragraph does
not of itself charge a purchaser for value with
notice of a defect going to the validity of the
security, even though the certificated security or
statement expressly states that a person accepting
it admits notice.
(2) A certificated security in the hands of a
purchaser for value or an uncertificated security
as to which an initial transaction statement has
been sent to a purchaser for value, other than a
security issued by a government or governmental
agency or unit even though issued with a defect
going to its validity, is valid with respect to
the purchaser if he is without notice of the
particular defect unless the defect involves a
violation of constitutional provisions, in which
case the security is valid with respect to a
subsequent purchaser for value and without notice
of the defect. This subsection applies to an
issuer that is a government or governmental agency
or unit only if either there has been substantial
compliance with the legal requirements governing
the issue or the issuer has received a substantial
consideration for the issue as a whole or for the
particular security and a stated purpose of the
issue is one for which the issuer has power to
borrow money or issue the security.
(3) Except as provided by section 42a-8-205
in the case of certain unauthorized signatures,
lack of genuineness of a certificated security or
an initial transaction statement is a complete
defense, even against a purchaser for value and
without notice.
(4) All other defenses of the issuer of a
certificated or uncertificated security, including
nondelivery and conditional delivery of a
certificated security, are ineffective against a
purchaser for value who has taken without notice
of the particular defense.
(5) Nothing in this section shall be
construed to affect the rights of a party to a
"when, as and if issued" or a "when distributed"
contract to cancel the contract in the event of a
material change in the character of the security
that is the subject of the contract or in the plan
or arrangement pursuant to which the security is
to be issued or distributed.]
(a) EVEN AGAINST A PURCHASER FOR VALUE AND
WITHOUT NOTICE, THE TERMS OF A CERTIFICATED
SECURITY INCLUDE TERMS STATED ON THE CERTIFICATE
AND TERMS MADE PART OF THE SECURITY BY REFERENCE
ON THE CERTIFICATE TO ANOTHER INSTRUMENT,
INDENTURE OR DOCUMENT OR TO A CONSTITUTION,
STATUTE, ORDINANCE, RULE, REGULATION, ORDER OR THE
LIKE, TO THE EXTENT THE TERMS REFERRED TO DO NOT
CONFLICT WITH TERMS STATED ON THE CERTIFICATE. A
REFERENCE UNDER THIS SUBSECTION DOES NOT OF ITSELF
CHARGE A PURCHASER FOR VALUE WITH NOTICE OF A
DEFECT GOING TO THE VALIDITY OF THE SECURITY, EVEN
IF THE CERTIFICATE EXPRESSLY STATES THAT A PERSON
ACCEPTING IT ADMITS NOTICE. THE TERMS OF AN
UNCERTIFICATED SECURITY INCLUDE THOSE STATED IN
ANY INSTRUMENT, INDENTURE OR DOCUMENT OR IN A
CONSTITUTION, STATUTE, ORDINANCE, RULE,
REGULATION, ORDER OR THE LIKE, PURSUANT TO WHICH
THE SECURITY IS ISSUED.
(b) THE FOLLOWING RULES APPLY IF AN ISSUER
ASSERTS THAT A SECURITY IS NOT VALID:
(1) A SECURITY OTHER THAN ONE ISSUED BY A
GOVERNMENT OR GOVERNMENTAL SUBDIVISION, AGENCY OR
INSTRUMENTALITY, EVEN THOUGH ISSUED WITH A DEFECT
GOING TO ITS VALIDITY, IS VALID IN THE HANDS OF A
PURCHASER FOR VALUE AND WITHOUT NOTICE OF THE
PARTICULAR DEFECT UNLESS THE DEFECT INVOLVES A
VIOLATION OF A CONSTITUTIONAL PROVISION. IN THAT
CASE, THE SECURITY IS VALID IN THE HANDS OF A
PURCHASER FOR VALUE AND WITHOUT NOTICE OF THE
DEFECT, OTHER THAN ONE WHO TAKES BY ORIGINAL
ISSUE.
(2) SUBDIVISION (1) OF THIS SUBSECTION
APPLIES TO AN ISSUER THAT IS A GOVERNMENT OR
GOVERNMENTAL SUBDIVISION, AGENCY OR
INSTRUMENTALITY ONLY IF THERE HAS BEEN SUBSTANTIAL
COMPLIANCE WITH THE LEGAL REQUIREMENTS GOVERNING
THE ISSUE OR THE ISSUER HAS RECEIVED A SUBSTANTIAL
CONSIDERATION FOR THE ISSUE AS A WHOLE OR FOR THE
PARTICULAR SECURITY AND A STATED PURPOSE OF THE
ISSUE IS ONE FOR WHICH THE ISSUER HAS POWER TO
BORROW MONEY OR ISSUE THE SECURITY.
(c) EXCEPT AS OTHERWISE PROVIDED IN SECTION
42a-8-205, LACK OF GENUINENESS OF A CERTIFICATED
SECURITY IS A COMPLETE DEFENSE, EVEN AGAINST A
PURCHASER FOR VALUE AND WITHOUT NOTICE.
(d) ALL OTHER DEFENSES OF THE ISSUER OF A
SECURITY, INCLUDING NONDELIVERY AND CONDITIONAL
DELIVERY OF A CERTIFICATED SECURITY, ARE
INEFFECTIVE AGAINST A PURCHASER FOR VALUE WHO HAS
TAKEN THE CERTIFICATED SECURITY WITHOUT NOTICE OF
THE PARTICULAR DEFENSE.
(e) THIS SECTION DOES NOT AFFECT THE RIGHT OF
A PARTY TO CANCEL A CONTRACT FOR A SECURITY "WHEN,
AS AND IF ISSUED" OR "WHEN DISTRIBUTED" IN THE
EVENT OF A MATERIAL CHANGE IN THE CHARACTER OF THE
SECURITY THAT IS THE SUBJECT OF THE CONTRACT OR IN
THE PLAN OR ARRANGEMENT PURSUANT TO WHICH THE
SECURITY IS TO BE ISSUED OR DISTRIBUTED.
(f) IF A SECURITY IS HELD BY A SECURITIES
INTERMEDIARY AGAINST WHOM AN ENTITLEMENT HOLDER
HAS A SECURITY ENTITLEMENT WITH RESPECT TO THE
SECURITY, THE ISSUER MAY NOT ASSERT ANY DEFENSE
THAT THE ISSUER COULD NOT ASSERT IF THE
ENTITLEMENT HOLDER HELD THE SECURITY DIRECTLY.
Sec. 19. Section 42a-8-203 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[(1) After an act or event creating a right
to immediate performance of the principal
obligation represented by a certificated security
or that sets a date on or after which the security
is to be presented or surrendered for redemption
or exchange, a purchaser is charged with notice of
any defect in its issue or defense of the issuer
if: (a) The act or event is one requiring the
payment of money, the delivery of certificated
securities, the registration of transfer of
uncertificated securities or any of these on
presentation or surrender of the certificated
security, the funds or securities are available on
the date set for payment or exchange and he takes
the security more than one year after that date;
and (b) the act or event is not covered by
paragraph (a) and he takes the security more than
two years after the date set for surrender or
presentation or the date on which performance
became due.
(2) A call that has been revoked is not
within subsection (1).]
AFTER AN ACT OR EVENT, OTHER THAN A CALL THAT
HAS BEEN REVOKED, CREATING A RIGHT TO IMMEDIATE
PERFORMANCE OF THE PRINCIPAL OBLIGATION
REPRESENTED BY A CERTIFICATED SECURITY OR SETTING
A DATE ON OR AFTER WHICH THE SECURITY IS TO BE
PRESENTED OR SURRENDERED FOR REDEMPTION OR
EXCHANGE, A PURCHASER IS CHARGED WITH NOTICE OF
ANY DEFECT IN ITS ISSUE OR DEFENSE OF THE ISSUER,
IF THE ACT OR EVENT:
(1) REQUIRES THE PAYMENT OF MONEY, THE
DELIVERY OF A CERTIFICATED SECURITY, THE
REGISTRATION OF TRANSFER OF AN UNCERTIFICATED
SECURITY, OR ANY OF THEM ON PRESENTATION OR
SURRENDER OF THE SECURITY CERTIFICATE, THE MONEY
OR SECURITY IS AVAILABLE ON THE DATE SET FOR
PAYMENT OR EXCHANGE, AND THE PURCHASER TAKES THE
SECURITY MORE THAN ONE YEAR AFTER THAT DATE; OR
(2) IS NOT COVERED BY SUBDIVISION (1) OF THIS
SECTION AND THE PURCHASER TAKES THE SECURITY MORE
THAN TWO YEARS AFTER THE DATE SET FOR SURRENDER OR
PRESENTATION OR THE DATE ON WHICH PERFORMANCE
BECAME DUE.
Sec. 20. Section 42a-8-204 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[A restriction on transfer of a security
imposed by the issuer, even though otherwise
lawful, is ineffective against any person without
actual knowledge of it unless: (a) The security is
certificated and the restriction is noted
conspicuously thereon; or (b) the security is
uncertificated and a notation of the restriction
is contained in the initial transaction statement
sent to the person or, if his interest is
transferred to him other than by registration of
transfer, pledge or release, the initial
transaction statement sent to the registered owner
or the registered pledgee.]
A RESTRICTION ON TRANSFER OF A SECURITY
IMPOSED BY THE ISSUER, EVEN IF OTHERWISE LAWFUL,
IS INEFFECTIVE AGAINST A PERSON WITHOUT KNOWLEDGE
OF THE RESTRICTION UNLESS:
(1) THE SECURITY IS CERTIFICATED AND THE
RESTRICTION IS NOTED CONSPICUOUSLY ON THE SECURITY
CERTIFICATE; OR
(2) THE SECURITY IS UNCERTIFICATED AND THE
REGISTERED OWNER HAS BEEN NOTIFIED OF THE
RESTRICTION.
Sec. 21. Section 42a-8-205 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[An unauthorized signature placed on a
certificated security prior to or in the course of
issue or placed on an initial transaction
statement is ineffective, but the signature is
effective in favor of a purchaser for value of the
certificated security to whom such initial
transaction statement has been sent, if the
purchaser is without notice of the lack of
authority and the signing has been done by: (a) An
authenticating trustee, registrar, transfer agent
or other person entrusted by the issuer with the
signing of the security, of similar securities or
of initial transaction statements or the immediate
preparation for signing of any of them; or (b) an
employee of the issuer, or of any of the
foregoing, entrusted with responsible handling of
the security or initial transaction statement.]
AN UNAUTHORIZED SIGNATURE PLACED ON A
SECURITY CERTIFICATE BEFORE OR IN THE COURSE OF
ISSUE IS INEFFECTIVE, BUT THE SIGNATURE IS
EFFECTIVE IN FAVOR OF A PURCHASER FOR VALUE OF THE
CERTIFICATED SECURITY IF THE PURCHASER IS WITHOUT
NOTICE OF THE LACK OF AUTHORITY AND THE SIGNING
HAS BEEN DONE BY:
(1) AN AUTHENTICATING TRUSTEE, REGISTRAR,
TRANSFER AGENT OR OTHER PERSON ENTRUSTED BY THE
ISSUER WITH THE SIGNING OF THE SECURITY
CERTIFICATE OR OF SIMILAR SECURITY CERTIFICATES,
OR THE IMMEDIATE PREPARATION FOR SIGNING OF ANY OF
THEM; OR
(2) AN EMPLOYEE OF THE ISSUER, OR OF ANY OF
THE PERSONS LISTED IN SUBDIVISION (1) OF THIS
SECTION, ENTRUSTED WITH RESPONSIBLE HANDLING OF
THE SECURITY CERTIFICATE.
Sec. 22. Section 42a-8-206 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[(1) If a certificated security contains the
signatures necessary to its issue or transfer but
is incomplete in any other respect: (a) Any person
may complete it by filling in the blanks as
authorized; and (b) even though the blanks are
incorrectly filled in, the security as completed
is enforceable by a purchaser who took it for
value and without notice of the incorrectness.
(2) A complete certificated security that has
been improperly altered, even though fraudulently,
remains enforceable, but only according to its
original terms.
(3) If an initial transaction statement
contains the signatures necessary to its validity,
but is incomplete in any other respect: (a) Any
person may complete it by filling in the blanks as
authorized; and (b) even though the blanks are
incorrectly filled in, the statement as completed
is effective in favor of the person to whom it is
sent if he purchased the security referred to
therein for value and without notice of the
incorrectness.
(4) A complete initial transaction statement
that has been improperly altered, even though
fraudulently, is effective in favor of a purchaser
to whom it has been sent, but only according to
its original terms.]
(a) IF A SECURITY CERTIFICATE CONTAINS THE
SIGNATURES NECESSARY TO ITS ISSUE OR TRANSFER BUT
IS INCOMPLETE IN ANY OTHER RESPECT:
(1) ANY PERSON MAY COMPLETE IT BY FILLING IN
THE BLANKS AS AUTHORIZED; AND
(2) EVEN IF THE BLANKS ARE INCORRECTLY FILLED
IN, THE SECURITY CERTIFICATE AS COMPLETED IS
ENFORCEABLE BY A PURCHASER WHO TOOK IT FOR VALUE
AND WITHOUT NOTICE OF THE INCORRECTNESS.
(b) A COMPLETE SECURITY CERTIFICATE THAT HAS
BEEN IMPROPERLY ALTERED, EVEN IF FRAUDULENTLY,
REMAINS ENFORCEABLE, BUT ONLY ACCORDING TO ITS
ORIGINAL TERMS.
Sec. 23. Section 42a-8-207 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[(1) Prior to due presentment for
registration of transfer of a certificated
security in registered form, the issuer or
indenture trustee may treat the registered owner
as the person exclusively entitled to vote, to
receive notifications and otherwise to exercise
all the rights and powers of an owner.
(2) Subject to the provisions of subsections
(3), (4) and (6), the issuer or indenture trustee
may treat the registered owner of an
uncertificated security as a person exclusively
entitled to vote, to receive notifications, and
otherwise to exercise all the rights and powers of
an owner.
(3) The registered owner of an uncertificated
security that is subject to a registered pledge is
not entitled to registration of transfer prior to
the due presentment to the issuer of a release
instruction. The exercise of conversion rights
with respect to a convertible uncertificated
security is a transfer within the meaning of this
section.
(4) Upon due presentment of a transfer
instruction from the registered pledgee of an
uncertificated security, the issuer shall: (a)
Register the transfer of the security to the new
owner free of pledge, if the instruction specifies
a new owner, who may be the registered pledgee,
and does not specify a pledgee; (b) register the
transfer of the security to the new owner subject
to the interest of the existing pledgee, if the
instruction specifies a new owner and the existing
pledgee; or (c) register the release of the
security from the existing pledge and register the
pledge of the security to the other pledgee, if
the instruction specifies the existing owner and
another pledgee.
(5) Continuity of perfection of a security
interest is not broken by registration of transfer
under paragraph (b) of subsection (4) or by
registration of release and pledge under paragraph
(c) of subsection (4), if the security interest is
assigned.
(6) If an uncertificated security is subject
to a registered pledge: (a) Any uncertificated
securities issued in exchange for or distributed
with respect to the pledged security shall be
registered subject to the pledge; (b) any
certificated securities issued in exchange for or
distributed with respect to the pledged security
shall be delivered to the registered pledgee; and
(c) any money paid in exchange for or in
redemption of part or all of the security shall be
paid to the registered pledgee.
(7) Nothing in this article shall be
construed to affect the liability of the
registered owner of a security for calls,
assessments or the like.]
(a) BEFORE DUE PRESENTMENT FOR REGISTRATION
OF TRANSFER OF A CERTIFICATED SECURITY IN
REGISTERED FORM OR OF AN INSTRUCTION REQUESTING
REGISTRATION OF TRANSFER OF AN UNCERTIFICATED
SECURITY, THE ISSUER OR INDENTURE TRUSTEE MAY
TREAT THE REGISTERED OWNER AS THE PERSON
EXCLUSIVELY ENTITLED TO VOTE, RECEIVE
NOTIFICATIONS AND OTHERWISE EXERCISE ALL THE
RIGHTS AND POWERS OF AN OWNER.
(b) THIS ARTICLE DOES NOT AFFECT THE
LIABILITY OF THE REGISTERED OWNER OF A SECURITY
FOR A CALL, ASSESSMENT OR THE LIKE.
Sec. 24. Section 42a-8-208 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[(1) A person placing his signature upon a
certificated security or an initial transaction
statement, as authenticating trustee, registrar,
transfer agent or the like, warrants to a
purchaser for value of the certificated security
or a purchaser for value of an uncertificated
security to whom the initial transaction statement
has been sent, if the purchaser is without notice
of the particular defect, that: (a) The
certificated security or initial transaction
statement is genuine; (b) his own participation in
the issue or registration of the transfer, pledge
or release of the security is within his capacity
and within the scope of the authority received by
him from the issuer; and (c) he has reasonable
grounds to believe that the security is in the
form and within the amount the issuer is
authorized to issue.
(2) Unless otherwise agreed, a person by so
placing his signature does not assume
responsibility for the validity of the security in
other respects.]
(a) A PERSON SIGNING A SECURITY CERTIFICATE
AS AUTHENTICATING TRUSTEE, REGISTRAR, TRANSFER
AGENT, OR THE LIKE, WARRANTS TO A PURCHASER FOR
VALUE OF THE CERTIFICATED SECURITY, IF THE
PURCHASER IS WITHOUT NOTICE OF A PARTICULAR DEFECT
THAT:
(1) THE CERTIFICATE IS GENUINE;
(2) THE PERSON'S OWN PARTICIPATION IN THE
ISSUE OF THE SECURITY IS WITHIN THE PERSON'S
CAPACITY AND WITHIN THE SCOPE OF THE AUTHORITY
RECEIVED BY THE PERSON FROM THE ISSUER; AND
(3) THE PERSON HAS REASONABLE GROUNDS TO
BELIEVE THAT THE CERTIFICATED SECURITY IS IN THE
FORM AND WITHIN THE AMOUNT THE ISSUER IS
AUTHORIZED TO ISSUE.
(b) UNLESS OTHERWISE AGREED, A PERSON SIGNING
UNDER SUBSECTION (a) OF THIS SECTION DOES NOT
ASSUME RESPONSIBILITY FOR THE VALIDITY OF THE
SECURITY IN OTHER RESPECTS.
Sec. 25. (NEW) A lien in favor of an issuer
upon a certificated security is valid against a
purchaser only if the right of the issuer to the
lien is noted conspicuously on the security
certificate.
Sec. 26. (NEW) (a) In this section,
"overissue" means the issue of securities in
excess of the amount the issuer has corporate
power to issue, but an overissue does not occur if
appropriate action has cured the overissue.
(b) Except as otherwise provided in
subsections (c) and (d) of this section, the
provisions of this article which validate a
security or compel its issue or reissue do not
apply to the extent that validation, issue, or
reissue would result in overissue.
(c) If an identical security not constituting
an overissue is reasonably available for purchase,
a person entitled to issue or validation may
compel the issuer to purchase the security and
deliver it if certificated or register its
transfer if uncertificated, against surrender of
any security certificate the person holds.
(d) If a security is not reasonably available
for purchase, a person entitled to issue or
validation may recover from the issuer the price
the person or the last purchaser for value paid
for it with interest from the date of the person's
demand.
Sec. 27. Section 42a-8-301 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[(1) Upon transfer of a security to a
purchaser, as provided in section 42a-8-313, the
purchaser acquires the rights in the security
which his transferor had or had actual authority
to convey unless the purchaser's rights are
limited by subsection (4) of section 42a-8-302.
(2) A transferee of a limited interest
acquires rights only to the extent of the interest
transferred. The creation or release of a security
interest in a security is the transfer of a
limited interest in that security.]
(a) DELIVERY OF A CERTIFICATED SECURITY TO A
PURCHASER OCCURS WHEN:
(1) THE PURCHASER ACQUIRES POSSESSION OF THE
SECURITY CERTIFICATE;
(2) ANOTHER PERSON, OTHER THAN A SECURITIES
INTERMEDIARY, EITHER ACQUIRES POSSESSION OF THE
SECURITY CERTIFICATE ON BEHALF OF THE PURCHASER
OR, HAVING PREVIOUSLY ACQUIRED POSSESSION OF THE
CERTIFICATE, ACKNOWLEDGES THAT IT HOLDS FOR THE
PURCHASER; OR
(3) A SECURITIES INTERMEDIARY ACTING ON
BEHALF OF THE PURCHASER ACQUIRES POSSESSION OF THE
SECURITY CERTIFICATE, ONLY IF THE CERTIFICATE IS
IN REGISTERED FORM AND HAS BEEN SPECIALLY ENDORSED
TO THE PURCHASER BY AN EFFECTIVE ENDORSEMENT.
(b) DELIVERY OF AN UNCERTIFICATED SECURITY TO
A PURCHASER OCCURS WHEN:
(1) THE ISSUER REGISTERS THE PURCHASER AS THE
REGISTERED OWNER, UPON ORIGINAL ISSUE OR
REGISTRATION OF TRANSFER; OR
(2) ANOTHER PERSON, OTHER THAN A SECURITIES
INTERMEDIARY, EITHER BECOMES THE REGISTERED OWNER
OF THE UNCERTIFICATED SECURITY ON BEHALF OF THE
PURCHASER OR, HAVING PREVIOUSLY BECOME THE
REGISTERED OWNER, ACKNOWLEDGES THAT IT HOLDS FOR
THE PURCHASER.
Sec. 28. Section 42a-8-302 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[(1) A "bona fide purchaser" is a purchaser
for value in good faith and without notice of any
adverse claim: (a) Who takes delivery of a
certificated security in bearer form or in
registered form, issued or endorsed to him or in
blank; (b) to whom the transfer, pledge or release
of an uncertificated security is registered on the
books of the issuer; or (c) to whom a security is
transferred under the provisions of paragraph (c),
(d)(i), or (g) of subsection (1) of section
42a-8-313.
(2) "Adverse claim" includes a claim that a
transfer was or would be wrongful or that a
particular adverse person is the owner of or has
an interest in the security.
(3) A bona fide purchaser in addition to
acquiring the rights of a purchaser, as provided
in section 42a-8-301, also acquires his interest
in the security free of any adverse claim.
(4) Notwithstanding subsection (1) of section
42a-8-301, the transferee of a particular
certificated security who has been a party to any
fraud or illegality affecting the security, or who
as a prior holder of that certificated security
had notice of an adverse claim, cannot improve his
position by taking from a bona fide purchaser.]
(a) EXCEPT AS OTHERWISE PROVIDED IN
SUBSECTIONS (b) AND (c) OF THIS SECTION, UPON
DELIVERY OF A CERTIFICATED OR UNCERTIFICATED
SECURITY TO A PURCHASER, THE PURCHASER ACQUIRES
ALL RIGHTS IN THE SECURITY THAT THE TRANSFEROR HAD
OR HAD POWER TO TRANSFER.
(b) A PURCHASER OF A LIMITED INTEREST
ACQUIRES RIGHTS ONLY TO THE EXTENT OF THE INTEREST
PURCHASED.
(c) A PURCHASER OF A CERTIFICATED SECURITY
WHO AS A PREVIOUS HOLDER HAD NOTICE OF AN ADVERSE
CLAIM DOES NOT IMPROVE ITS POSITION BY TAKING FROM
A PROTECTED PURCHASER.
Sec. 29. Section 42a-8-303 of the general
statutes is repealed and the following is
substituted in lieu thereof:
["Broker" means a person engaged for all or
part of his time in the business of buying and
selling securities, who in the transaction
concerned acts for, buys a security from, or sells
a security to, a customer. Nothing in this article
determines the capacity in which a person acts for
purposes of any other statute or rule to which the
person is subject.]
(a) "PROTECTED PURCHASER" MEANS A PURCHASER
OF A CERTIFICATED OR UNCERTIFICATED SECURITY, OR
OF AN INTEREST THEREIN, WHO:
(1) GIVES VALUE;
(2) DOES NOT HAVE NOTICE OF ANY ADVERSE CLAIM
TO THE SECURITY; AND
(3) OBTAINS CONTROL OF THE CERTIFICATED OR
UNCERTIFICATED SECURITY.
(b) IN ADDITION TO ACQUIRING THE RIGHTS OF A
PURCHASER, A PROTECTED PURCHASER ALSO ACQUIRES ITS
INTEREST IN THE SECURITY FREE OF ANY ADVERSE
CLAIM.
Sec. 30. Section 42a-8-304 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[(1) A purchaser, including a broker for the
seller or buyer, but excluding an intermediary
bank, of a certificated security is charged with
notice of adverse claims if: (a) The security,
whether in bearer or registered form, has been
endorsed "for collection" or "for surrender" or
for some other purpose not involving transfer; or
(b) the security is in bearer form and has on it
an unambiguous statement that it is the property
of a person other than the transferor. The mere
writing of a name on a security is not such a
statement.
(2) A purchaser, including a broker for the
seller or buyer, but excluding an intermediary
bank, to whom the transfer, pledge or release of
an uncertificated security is registered is
charged with notice of adverse claims as to which
the issuer has a duty under subsection (4) of
section 42a-8-403, at the time of registration and
which are noted in the initial transaction
statement sent to the purchaser or, if his
interest is transferred to him other than by
registration of transfer, pledge, or release, the
initial transaction statement sent to the
registered owner or the registered pledgee.
(3) The fact that the purchaser, including a
broker for the seller or buyer, of a certificated
or uncertificated security, has notice that the
security is held for a third person or is
registered in the name of or endorsed by a
fiduciary does not create a duty of inquiry into
the rightfulness of the transfer or constitute
constructive notice of adverse claims. However, if
the purchaser, excluding an intermediary bank, has
knowledge that the proceeds are being used or the
transaction is for the individual benefit of the
fiduciary or otherwise in breach of duty, the
purchaser is charged with notice of adverse
claims.]
(a) AN ENDORSEMENT MAY BE IN BLANK OR
SPECIAL. AN ENDORSEMENT IN BLANK INCLUDES AN
ENDORSEMENT TO BEARER. A SPECIAL ENDORSEMENT
SPECIFIES TO WHOM A SECURITY IS TO BE TRANSFERRED
OR WHO HAS POWER TO TRANSFER IT. A HOLDER MAY
CONVERT A BLANK ENDORSEMENT TO A SPECIAL
ENDORSEMENT.
(b) AN ENDORSEMENT PURPORTING TO BE ONLY OF
PART OF A SECURITY CERTIFICATE REPRESENTING UNITS
INTENDED BY THE ISSUER TO BE SEPARATELY
TRANSFERABLE IS EFFECTIVE TO THE EXTENT OF THE
ENDORSEMENT.
(c) AN ENDORSEMENT, WHETHER SPECIAL OR IN
BLANK, DOES NOT CONSTITUTE A TRANSFER UNTIL
DELIVERY OF THE CERTIFICATE ON WHICH IT APPEARS
OR, IF THE ENDORSEMENT IS ON A SEPARATE DOCUMENT,
UNTIL DELIVERY OF BOTH THE DOCUMENT AND THE
CERTIFICATE.
(d) IF A SECURITY CERTIFICATE IN REGISTERED
FORM HAS BEEN DELIVERED TO A PURCHASER WITHOUT A
NECESSARY ENDORSEMENT, THE PURCHASER MAY BECOME A
PROTECTED PURCHASER ONLY WHEN THE ENDORSEMENT IS
SUPPLIED. HOWEVER, AGAINST A TRANSFEROR, A
TRANSFER IS COMPLETE UPON DELIVERY AND THE
PURCHASER HAS A SPECIFICALLY ENFORCEABLE RIGHT TO
HAVE ANY NECESSARY ENDORSEMENT SUPPLIED.
(e) AN ENDORSEMENT OF A SECURITY CERTIFICATE
IN BEARER FORM MAY GIVE NOTICE OF AN ADVERSE CLAIM
TO THE CERTIFICATE, BUT IT DOES NOT OTHERWISE
AFFECT A RIGHT TO REGISTRATION THAT THE HOLDER
POSSESSES.
(f) UNLESS OTHERWISE AGREED, A PERSON MAKING
AN ENDORSEMENT ASSUMES ONLY THE OBLIGATIONS
PROVIDED IN SECTION 8 OF THIS ACT AND NOT AN
OBLIGATION THAT THE SECURITY WILL BE HONORED BY
THE ISSUER.
Sec. 31. Section 42a-8-305 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[An act or event that creates a right to
immediate performance of the principal obligation
represented by a certificated security or sets a
date on or after which a certificated security is
to be presented or surrendered for redemption or
exchange does not itself constitute any notice of
adverse claims except in the case of a transfer:
(a) After one year from any date set for
presentment or surrender for redemption or
exchange; or (b) after six months from any date
set for payment of money against presentation or
surrender of the security if funds are available
for payment on that date.]
(a) IF AN INSTRUCTION HAS BEEN ORIGINATED BY
AN APPROPRIATE PERSON BUT IS INCOMPLETE IN ANY
OTHER RESPECT, ANY PERSON MAY COMPLETE IT AS
AUTHORIZED AND THE ISSUER MAY RELY ON IT AS
COMPLETED, EVEN THOUGH IT HAS BEEN COMPLETED
INCORRECTLY.
(b) UNLESS OTHERWISE AGREED, A PERSON
INITIATING AN INSTRUCTION ASSUMES ONLY THE
OBLIGATIONS IMPOSED BY SECTION 8 OF THIS ACT AND
NOT AN OBLIGATION THAT THE SECURITY WILL BE
HONORED BY THE ISSUER.
Sec. 32. Section 42a-8-306 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[(1) A person who presents a certificated
security for registration of transfer or for
payment or exchange warrants to the issuer that he
is entitled to the registration, payment or
exchange. But, a purchaser for value and without
notice of adverse claims who receives a new,
reissued or reregistered certificated security on
registration of transfer or receives an initial
transaction statement confirming the registration
of transfer of an equivalent uncertificated
security to him warrants only that he has no
knowledge of any unauthorized signature in a
necessary endorsement.
(2) A person by transferring a certificated
security to a purchaser for value warrants only
that: (a) His transfer is effective and rightful;
(b) the security is genuine and has not been
materially altered; and (c) he knows of no fact
which might impair the validity of the security.
(3) If a certificated security is delivered
by an intermediary known to be entrusted with
delivery of the security on behalf of another or
with collection of a draft or other claim against
delivery, the intermediary by delivery warrants
only his own good faith and authority, even though
he has purchased or made advances against the
claim to be collected against the delivery.
(4) A pledgee or other holder for security
who redelivers a certificated security received,
or after payment and on order of the debtor
delivers that security to a third person, makes
only the warranties of an intermediary under
subsection (3).
(5) A person who originates an instruction
warrants to the issuer that: (a) He is an
appropriate person to originate the instruction;
and (b) at the time the instruction is presented
to the issuer he will be entitled to the
registration of transfer, pledge or release.
(6) A person who originates an instruction
warrants to any person specially guaranteeing his
signature that: (a) He is an appropriate person to
originate the instruction; and (b) at the time the
instruction is presented to the issuer (i) he will
be entitled to the registration of transfer,
pledge or release; and (ii) the transfer, pledge
or release requested in the instruction will be
registered by the issuer free from all liens,
security interests, restrictions and claims other
than those specified in the instruction.
(7) A person who originates an instruction
warrants to a purchaser for value and to any
person guaranteeing the instruction that: (a) He
is an appropriate person to originate the
instruction; (b) the uncertificated security
referred to therein is valid; and (c) at the time
the instruction is presented to the issuer (i) the
transferor will be entitled to the registration of
transfer, pledge or release; (ii) the transfer,
pledge or release requested in the instruction
will be registered by the issuer free from all
liens, security interests, restrictions and claims
other than those specified in the instruction; and
(iii) the requested transfer, pledge or release
will be rightful.
(8) If a secured party is the registered
pledgee or the registered owner of an
uncertificated security, a person who originates
an instruction of release or transfer to the
debtor or, after payment and on order of the
debtor, a transfer instruction to a third person,
warrants to the debtor or the third person only
that he is an appropriate person to originate the
instruction and at the time the instruction is
presented to the issuer, the transferor will be
entitled to the registration of release or
transfer. If a transfer instruction to a third
person who is a purchaser for value is originated
on order of the debtor, the debtor makes to the
purchaser the warranties of paragraphs (b),
(c)(ii) and (c)(iii) of subsection (7) of this
section.
(9) A person who transfers an uncertificated
security to a purchaser for value and does not
originate an instruction in connection with the
transfer warrants only that: (a) His transfer is
effective and rightful; and (b) the uncertificated
security is valid.
(10) A broker gives to his customer and to
the issuer and a purchaser the applicable
warranties provided in this section and has the
rights and privileges of a purchaser under this
section. The warranties of and in favor of the
broker acting as an agent are in addition to
applicable warranties given by and in favor of his
customer.]
(a) A PERSON WHO GUARANTEES A SIGNATURE OF AN
ENDORSER OF A SECURITY CERTIFICATE WARRANTS THAT
AT THE TIME OF SIGNING:
(1) THE SIGNATURE WAS GENUINE;
(2) THE SIGNER WAS AN APPROPRIATE PERSON TO
ENDORSE, OR IF THE SIGNATURE IS BY AN AGENT, THE
AGENT HAD ACTUAL AUTHORITY TO ACT ON BEHALF OF THE
APPROPRIATE PERSON; AND
(3) THE SIGNER HAD LEGAL CAPACITY TO SIGN.
(b) A PERSON WHO GUARANTEES A SIGNATURE OF
THE ORIGINATOR OF AN INSTRUCTION WARRANTS THAT AT
THE TIME OF SIGNING:
(1) THE SIGNATURE WAS GENUINE;
(2) THE SIGNER WAS AN APPROPRIATE PERSON TO
ORIGINATE THE INSTRUCTION, OR IF THE SIGNATURE IS
BY AN AGENT, THE AGENT HAD ACTUAL AUTHORITY TO ACT
ON BEHALF OF THE APPROPRIATE PERSON, IF THE PERSON
SPECIFIED IN THE INSTRUCTION AS THE REGISTERED
OWNER WAS, IN FACT, THE REGISTERED OWNER, AS TO
WHICH FACT THE SIGNATURE GUARANTOR DOES NOT MAKE A
WARRANTY; AND
(3) THE SIGNER HAD LEGAL CAPACITY TO SIGN.
(c) A PERSON WHO SPECIALLY GUARANTEES THE
SIGNATURE OF AN ORIGINATOR OF AN INSTRUCTION MAKES
THE WARRANTIES OF A SIGNATURE GUARANTOR UNDER
SUBSECTION (b) OF THIS SECTION AND ALSO WARRANTS
THAT AT THE TIME THE INSTRUCTION IS PRESENTED TO
THE ISSUER:
(1) THE PERSON SPECIFIED IN THE INSTRUCTION
AS THE REGISTERED OWNER OF THE UNCERTIFICATED
SECURITY WILL BE THE REGISTERED OWNER; AND
(2) THE TRANSFER OF THE UNCERTIFICATED
SECURITY REQUESTED IN THE INSTRUCTION WILL BE
REGISTERED BY THE ISSUER FREE FROM ALL LIENS,
SECURITY INTERESTS, RESTRICTIONS AND CLAIMS OTHER
THAN THOSE SPECIFIED IN THE INSTRUCTION.
(d) A GUARANTOR UNDER SUBSECTIONS (a) AND (b)
OF THIS SECTION OR A SPECIAL GUARANTOR UNDER
SUBSECTION (c) OF THIS SECTION DOES NOT OTHERWISE
WARRANT THE RIGHTFULNESS OF THE TRANSFER.
(e) A PERSON WHO GUARANTEES AN ENDORSEMENT OF
A SECURITY CERTIFICATE MAKES THE WARRANTIES OF A
SIGNATURE GUARANTOR UNDER SUBSECTION (a) OF THIS
SECTION AND ALSO WARRANTS THE RIGHTFULNESS OF THE
TRANSFER IN ALL RESPECTS.
(f) A PERSON WHO GUARANTEES AN INSTRUCTION
REQUESTING THE TRANSFER OF AN UNCERTIFICATED
SECURITY MAKES THE WARRANTIES OF A SPECIAL
SIGNATURE GUARANTOR UNDER SUBSECTION (c) OF THIS
SECTION AND ALSO WARRANTS THE RIGHTFULNESS OF THE
TRANSFER IN ALL RESPECTS.
(g) AN ISSUER MAY NOT REQUIRE A SPECIAL
GUARANTY OF SIGNATURE, A GUARANTY OF ENDORSEMENT,
OR A GUARANTY OF INSTRUCTION AS A CONDITION TO
REGISTRATION OF TRANSFER.
(h) THE WARRANTIES UNDER THIS SECTION ARE
MADE TO A PERSON TAKING OR DEALING WITH THE
SECURITY IN RELIANCE ON THE GUARANTY, AND THE
GUARANTOR IS LIABLE TO THE PERSON FOR LOSS
RESULTING FROM THEIR BREACH. AN ENDORSER OR
ORIGINATOR OF AN INSTRUCTION WHOSE SIGNATURE,
ENDORSEMENT OR INSTRUCTION HAS BEEN GUARANTEED IS
LIABLE TO A GUARANTOR FOR ANY LOSS SUFFERED BY THE
GUARANTOR AS A RESULT OF BREACH OF THE WARRANTIES
OF THE GUARANTOR.
Sec. 33. Section 42a-8-307 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[If a certificated security in registered
form has been delivered to a purchaser without a
necessary endorsement he may become a bona fide
purchaser only as of the time the endorsement is
supplied; but against the transferor, the transfer
is complete upon delivery and the purchaser has a
specifically enforceable right to have any
necessary endorsement supplied.]
UNLESS OTHERWISE AGREED, THE TRANSFEROR OF A
SECURITY ON DUE DEMAND SHALL SUPPLY THE PURCHASER
WITH PROOF OF AUTHORITY TO TRANSFER OR WITH ANY
OTHER REQUISITE NECESSARY TO OBTAIN REGISTRATION
OF THE TRANSFER OF THE SECURITY, BUT IF THE
TRANSFER IS NOT FOR VALUE, A TRANSFEROR NEED NOT
COMPLY UNLESS THE PURCHASER PAYS THE NECESSARY
EXPENSES. IF THE TRANSFEROR FAILS WITHIN A
REASONABLE TIME TO COMPLY WITH THE DEMAND, THE
PURCHASER MAY REJECT OR RESCIND THE TRANSFER.
Sec. 34. Section 42a-8-401 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[(1) If a certificated security in registered
form is presented to the issuer with a request to
register transfer or an instruction is presented
to the issuer with a request to register transfer,
pledge or release, the issuer shall register the
transfer, pledge or release as requested if: (a)
The security is endorsed or the instruction was
originated by the appropriate person or persons as
provided by section 42a-8-308; (b) reasonable
assurance is given as provided by section
42a-8-402 that those endorsements are genuine and
effective; (c) the issuer has no duty as to
adverse claims or has discharged the duty as
provided by section 42a-8-403; (d) any applicable
law relating to the collection of taxes has been
complied with; and (e) the transfer is in fact
rightful or is to a bona fide purchaser.
(2) If an issuer is under a duty to register
a transfer, pledge or release of a security, the
issuer is also liable to the person presenting a
certificated security or an instruction for
registration or his principal for loss resulting
from any unreasonable delay in registration or
from failure or refusal to register the transfer,
pledge or release.]
(a) IF A CERTIFICATED SECURITY IN REGISTERED
FORM IS PRESENTED TO AN ISSUER WITH A REQUEST TO
REGISTER TRANSFER OR AN INSTRUCTION IS PRESENTED
TO AN ISSUER WITH A REQUEST TO REGISTER TRANSFER
OF AN UNCERTIFICATED SECURITY, THE ISSUER SHALL
REGISTER THE TRANSFER AS REQUESTED IF:
(1) UNDER THE TERMS OF THE SECURITY THE
PERSON SEEKING REGISTRATION OF TRANSFER IS
ELIGIBLE TO HAVE THE SECURITY REGISTERED IN ITS
NAME;
(2) THE ENDORSEMENT OR INSTRUCTION IS MADE BY
THE APPROPRIATE PERSON OR BY AN AGENT WHO HAS
ACTUAL AUTHORITY TO ACT ON BEHALF OF THE
APPROPRIATE PERSON;
(3) REASONABLE ASSURANCE IS GIVEN THAT THE
ENDORSEMENT OR INSTRUCTION IS GENUINE AND
AUTHORIZED (SECTION 42a-8-402);
(4) ANY APPLICABLE LAW RELATING TO THE
COLLECTION OF TAXES HAS BEEN COMPLIED WITH;
(5) THE TRANSFER DOES NOT VIOLATE ANY
RESTRICTION ON TRANSFER IMPOSED BY THE ISSUER IN
ACCORDANCE WITH SECTION 42a-8-204;
(6) A DEMAND THAT THE ISSUER NOT REGISTER
TRANSFER HAS NOT BECOME EFFECTIVE UNDER SECTION
42a-8-403, OR THE ISSUER HAS COMPLIED WITH
SUBSECTION (b) OF SECTION 42a-8-403 BUT NO LEGAL
PROCESS OR INDEMNITY BOND IS OBTAINED AS PROVIDED
IN SUBSECTION (d) OF SECTION 42a-8-403; AND
(7) THE TRANSFER IS IN FACT RIGHTFUL OR IS TO
A PROTECTED PURCHASER.
(b) IF AN ISSUER IS UNDER A DUTY TO REGISTER
A TRANSFER OF A SECURITY, THE ISSUER IS LIABLE TO
A PERSON PRESENTING A CERTIFICATED SECURITY OR AN
INSTRUCTION FOR REGISTRATION OR TO THE PERSON'S
PRINCIPAL FOR LOSS RESULTING FROM UNREASONABLE
DELAY IN REGISTRATION OR FAILURE OR REFUSAL TO
REGISTER THE TRANSFER.
Sec. 35. Section 42a-8-402 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[(1) The issuer may require the following
assurance that each necessary endorsement of a
certificated security or each instruction, as
provided for in section 42a-8-308, is genuine and
effective: (a) In all cases, a guarantee of the
signature, as provided for in subsection (1) or
(2) of section 42a-8-312, of the person endorsing
a certificated security or originating an
instruction including, in the case of an
instruction, a warranty of the taxpayer
identification number or, in the absence thereof,
other reasonable assurance of identity; (b) if the
endorsement is made or the instruction is
originated by an agent, appropriate assurance of
authority to sign; (c) if the endorsement is made
or the instruction is originated by a fiduciary,
appropriate evidence of appointment or incumbency;
(d) if there is more than one fiduciary,
reasonable assurance that all who are required to
sign have done so; and (e) if the endorsement is
made or the instruction is originated by a person
not covered by any of the foregoing, assurance
appropriate to the case corresponding as nearly as
may be to the foregoing.
(2) A "guarantee of the signature" in
subsection (1) means a guarantee signed by or on
behalf of a person reasonably believed by the
issuer to be responsible. The issuer may adopt
standards with respect to responsibility if they
are not manifestly unreasonable.
(3) "Appropriate evidence of appointment or
incumbency" in subsection (1) means: (a) In the
case of fiduciary appointed or qualified by a
court, a certificate issued by or under the
direction or supervision of that court or an
officer thereof and dated within sixty days before
the date of presentation for transfer, pledge or
release; or (b) in any other case, a copy of a
document showing the appointment or a certificate
issued by or on behalf of a person reasonably
believed by the issuer to be responsible or, in
the absence of that document or certificate, other
evidence reasonably deemed by the issuer to be
appropriate. The issuer may adopt standards with
respect to the evidence if they are not manifestly
unreasonable. The issuer is not charged with
notice of the contents of any document obtained
pursuant to this paragraph (b) except to the
extent that the contents relate directly to the
appointment or incumbency.
(4) The issuer may elect to require
reasonable assurance beyond that specified in this
section, but if it does so and, for a purpose
other than that specified in subdivision (b) of
subsection (3) of this section, both requires and
obtains a copy of a will, trust, indenture,
articles of copartnership, bylaws or other
controlling instrument, it is charged with notice
of all matters contained therein affecting the
transfer, pledge or release.]
(a) AN ISSUER MAY REQUIRE THE FOLLOWING
ASSURANCE THAT EACH NECESSARY ENDORSEMENT OR EACH
INSTRUCTION IS GENUINE AND AUTHORIZED:
(1) IN ALL CASES, A GUARANTY OF THE SIGNATURE
OF THE PERSON MAKING AN ENDORSEMENT OR ORIGINATING
AN INSTRUCTION INCLUDING, IN THE CASE OF AN
INSTRUCTION, REASONABLE ASSURANCE OF IDENTITY;
(2) IF THE ENDORSEMENT IS MADE OR THE
INSTRUCTION IS ORIGINATED BY AN AGENT, APPROPRIATE
ASSURANCE OF ACTUAL AUTHORITY TO SIGN;
(3) IF THE ENDORSEMENT IS MADE OR THE
INSTRUCTION IS ORIGINATED BY A FIDUCIARY PURSUANT
TO SUBDIVISION (4) OR (5) OF SUBSECTION (a) OF
SECTION 42a-8-107, APPROPRIATE EVIDENCE OF
APPOINTMENT OR INCUMBENCY;
(4) IF THERE IS MORE THAN ONE FIDUCIARY,
REASONABLE ASSURANCE THAT ALL WHO ARE REQUIRED TO
SIGN HAVE DONE SO; AND
(5) IF THE ENDORSEMENT IS MADE OR THE
INSTRUCTION IS ORIGINATED BY A PERSON NOT COVERED
BY ANOTHER PROVISION OF THIS SUBSECTION, ASSURANCE
APPROPRIATE TO THE CASE CORRESPONDING AS NEARLY AS
MAY BE TO THE PROVISIONS OF THIS SUBSECTION.
(b) AN ISSUER MAY ELECT TO REQUIRE REASONABLE
ASSURANCE BEYOND THAT SPECIFIED IN THIS SECTION.
(c) IN THIS SECTION:
(1) "GUARANTY OF THE SIGNATURE" MEANS A
GUARANTY SIGNED BY OR ON BEHALF OF A PERSON
REASONABLY BELIEVED BY THE ISSUER TO BE
RESPONSIBLE. AN ISSUER MAY ADOPT STANDARDS WITH
RESPECT TO RESPONSIBILITY IF THEY ARE NOT
MANIFESTLY UNREASONABLE.
(2) "APPROPRIATE EVIDENCE OF APPOINTMENT OR
INCUMBENCY" MEANS:
(i) IN THE CASE OF A FIDUCIARY APPOINTED OR
QUALIFIED BY A COURT, A CERTIFICATE ISSUED BY OR
UNDER THE DIRECTION OR SUPERVISION OF THE COURT OR
AN OFFICER THEREOF AND DATED WITHIN SIXTY DAYS
BEFORE THE DATE OF PRESENTATION FOR TRANSFER; OR
(ii) IN ANY OTHER CASE, A COPY OF A DOCUMENT
SHOWING THE APPOINTMENT OR A CERTIFICATE ISSUED BY
OR ON BEHALF OF A PERSON REASONABLY BELIEVED BY AN
ISSUER TO BE RESPONSIBLE OR, IN THE ABSENCE OF
THAT DOCUMENT OR CERTIFICATE, OTHER EVIDENCE THE
ISSUER REASONABLY CONSIDERS APPROPRIATE.
Sec. 36. Section 42a-8-403 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[(1) An issuer to whom a certificated
security is presented for registration shall
inquire into adverse claims if: (a) A written
notification of an adverse claim is received at a
time and in a manner affording the issuer a
reasonable opportunity to act on it prior to the
issuance of a new, reissued or reregistered
certificated security, and the notification
identifies the claimant, the registered owner and
the issue of which the security is a part, and
provides an address for communications directed to
the claimant; or (b) the issuer is charged with
notice of an adverse claim from a controlling
instrument it has elected to require under
subsection (4) of section 42a-8-402.
(2) The issuer may discharge any duty of
inquiry by any reasonable means, including
notifying an adverse claimant by registered mail
or by certified mail receipted for on mailing at
the address furnished by him or, if there be no
such address, at his residence or regular place of
business that the certificated security has been
presented for registration of transfer by a named
person, and that the transfer will be registered
unless within thirty days from the date of mailing
the notification, either: (a) An appropriate
restraining order, injunction or other process
issues from a court of competent jurisdiction; or
(b) there is filed with the issuer an indemnity
bond, sufficient in the issuer's judgment to
protect the issuer and any transfer agent,
registrar or other agent of the issuer involved
from any loss it or they may suffer by complying
with the adverse claim.
(3) Unless an issuer is charged with notice
of an adverse claim from a controlling instrument
which it has elected to require under subsection
(4) of section 42a-8-402 or receives notification
of an adverse claim under subsection (1) of this
section, if a certificated security presented for
registration is endorsed by the appropriate person
or persons the issuer is under no duty to inquire
into adverse claims. In particular: (a) An issuer
registering a certificated security in the name of
a person who is a fiduciary or who is described as
a fiduciary is not bound to inquire into the
existence, extent, or correct description of the
fiduciary relationship; and thereafter the issuer
may assume without inquiry that the newly
registered owner continues to be the fiduciary
until the issuer receives written notice that the
fiduciary is no longer acting as such with respect
to the particular security; (b) an issuer
registering transfer on an endorsement by a
fiduciary is not bound to inquire whether the
transfer is made in compliance with a controlling
instrument or with the law of the state having
jurisdiction of the fiduciary relationship,
including any law requiring the fiduciary to
obtain court approval of the transfer; and (c) the
issuer is not charged with notice of the contents
of any court record or file or other recorded or
unrecorded document even though the document is in
its possession and even though the transfer is
made on the endorsement of a fiduciary to the
fiduciary himself or to his nominee.
(4) An issuer is under no duty as to adverse
claims with respect to an uncertificated security
except: (a) Claims embodied in a restraining
order, injunction or other legal process served
upon the issuer if the process was served at a
time and in a manner affording the issuer a
reasonable opportunity to act on it in accordance
with the requirements of subsection (5); (b)
claims of which the issuer has received a written
notification from the registered owner or the
registered pledgee if the notification was
received at a time and in a manner affording the
issuer a reasonable opportunity to act on it in
accordance with the requirements of subsection
(5); (c) claims, including restrictions on
transfer not imposed by the issuer, to which the
registration of transfer to the present registered
owner was subject and were so noted in the initial
transaction statement sent to him; and (d) claims
as to which an issuer is charged with notice from
a controlling instrument it has elected to require
under subsection (4) of section 42a-8-402.
(5) If the issuer of an uncertificated
security is under a duty as to an adverse claim,
he discharges that duty by: (a) Including a
notation of the claim in any statements sent with
respect to the security under subsections (3), (6)
and (7) of section 42a-8-408; and (b) refusing to
register the transfer or pledge of the security
unless the nature of the claim does not preclude
transfer or pledge subject thereto.
(6) If the transfer or pledge of the security
is registered subject to an adverse claim, a
notation of the claim must be included in the
initial transaction statement and all subsequent
statements sent to the transferee and pledgee
under section 42a-8-408.
(7) Notwithstanding subsections (4) and (5),
if an uncertificated security was subject to a
registered pledge at the time the issuer first
came under a duty as to a particular adverse
claim, the issuer has no duty as to that claim if
transfer of the security is requested by the
registered pledgee or an appropriate person acting
for the registered pledgee unless: (a) The claim
was embodied in legal process which expressly
provides otherwise; (b) the claim was asserted in
a written notification from the registered
pledgee; (c) the claim was one as to which the
issuer was charged with notice from a controlling
instrument it required under subsection (4) of
section 42a-8-402 in connection with the pledgee's
request for transfer; or (d) the transfer
requested is to the registered owner.]
(a) A PERSON WHO IS AN APPROPRIATE PERSON TO
MAKE AN ENDORSEMENT OR ORIGINATE AN INSTRUCTION
MAY DEMAND THAT THE ISSUER NOT REGISTER TRANSFER
OF A SECURITY BY COMMUNICATING TO THE ISSUER A
NOTIFICATION THAT IDENTIFIES THE REGISTERED OWNER
AND THE ISSUE OF WHICH THE SECURITY IS A PART AND
PROVIDES AN ADDRESS FOR COMMUNICATIONS DIRECTED TO
THE PERSON MAKING THE DEMAND. THE DEMAND IS
EFFECTIVE ONLY IF IT IS RECEIVED BY THE ISSUER AT
A TIME AND IN A MANNER AFFORDING THE ISSUER
REASONABLE OPPORTUNITY TO ACT ON IT.
(b) IF A CERTIFICATED SECURITY IN REGISTERED
FORM IS PRESENTED TO AN ISSUER WITH A REQUEST TO
REGISTER TRANSFER OR AN INSTRUCTION IS PRESENTED
TO AN ISSUER WITH A REQUEST TO REGISTER TRANSFER
OF AN UNCERTIFICATED SECURITY AFTER DEMAND THAT
THE ISSUER NOT REGISTER A TRANSFER HAS BECOME
EFFECTIVE, THE ISSUER SHALL PROMPTLY COMMUNICATE
TO THE PERSON WHO INITIATED THE DEMAND AT THE
ADDRESS PROVIDED IN THE DEMAND AND THE PERSON WHO
PRESENTED THE SECURITY FOR REGISTRATION OF
TRANSFER OR INITIATED THE INSTRUCTION REQUESTING
REGISTRATION OF TRANSFER A NOTIFICATION STATING
THAT:
(1) THE CERTIFICATED SECURITY HAS BEEN
PRESENTED FOR REGISTRATION OF TRANSFER OR THE
INSTRUCTION FOR REGISTRATION OF TRANSFER OF THE
UNCERTIFICATED SECURITY HAS BEEN RECEIVED;
(2) A DEMAND THAT THE ISSUER NOT REGISTER
TRANSFER HAD PREVIOUSLY BEEN RECEIVED; AND
(3) THE ISSUER WILL WITHHOLD REGISTRATION OF
TRANSFER FOR A PERIOD OF TIME STATED IN THE
NOTIFICATION IN ORDER TO PROVIDE THE PERSON WHO
INITIATED THE DEMAND AN OPPORTUNITY TO OBTAIN
LEGAL PROCESS OR AN INDEMNITY BOND.
(c) THE PERIOD DESCRIBED IN SUBDIVISION (3)
OF SUBSECTION (b) OF THIS SECTION MAY NOT EXCEED
THIRTY DAYS AFTER THE DATE OF COMMUNICATION OF THE
NOTIFICATION. A SHORTER PERIOD MAY BE SPECIFIED BY
THE ISSUER IF IT IS NOT MANIFESTLY UNREASONABLE.
(d) AN ISSUER IS NOT LIABLE TO A PERSON WHO
INITIATED A DEMAND THAT THE ISSUER NOT REGISTER
TRANSFER FOR ANY LOSS THE PERSON SUFFERS AS A
RESULT OF REGISTRATION OF A TRANSFER PURSUANT TO
AN EFFECTIVE ENDORSEMENT OR INSTRUCTION IF THE
PERSON WHO INITIATED THE DEMAND DOES NOT, WITHIN
THE TIME STATED IN THE ISSUER'S COMMUNICATION,
EITHER:
(1) OBTAIN AN APPROPRIATE RESTRAINING ORDER,
INJUNCTION OR OTHER PROCESS FROM A COURT OF
COMPETENT JURISDICTION ENJOINING THE ISSUER FROM
REGISTERING THE TRANSFER; OR
(2) FILE WITH THE ISSUER AN INDEMNITY BOND,
SUFFICIENT IN THE ISSUER'S JUDGMENT TO PROTECT THE
ISSUER AND ANY TRANSFER AGENT, REGISTRAR OR OTHER
AGENT OF THE ISSUER INVOLVED FROM ANY LOSS IT OR
THEY MAY SUFFER BY REFUSING TO REGISTER THE
TRANSFER.
(e) THIS SECTION DOES NOT RELIEVE AN ISSUER
FROM LIABILITY FOR REGISTERING TRANSFER PURSUANT
TO AN ENDORSEMENT OR INSTRUCTION THAT WAS NOT
EFFECTIVE.
Sec. 37. Section 42a-8-404 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[(1) Except as provided in any law relating
to the collection of taxes, the issuer is not
liable to the owner, pledgee or any other person
suffering loss as a result of the registration of
a transfer, pledge or release of a security if:
(a) There were on or with a certificated security
the necessary endorsements or the issuer had
received an instruction originated by an
appropriate person as provided by section
42a-8-308; and (b) the issuer had no duty as to
adverse claims or has discharged the duty as
provided by section 42a-8-403.
(2) If an issuer has registered a transfer of
a certificated security to a person not entitled
to it, the issuer on demand shall deliver a like
security to the true owner unless: (a) The
registration was pursuant to subsection (1); (b)
the owner is precluded from asserting any claim
for registering the transfer under subsection (1)
of section 42a-8-405; or (c) the delivery would
result in overissue, in which case the issuer's
liability is governed by section 42a-8-104.
(3) If an issuer has improperly registered a
transfer, pledge or release of an uncertificated
security, the issuer on demand from the injured
party shall restore the records as to the injured
party to the condition that would have obtained if
the improper registration had not been made
unless: (a) The registration was pursuant to
subsection (1); or (b) the registration would
result in overissue, in which case the issuer's
liability is governed by section 42a-8-104.]
(a) EXCEPT AS OTHERWISE PROVIDED IN SECTION
42a-8-406, AN ISSUER IS LIABLE FOR WRONGFUL
REGISTRATION OF TRANSFER IF THE ISSUER HAS
REGISTERED A TRANSFER OF A SECURITY TO A PERSON
NOT ENTITLED TO IT, AND THE TRANSFER WAS
REGISTERED:
(1) PURSUANT TO AN INEFFECTIVE ENDORSEMENT OR
INSTRUCTION;
(2) AFTER A DEMAND THAT THE ISSUER NOT
REGISTER TRANSFER BECAME EFFECTIVE UNDER
SUBSECTION (a) OF SECTION 42a-8-403 AND THE ISSUER
DID NOT COMPLY WITH SUBSECTION (b) OF SECTION
42a-8-403;
(3) AFTER THE ISSUER HAD BEEN SERVED WITH AN
INJUNCTION, RESTRAINING ORDER OR OTHER LEGAL
PROCESS ENJOINING IT FROM REGISTERING THE
TRANSFER, ISSUED BY A COURT OF COMPETENT
JURISDICTION, AND THE ISSUER HAD A REASONABLE
OPPORTUNITY TO ACT ON THE INJUNCTION, RESTRAINING
ORDER OR OTHER LEGAL PROCESS; OR
(4) BY AN ISSUER ACTING IN COLLUSION WITH THE
WRONGDOER.
(b) AN ISSUER THAT IS LIABLE FOR WRONGFUL
REGISTRATION OF TRANSFER UNDER SUBSECTION (a) OF
THIS SECTION ON DEMAND SHALL PROVIDE THE PERSON
ENTITLED TO THE SECURITY WITH A LIKE CERTIFICATED
OR UNCERTIFICATED SECURITY, AND ANY PAYMENTS OR
DISTRIBUTIONS THAT THE PERSON DID NOT RECEIVE AS A
RESULT OF THE WRONGFUL REGISTRATION. IF AN
OVERISSUE WOULD RESULT, THE ISSUER'S LIABILITY TO
PROVIDE THE PERSON WITH A LIKE SECURITY IS
GOVERNED BY SECTION 26 OF THIS ACT.
(c) EXCEPT AS OTHERWISE PROVIDED IN
SUBSECTION (a) OF THIS SECTION OR IN A LAW
RELATING TO THE COLLECTION OF TAXES, AN ISSUER IS
NOT LIABLE TO AN OWNER OR OTHER PERSON SUFFERING
LOSS AS A RESULT OF THE REGISTRATION OF A TRANSFER
OF A SECURITY IF REGISTRATION WAS MADE PURSUANT TO
AN EFFECTIVE ENDORSEMENT OR INSTRUCTION.
Sec. 38. Section 42a-8-405 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[(1) If a certificated security has been
lost, apparently destroyed, or wrongfully taken,
and the owner fails to notify the issuer of that
fact within a reasonable time after he has notice
of it and the issuer registers a transfer of the
security before receiving notification, the owner
is precluded from asserting against the issuer any
claim for registering the transfer under section
42a-8-404 or any claim to a new security under
this section.
(2) If the owner of a certificated security
claims that the security has been lost, destroyed
or wrongfully taken, the issuer shall issue a new
certificated security or, at the option of the
issuer, an equivalent uncertificated security in
place of the original security if the owner: (a)
So requests before the issuer has notice that the
security has been acquired by a bona fide
purchaser; (b) files with the issuer a sufficient
indemnity bond; and (c) satisfies any other
reasonable requirements imposed by the issuer.
(3) If, after the issue of a new certificated
or uncertificated security, a bona fide purchaser
of the original certificated security presents it
for registration of transfer, the issuer shall
register the transfer unless registration would
result in overissue, in which event the issuer's
liability is governed by section 42a-8-104. In
addition to any rights on the indemnity bond, the
issuer may recover the new certificated security
from the person to whom it was issued or any
person taking under him except a bona fide
purchaser or may cancel the uncertificated
security unless a bona fide purchaser or any
person taking under a bona fide purchaser is then
the registered owner or registered pledgee
thereof.]
(a) IF AN OWNER OF A CERTIFICATED SECURITY,
WHETHER IN REGISTERED OR BEARER FORM, CLAIMS THAT
THE CERTIFICATE HAS BEEN LOST, DESTROYED OR
WRONGFULLY TAKEN, THE ISSUER SHALL ISSUE A NEW
CERTIFICATE IF THE OWNER:
(1) SO REQUESTS BEFORE THE ISSUER HAS NOTICE
THAT THE CERTIFICATE HAS BEEN ACQUIRED BY A
PROTECTED PURCHASER;
(2) FILES WITH THE ISSUER A SUFFICIENT
INDEMNITY BOND; AND
(3) SATISFIES OTHER REASONABLE REQUIREMENTS
IMPOSED BY THE ISSUER.
(b) IF, AFTER THE ISSUE OF A NEW SECURITY
CERTIFICATE, A PROTECTED PURCHASER OF THE ORIGINAL
CERTIFICATE PRESENTS IT FOR REGISTRATION OF
TRANSFER, THE ISSUER SHALL REGISTER THE TRANSFER
UNLESS AN OVERISSUE WOULD RESULT. IN THAT CASE,
THE ISSUER'S LIABILITY IS GOVERNED BY SECTION 26
OF THIS ACT. IN ADDITION TO ANY RIGHTS ON THE
INDEMNITY BOND, AN ISSUER MAY RECOVER THE NEW
CERTIFICATE FROM A PERSON TO WHOM IT WAS ISSUED OR
ANY PERSON TAKING UNDER THAT PERSON, EXCEPT A
PROTECTED PURCHASER.
Sec. 39. Section 42a-8-406 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[(1) If a person acts as authenticating
trustee, transfer agent, registrar, or other agent
for an issuer in the registration of transfers of
its certificated securities or in the registration
of transfers, pledges and releases of its
uncertificated securities, in the issue of new
securities or in the cancellation of surrendered
securities: (a) He is under a duty to the issuer
to exercise good faith and due diligence in
performing his functions; and (b) with regard to
the particular functions he performs, he has the
same obligation to the holder or owner of a
certificated security or to the owner or pledgee
of an uncertificated security and has the same
rights and privileges as the issuer has in regard
to those functions.
(2) Notice to an authenticating trustee,
transfer agent, registrar or other agent is notice
to the issuer with respect to the functions
performed by the agent.]
IF A SECURITY CERTIFICATE HAS BEEN LOST,
APPARENTLY DESTROYED, OR WRONGFULLY TAKEN, AND THE
OWNER FAILS TO NOTIFY THE ISSUER OF THAT FACT
WITHIN A REASONABLE TIME AFTER THE OWNER HAS
NOTICE OF IT AND THE ISSUER REGISTERS A TRANSFER
OF THE SECURITY BEFORE RECEIVING NOTIFICATION, THE
OWNER MAY NOT ASSERT AGAINST THE ISSUER A CLAIM
FOR REGISTERING THE TRANSFER UNDER SECTION
42a-8-404, AS AMENDED BY SECTION 37 OF THIS ACT,
OR A CLAIM TO A NEW SECURITY CERTIFICATE UNDER
SECTION 42a-8-405, AS AMENDED BY SECTION 38 OF
THIS ACT.
Sec. 40. Section 42a-8-407 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[(1) No issuer is subject to the requirements
of this section unless it regularly maintains a
system for issuing the class of securities
involved under which both certificated and
uncertificated securities are regularly issued to
the category of owners, which includes the person
in whose name the new security is to be
registered.
(2) Upon surrender of a certificated security
with all necessary endorsements and presentation
of a written request by the person surrendering
the security, the issuer, if he has no duty as to
adverse claims or has discharged the duty,
pursuant to section 42a-8-403, shall issue to the
person or a person designated by him an equivalent
uncertificated security subject to all liens,
restrictions and claims that were noted on the
certificated security.
(3) Upon receipt of a transfer instruction
originated by an appropriate person who so
requests, the issuer of an uncertificated security
shall cancel the uncertificated security and issue
an equivalent certificated security on which must
be noted conspicuously any liens and restrictions
of the issuer and any adverse claims, as to which
the issuer has a duty under subsection (4) of
section 42a-8-403 to which the uncertificated
security was subject. The certificated security
shall be registered in the name of and delivered
to: (a) The registered owner, if the
uncertificated security was not subject to a
registered pledge; or (b) the registered pledgee,
if the uncertificated security was subject to a
registered pledge.]
A PERSON ACTING AS AUTHENTICATING TRUSTEE, A
TRANSFER AGENT, REGISTRAR OR OTHER AGENT FOR AN
ISSUER IN THE REGISTRATION OF TRANSFER OF ITS
SECURITIES, IN THE ISSUE OF NEW SECURITY
CERTIFICATES OR UNCERTIFICATED SECURITIES, OR IN
THE CANCELLATION OF SURRENDERED SECURITY
CERTIFICATES HAS THE SAME OBLIGATION TO THE HOLDER
OR OWNER OF A CERTIFICATED OR UNCERTIFICATED
SECURITY WITH REGARD TO THE PARTICULAR FUNCTIONS
PERFORMED AS THE ISSUER HAS IN REGARD TO THOSE
FUNCTIONS.
Sec. 41. (NEW) (a) "Securities account" means
an account to which a financial asset is or may be
credited in accordance with an agreement under
which the person maintaining the account
undertakes to treat the person for whom the
account is maintained as entitled to exercise the
rights that comprise the financial asset.
(b) Except as otherwise provided in
subsections (d) and (e) of this section, a person
acquires a security entitlement if a securities
intermediary:
(1) Indicates by book entry that a financial
asset has been credited to the person's securities
account;
(2) Receives a financial asset from the
person or acquires a financial asset for the
person and, in either case, accepts it for credit
to the person's securities account; or
(3) Becomes obligated under other law,
regulation or rule to credit a financial asset to
the person's securities account.
(c) If a condition of subsection (b) of this
section has been met, a person has a security
entitlement even though the securities
intermediary does not itself hold the financial
asset.
(d) If a securities intermediary holds a
financial asset for another person, and the
financial asset is registered in the name of,
payable to the order of, or specially endorsed to
the other person, and has not been endorsed to the
securities intermediary or in blank, the other
person is treated as holding the financial asset
directly rather than as having a security
entitlement with respect to the financial asset.
(e) Issuance of a security is not
establishment of a security entitlement.
Sec. 42. (NEW) An action based on an adverse
claim to a financial asset, whether framed in
conversion, replevin, constructive trust,
equitable lien or other theory, may not be
asserted against a person who acquires a security
entitlement under section 41 of this act for value
and without notice of the adverse claim.
Sec. 43. (NEW) (a) To the extent necessary
for a securities intermediary to satisfy all
security by entitlements with respect to a
particular financial asset, all interests in that
financial asset held by the securities
intermediary are held by the securities
intermediary for the entitlement holders, are not
property of the securities intermediary, and are
not subject to claims of creditors of the
securities intermediary.
(b) An entitlement holder's property interest
with respect to a particular financial asset under
subsection (a) of this section is a pro rata
property interest in all interests in that
financial asset held by the securities
intermediary, without regard to the time the
entitlement holder acquired the security
entitlement or the time the securities
intermediary acquired the interest in that
financial asset.
(c) An entitlement holder's property interest
with respect to a particular financial asset under
subsection (a) of this section may be enforced
against the securities intermediary only by
exercise of the entitlement holder's rights under
sections 45 to 48, inclusive, of this act.
(d) An entitlement holder's property interest
with respect to a particular financial asset under
subsection (a) of this section may be enforced
against a purchaser of the financial asset or
interest therein only if:
(1) Insolvency proceedings have been
initiated by or against the securities
intermediary;
(2) The securities intermediary does not have
sufficient interests in the financial asset to
satisfy the security entitlements of all of its
entitlement holders to that financial asset;
(3) The securities intermediary violated its
obligations under section 44 of this act
transferring the financial asset or interest
therein to the purchaser; and
(4) The purchaser is not protected under
subsection (e) of this section. The trustee or
other liquidator, acting on behalf of all
entitlement holders having security entitlements
with respect to a particular financial asset, may
recover the financial asset, or interest therein,
from the purchaser. If the trustee or other
liquidator elects not to pursue that right, an
entitlement holder whose security entitlement
remains unsatisfied has the right to recover its
interest in the financial asset from the
purchaser.
(e) An action based on the entitlement
holder's property interest with respect to a
particular financial asset under subsection (a) of
this section, whether framed in conversion,
replevin, constructive trust, equitable lien or
other theory, may not be asserted against any
buyer of a financial asset or interest therein who
gives value and does not act in collusion with the
securities intermediary in violating the
securities intermediary's obligations under
section 44 of this act.
Sec. 44. (NEW) (a) A securities intermediary
shall promptly obtain and thereafter maintain a
financial asset in a quantity corresponding to the
aggregate of all security entitlements it has
established in favor of its entitlement holders
with respect to that financial asset. The
securities intermediary may maintain those
financial assets directly or through one or more
other securities intermediaries.
(b) Except to the extent otherwise agreed by
its entitlement holder, a securities intermediary
may not grant any security interests in a
financial asset it is obligated to maintain
pursuant to subsection (a) of this section.
(c) A securities intermediary satisfies the
duty in subsection (a) of this section if:
(1) The securities intermediary acts with
respect to the duty as agreed upon by the
entitlement holder and the securities
intermediary; or
(2) In the absence of agreement, the
securities intermediary exercises due care in
accordance with reasonable commercial standards to
obtain and maintain the financial asset.
(d) This section does not apply to a clearing
corporation that is itself the obligor of an
option or similar obligation to which its
entitlement holders have security entitlements.
Sec. 45. (NEW) (a) A securities intermediary
shall take action to obtain a payment or
distribution made by the issuer of a financial
asset. A securities intermediary satisfies the
duty if:
(1) The securities intermediary acts with
respect to the duty as agreed upon by the
entitlement holder and the securities
intermediary; or
(2) In the absence of agreement, the
securities intermediary exercises due care in
accordance with reasonable commercial standards to
attempt to obtain the payment or distribution.
(b) A securities intermediary is obligated to
its entitlement holder for a payment or
distribution made by the issuer of a financial
asset if the payment or distribution is received
by the securities intermediary.
Sec. 46. (NEW) A securities intermediary
shall exercise rights with respect to a financial
asset if directed to do so by an entitlement
holder. A securities intermediary satisfies the
duty if:
(1) The securities intermediary acts with
respect to the duty as agreed upon by the
entitlement holder and the securities
intermediary; or
(2) In the absence of agreement, the
securities intermediary either places the
entitlement holder in a position to exercise the
rights directly or exercises due care in
accordance with reasonable commercial standards to
follow the direction of the entitlement holder.
Sec. 47. (NEW) (a) A securities intermediary
shall comply with an entitlement order if the
entitlement order is originated by the appropriate
person, the securities intermediary has had
reasonable opportunity to assure itself that the
entitlement order is genuine and authorized, and
the securities intermediary has had reasonable
opportunity to comply with the entitlement order.
A securities intermediary satisfies the duty if:
(1) The securities intermediary acts with
respect to the duty as agreed upon by the
entitlement holder and the securities
intermediary; or
(2) In the absence of agreement, the
securities intermediary exercises due care in
accordance with reasonable commercial standards to
comply with the entitlement order.
(b) If a securities intermediary transfers a
financial asset pursuant to an ineffective
entitlement order, the securities intermediary
shall reestablish a security entitlement in favor
of the person entitled to it, and pay or credit
any payments or distributions that the person did
not receive as a result of the wrongful transfer.
If the securities intermediary does not
reestablish a security entitlement, the securities
intermediary is liable to the entitlement holder
for damages.
Sec. 48. (NEW) A securities intermediary
shall act at the direction of an entitlement
holder to change a security entitlement into
another available form of holding for which the
entitlement holder is eligible, or to cause the
financial asset to be transferred to a securities
account of the entitlement holder with another
securities intermediary. A securities intermediary
satisfies the duty if:
(1) The securities intermediary acts as
agreed upon by the entitlement holder and the
securities intermediary; or
(2) In the absence of agreement, the
securities intermediary exercises due care in
accordance with reasonable commercial standards to
follow the direction of the entitlement holder.
Sec. 49. (NEW) (a) If the substance of a duty
imposed upon a securities intermediary by sections
44 to 48, inclusive, of this act is the subject of
other statute, regulation or rule, compliance with
that statute, regulation or rule satisfies the
duty.
(b) To the extent that specific standards for
the performance of the duties of a securities
intermediary or the exercise of the rights of an
entitlement holder are not specified by other
statute, regulation or rule or by agreement
between the securities intermediary and
entitlement holder, the securities intermediary
shall perform its duties and the entitlement
holder shall exercise its rights in a commercially
reasonable manner.
(c) The obligation of a securities
intermediary to perform the duties imposed by
sections 44 to 48, inclusive, of this act is
subject to:
(1) Rights of the securities intermediary
arising out of a security interest under a
security agreement with the entitlement holder or
otherwise; and
(2) Rights of the securities intermediary
under other law, regulation, rule or agreement to
withhold performance of its duties as a result of
unfulfilled obligations of the entitlement holder
to the securities intermediary.
(d) Sections 44 to 48, inclusive, of this act
do not require a securities intermediary to take
any action that is prohibited by other statute,
regulation or rule.
Sec. 50. (NEW) (a) An action based on an
adverse claim to a financial asset or security
entitlement, whether framed in conversion,
replevin, constructive trust, equitable lien or
other theory, may not be asserted against a person
who buys a security entitlement, or an interest
therein, from an entitlement holder if the
purchaser gives value, does not have notice of the
adverse claim, and obtains control.
(b) If an adverse claim could not have been
asserted against an entitlement holder under
section 42 of this act, the adverse claim cannot
be asserted against a person who purchases a
security entitlement, or an interest therein, from
the entitlement holder.
(c) In a case not covered by the priority
rules in article 9, a purchaser for value of a
security entitlement, or an interest therein, who
obtains control has priority over a purchaser of a
security entitlement, or an interest therein, who
does not obtain control. Purchasers who have
control rank equally, except that a securities
intermediary as purchaser has priority over a
conflicting purchaser who has control unless
otherwise agreed by the securities intermediary.
Sec. 51. (NEW) (a) Except as otherwise
provided in subsection (b) of this section, if a
securities intermediary does not have sufficient
interests in a particular financial asset to
satisfy both its obligations to entitlement
holders who have security entitlements to that
financial asset and its obligation to a creditor
of the securities intermediary who has a security
interest in that financial asset, the claims of
entitlement holders, other than the creditor, have
priority over the claim of the creditor.
(b) If a clearing corporation does not have
sufficient financial assets to satisfy both its
obligations to entitlement holders who have
security entitlements with respect to a financial
asset and its obligation to a creditor of the
clearing corporation who has a security interest
in that financial asset, the claim of the creditor
has priority over the claims of entitlement
holders.
Sec. 52. Subsection (6) of section 42a-9-103a
of the general statutes is repealed and the
following is substituted in lieu thereof:
[(6) The law, including conflict of laws
rules, of the jurisdiction of organization of the
issuer governs the perfection and the effect of
perfection or nonperfection of a security interest
in uncertificated securities.]
(6) (a) THIS SUBSECTION APPLIES TO INVESTMENT
PROPERTY.
(b) EXCEPT AS OTHERWISE PROVIDED IN
SUBDIVISION (f) OF THIS SUBSECTION, DURING THE
TIME THAT A SECURITY CERTIFICATE IS LOCATED IN A
JURISDICTION, PERFECTION OF A SECURITY INTEREST,
THE EFFECT OF PERFECTION OR NONPERFECTION, AND THE
PRIORITY OF A SECURITY INTEREST IN THE
CERTIFICATED SECURITY REPRESENTED THEREBY ARE
GOVERNED BY THE LOCAL LAW OF THAT JURISDICTION.
(c) EXCEPT AS OTHERWISE PROVIDED IN
SUBDIVISION (f) OF THIS SUBSECTION, PERFECTION OF
A SECURITY INTEREST, THE EFFECT OF PERFECTION OR
NONPERFECTION AND THE PRIORITY OF A SECURITY
INTEREST IN AN UNCERTIFICATED SECURITY ARE
GOVERNED BY THE LOCAL LAW OF THE ISSUER'S
JURISDICTION AS SPECIFIED IN SUBSECTION (d) OF
SECTION 10 OF THIS ACT.
(d) EXCEPT AS OTHERWISE PROVIDED IN
SUBDIVISION (f) OF THIS SUBSECTION, PERFECTION OF
A SECURITY INTEREST, THE EFFECT OF PERFECTION OR
NONPERFECTION AND THE PRIORITY OF A SECURITY
INTEREST IN A SECURITY ENTITLEMENT OR SECURITIES
ACCOUNT ARE GOVERNED BY THE LOCAL LAW OF THE
SECURITIES INTERMEDIARY'S JURISDICTION AS
SPECIFIED IN SUBSECTION (e) OF SECTION 10 OF THIS
ACT.
(e) EXCEPT AS OTHERWISE PROVIDED IN
SUBDIVISION (f) OF THIS SUBSECTION, PERFECTION OF
A SECURITY INTEREST, THE EFFECT OF PERFECTION OR
NONPERFECTION AND THE PRIORITY OF A SECURITY
INTEREST IN A COMMODITY CONTRACT OR COMMODITY
ACCOUNT ARE GOVERNED BY THE LOCAL LAW OF THE
COMMODITY INTERMEDIARY'S JURISDICTION. THE
FOLLOWING RULES DETERMINE A "COMMODITY
INTERMEDIARY'S JURISDICTION" FOR PURPOSES OF THIS
SUBDIVISION:
(i) IF AN AGREEMENT BETWEEN THE COMMODITY
INTERMEDIARY AND COMMODITY CUSTOMER SPECIFIES THAT
IT IS GOVERNED BY THE LAW OF A PARTICULAR
JURISDICTION, THAT JURISDICTION IS THE COMMODITY
INTERMEDIARY'S JURISDICTION.
(ii) IF AN AGREEMENT BETWEEN THE COMMODITY
INTERMEDIARY AND COMMODITY CUSTOMER DOES NOT
SPECIFY THE GOVERNING LAW AS PROVIDED IN
SUBPARAGRAPH (i) OF THIS SUBDIVISION, BUT
EXPRESSLY SPECIFIES THAT THE COMMODITY ACCOUNT IS
MAINTAINED AT AN OFFICE IN A PARTICULAR
JURISDICTION, THAT JURISDICTION IS THE COMMODITY
INTERMEDIARY'S JURISDICTION.
(iii) IF AN AGREEMENT BETWEEN THE COMMODITY
INTERMEDIARY AND COMMODITY CUSTOMER DOES NOT
SPECIFY A JURISDICTION AS PROVIDED IN SUBPARAGRAPH
(i) OR (ii) OF THIS SUBDIVISION, THE COMMODITY
INTERMEDIARY'S JURISDICTION IS THE JURISDICTION IN
WHICH IS LOCATED THE OFFICE IDENTIFIED IN AN
ACCOUNT STATEMENT AS THE OFFICE SERVING THE
COMMODITY CUSTOMER'S ACCOUNT.
(iv) IF AN AGREEMENT BETWEEN THE COMMODITY
INTERMEDIARY AND COMMODITY CUSTOMER DOES NOT
SPECIFY A JURISDICTION AS PROVIDED IN SUBPARAGRAPH
(i) OR (ii) OF THIS SUBDIVISION AND AN ACCOUNT
STATEMENT DOES NOT IDENTIFY AN OFFICE SERVING THE
COMMODITY CUSTOMER'S ACCOUNT AS PROVIDED IN
SUBPARAGRAPH (iii) OF THIS SUBDIVISION, THE
COMMODITY INTERMEDIARY'S JURISDICTION IS THE
JURISDICTION IN WHICH IS LOCATED THE CHIEF
EXECUTIVE OFFICE OF THE COMMODITY INTERMEDIARY.
(f) PERFECTION OF A SECURITY INTEREST BY
FILING, AUTOMATIC PERFECTION OF A SECURITY
INTEREST IN INVESTMENT PROPERTY GRANTED BY A
BROKER OR SECURITIES INTERMEDIARY AND AUTOMATIC
PERFECTION OF A SECURITY INTEREST IN A COMMODITY
CONTRACT OR COMMODITY ACCOUNT GRANTED BY A
COMMODITY INTERMEDIARY ARE GOVERNED BY THE LOCAL
LAW OF THE JURISDICTION IN WHICH THE DEBTOR IS
LOCATED.
Sec. 53. Section 42a-9-105 of the general
statutes is repealed and the following is
substituted in lieu thereof:
(1) In this article unless the context
otherwise requires: (a) "Account debtor" means the
person who is obligated on an account, chattel
paper or general intangible; (b) "chattel paper"
means a writing or writings which evidence both a
monetary obligation and a security interest in or
a lease of specific goods, but a charter or other
contract involving the use or hire of a vessel is
not chattel paper. When a transaction is evidenced
both by such a security agreement or a lease and
by an instrument or a series of instruments, the
group of writings taken together constitutes
chattel paper; (c) "collateral" means the property
subject to a security interest, and includes
accounts and chattel paper which have been sold;
(d) "debtor" means the person who owes a payment
or other performance of the obligation secured,
whether or not he owns or has rights in the
collateral, and includes the seller of accounts or
chattel paper. Where the debtor and the owner of
the collateral are not the same person, the term
"debtor" means the owner of the collateral in any
provision of the article dealing with the
collateral, the obligor in any provision dealing
with the obligation, and may include both where
the context so requires; (e) "deposit account"
means a demand, time, savings, passbook or like
account maintained with a bank, savings and loan
association, credit union or like organization,
other than an account evidenced by a certificate
of deposit; (f) "document" means document of title
as defined in the general definitions of section
42a-1-201, and a receipt of the kind described in
subsection (2) of section 42a-7-201; (g)
"encumbrance" includes real estate mortgages and
other liens on real estate and all other rights in
real estate that are not ownership interest; (h)
"goods" includes all things which are movable at
the time the security interest attaches or which
are fixtures, as provided in section 42a-9-313,
but does not include money, documents,
instruments, INVESTMENT PROPERTY, accounts,
chattel paper, general intangibles or minerals or
the like, including oil and gas, before
extraction. "Goods" also includes standing timber
which is to be cut and removed under a conveyance
or contract for sale, the unborn young of animals
and growing crops; (i) "instrument" means a
negotiable instrument, as defined in section
42a-3-104, [or a certificated security, as defined
in section 42a-8-102,] or any other writing which
evidences a right to the payment of money and is
not itself a security agreement or lease and is of
a type which is in ordinary course of business
transferred by delivery with any necessary
endorsement or assignment. THE TERM DOES NOT
INCLUDE INVESTMENT PROPERTY; (j) "mortgage" means
a consensual interest created by a real estate
mortgage, a trust deed on real estate or the like;
(k) an advance is made "pursuant to commitment" if
the secured party has bound himself to make it,
whether or not a subsequent event of default or
other event not within his control has relieved or
may relieve him from his obligation; (l) "security
agreement" means an agreement which creates or
provides for a security interest; (m) "secured
party" means a lender, seller or other person in
whose favor there is a security interest,
including a person to whom accounts or chattel
paper have been sold. When the holders of
obligations issued under an indenture of trust,
equipment trust agreement or the like are
represented by a trustee or other person, the
representative is the secured party; (n)
"transmitting utility" means any person primarily
engaged in the railroad business, the electric or
electronics communications transmission business,
the transmission of goods by pipeline, or the
transmission or the production and transmission of
electricity, steam, gas or water, or the provision
of sewer service.
(2) Other definitions applying to this
article and the sections in which they appear are:
"Account". Section 42a-9-106.
"Attach". Section 42a-9-203.
"COMMODITY CONTRACT". SECTION 55 OF THIS ACT.
"COMMODITY CUSTOMER". SECTION 55 OF THIS ACT.
"COMMODITY INTERMEDIARY". SECTION 55 OF THIS
ACT.
["Consumer goods". Section 42a-9-109(1).]
"Construction mortgage". Section 42a-9-313(1).
"CONSUMER GOODS". SECTION 42a-9-109(1).
"CONTROL". SECTION 55 OF THIS ACT.
"Equipment". Section 42a-9-109(2).
"Farm products". Section 42a-9-109(3).
"Fixture". Section 42a-9-313.
"Fixture filing". Section 42a-9-313.
"General intangibles". Section 42a-9-106.
"Inventory". Section 42a-9-109(4).
"INVESTMENT PROPERTY". SECTION 55 OF THIS ACT.
"Lien creditor". Section 42a-9-301(3).
"Proceeds". Section 42a-9-306(1).
"Purchase money security interest". Section
42a-9-107.
"United States". Section 42a-9-103a.
(3) The following definitions in other
articles apply to this article:
"BROKER". SECTION 42a-8-102.
"CERTIFICATED SECURITY". SECTION 42a-8-102.
"Check". Section 42a-3-104.
"CLEARING CORPORATION". SECTION 42a-8-102.
"Contract for sale". Section 42a-2-106.
"CONTROL". SECTION 42a-8-106.
"DELIVERY". SECTION 42a-8-301.
"ENTITLEMENT HOLDER". SECTION 42a-8-102.
"FINANCIAL ASSET". SECTION 42a-8-102.
"Holder in due course". Section 42a-3-302.
"Letter of credit". Section 42a-5-102.
"Note". Section 42a-3-104.
"Proceeds of a letter of credit". Section
42a-5-114(a).
"Sale". Section 42a-2-106.
"SECURITIES INTERMEDIARY". SECTION 42a-8-102.
"SECURITY". SECTION 42a-8-102.
"SECURITY CERTIFICATE". SECTION 42a-8-102.
"SECURITY ENTITLEMENT". SECTION 42a-8-102.
"UNCERTIFICATED SECURITY". SECTION 42a-8-102.
(4) In addition article 1 contains general
definitions and principles of construction and
interpretation applicable throughout this article.
Sec. 54. Section 42a-9-106 of the general
statutes is repealed and the following is
substituted in lieu thereof:
"Account" means any right to payment for
goods sold or leased or for services rendered
which is not evidenced by an instrument or chattel
paper, whether or not it has been earned by
performance. "General intangibles" means any
personal property, including things in action,
other than goods, accounts, chattel paper,
documents, instruments, INVESTMENT PROPERTY,
rights to proceeds of written letters of credit
and money. All rights to payment earned or
unearned under a charter or other contract
involving the use or hire of a vessel and all
rights incident to the charter or contract are
accounts.
Sec. 55. (NEW) (1) In article 9:
(a) "Commodity account" means an account
maintained by a commodity intermediary in which a
commodity contract is carried for a commodity
customer.
(b) "Commodity contract" means a commodity
futures contract, an option on a commodity futures
contract, a commodity option, or other contract
that, in each case, is: (i) Traded on or subject
to the rules of a board of trade that has been
designated as a contract market for such a
contract pursuant to the federal commodities laws;
or (ii) traded on a foreign commodity board of
trade, exchange or market, and is carried on the
books of a commodity intermediary for a commodity
customer.
(c) "Commodity customer" means a person for
whom a commodity intermediary carries a commodity
contract on its books.
(d) "Commodity intermediary" means: (i) A
person who is registered as a futures commission
merchant under the federal commodities laws; or
(ii) a person who in the ordinary course of his
business provides clearance or settlement services
for a board of trade that has been designated as a
contract market pursuant to the federal
commodities laws.
(e) "Control" with respect to a certificated
security, uncertificated security or security
entitlement has the meaning specified in section
42a-8-106 of the general statutes, as amended by
section 6 of this act. A secured party has control
over a commodity contract if by agreement among
the commodity customer, the commodity intermediary
and the secured party, the commodity intermediary
has agreed that it will apply any value
distributed on account of the commodity contract
as directed by the secured party without further
consent by the commodity customer. If a commodity
customer grants a security interest in a commodity
contract to its own commodity intermediary, the
commodity intermediary as secured party has
control. A secured party has control over a
securities account or commodity account if the
secured party has control over all security
entitlements or commodity contracts carried in the
securities account or commodity account.
(f) "Investment property" means: (i) A
security, whether certificated or uncertificated;
(ii) a security entitlement; (iii) a commodity
contract; or (iv) a commodity account.
(2) Attachment or perfection of a security
interest in a securities account is also
attachment or perfection of a security interest in
all security entitlements carried in the
securities account. Attachment or perfection of a
security interest in a commodity account is also
attachment or perfection of a security interest in
all commodity contracts carried in the commodity
account.
(3) A description of collateral in a security
agreement or financing statement is sufficient to
create or perfect a security interest in a
certificated security, uncertificated security,
security entitlement, securities account,
commodity contract or commodity account whether it
describes the collateral by those terms, or as
investment property, or by description of the
underlying security, financial asset or commodity
contract. A description of investment property
collateral in a security agreement or financing
statement is sufficient if it identifies the
collateral by specific listing, by category, by
quantity, by a computational or allocational
formula or procedure, or by any other method, if
the identity of the collateral is objectively
determinable.
(4) Perfection of a security interest in
investment property is governed by the following
rules:
(a) A security interest in investment
property may be perfected by control.
(b) Except as otherwise provided in
subdivisions (c) and (d) of this subsection, a
security interest in investment property may be
perfected by filing.
(c) If the debtor is a broker or securities
intermediary, a security interest in investment
property is perfected when it attaches. The filing
of a financing statement with respect to a
security interest in investment property granted
by a broker or securities intermediary has no
effect for purposes of perfection or priority with
respect to that security interest.
(d) If a debtor is a commodity intermediary,
a security interest in a commodity contract or a
commodity account is perfected when it attaches.
The filing of a financing statement with respect
to a security interest in a commodity contract or
a commodity account granted by a commodity
intermediary has no effect for purposes of
perfection or priority with respect to that
security interest.
(5) Priority between conflicting security
interests in the same investment property is
governed by the following rules:
(a) A security interest of a secured party
who has control over investment property has
priority over a security interest of a secured
party who does not have control over the
investment property.
(b) Except as otherwise provided in
subdivisions (c) and (d) of this subsection,
conflicting security interests of secured parties
each of whom has control rank equally.
(c) Except as otherwise agreed by the
securities intermediary, a security interest in a
security entitlement or a securities account
granted to the debtor's own securities
intermediary has priority over any security
interest granted by the debtor to another secured
party.
(d) Except as otherwise agreed by the
commodity intermediary, a security interest in a
commodity contract or a commodity account granted
to the debtor's own commodity intermediary has
priority over any security interest granted by the
debtor to another secured party.
(e) Conflicting security interests granted by
a broker, a securities intermediary or a commodity
intermediary which are perfected without control
rank equally.
(f) In all other cases, priority between
conflicting security interests in investment
property is governed by subsections (5), (6) and
(7) of section 42a-9-312 of the general statutes,
as amended by section 64 of this act. Subsection
(4) of section 42a-9-312 of the general statutes,
as amended by section 64 of this act, does not
apply to investment property.
(6) If a security certificate in registered
form is delivered to a secured party pursuant to
agreement, a written security agreement is not
required for attachment or enforceability of the
security interest, delivery suffices for
perfection of the security interest, and the
security interest has priority over a conflicting
security interest perfected by means other than
control, even if a necessary endorsement is
lacking.
Sec. 56. (NEW) (1) If a person buys a
financial asset through a securities intermediary
in a transaction in which the buyer is obligated
to pay the purchase price to the securities
intermediary at the time of the purchase, and the
securities intermediary credits the financial
asset to the buyer's securities account before the
buyer pays the securities intermediary, the
securities intermediary has a security interest in
the buyer's security entitlement securing the
buyer's obligation to pay. A security agreement is
not required for attachment or enforceability of
the security interest, and the security interest
is automatically perfected.
(2) If a certificated security, or other
financial asset represented by a writing which in
the ordinary course of business is transferred by
delivery with any necessary endorsement or
assignment is delivered pursuant to an agreement
between persons in the business of dealing with
such securities or financial assets and the
agreement calls for delivery versus payment, the
person delivering the certificate or other
financial asset has a security interest in the
certificated security or other financial asset
securing the seller's right to receive payment. A
security agreement is not required for attachment
or enforceability of the security interest, and
the security interest is automatically perfected.
Sec. 57. Subsection (1) of section 42a-9-203
of the general statutes is repealed and the
following is substituted in lieu thereof:
(1) Subject to the provisions of section
42a-4-210 on the security interest of a collecting
bank, [section 42a-8-321 on security interests in
securities] SECTIONS 55 AND 56 OF THIS ACT ON
SECURITY INTERESTS IN INVESTMENT PROPERTY and
section 42a-9-113 on a security interest arising
under article 2, a security interest is not
enforceable against the debtor or third parties
with respect to the collateral and does not attach
unless: (a) The collateral is in the possession of
the secured party pursuant to agreement, THE
COLLATERAL IS INVESTMENT PROPERTY AND THE SECURED
PARTY HAS CONTROL PURSUANT TO AGREEMENT or the
debtor has signed a security agreement which
contains a description of the collateral and in
addition, when the security interest covers crops
growing or to be grown or timber to be cut, a
description of the land concerned; (b) value has
been given; and (c) the debtor has rights in the
collateral.
Sec. 58. Subsection (1) of section 42a-9-301
of the general statutes is repealed and the
following is substituted in lieu thereof:
(1) Except as otherwise provided in
subsection (2) of this section, an unperfected
security interest is subordinate to the rights of
(a) persons entitled to priority under section
42a-9-312; (b) a person who becomes a lien
creditor before the security interest is
perfected; (c) in the case of goods, instruments,
documents, and chattel paper, a person who is not
a secured party and who is a transferee in bulk or
other buyer not in ordinary course of business, or
is a buyer of farm products in ordinary course of
business, to the extent that he gives value and
receives delivery of the collateral without
knowledge of the security interest and before it
is perfected; (d) in the case of accounts, [and]
general intangibles AND INVESTMENT PROPERTY, a
person who is not a secured party and who is a
transferee to the extent that he gives value
without knowledge of the security interest and
before it is perfected.
Sec. 59. Subsection (1) of section 42a-9-302
of the general statutes is repealed and the
following is substituted in lieu thereof:
(1) A financing statement must be filed to
perfect all security interests except the
following: (a) A security interest in collateral
in possession of the secured party under section
42a-9-305; (b) a security interest temporarily
perfected in instruments, CERTIFICATED SECURITIES
or documents without delivery under section
42a-9-304 or in proceeds for a ten-day period
under section 42a-9-306; (c) a security interest
created by an assignment of a beneficial interest
in a trust or a decedent's estate; (d) a purchase
money security interest in consumer goods; but
filing is required for a motor vehicle required to
be registered, and fixture filing is required for
priority over conflicting interests in fixtures to
the extent provided in section 42a-9-313; (e) an
assignment of accounts which does not alone or in
conjunction with other assignments to the same
assignee transfer a significant part of the
outstanding accounts of the assignor; (f) a
security interest of a collecting bank as provided
in section 42a-4-210 [or in securities as provided
in section 42a-8-321] or arising under article 3
of this title or covered in subsection (3) of this
section; (g) an assignment for the benefit of all
the creditors of the transferor, and subsequent
transfers by the assignee thereunder; (h) A
SECURITY INTEREST IN INVESTMENT PROPERTY WHICH IS
PERFECTED WITHOUT FILING UNDER SECTION 55 OR 56 OF
THIS ACT.
Sec. 60. Section 42a-9-304 of the general
statutes is repealed and the following is
substituted in lieu thereof:
(1) A security interest in chattel paper or
negotiable documents may be perfected by filing. A
security interest in the rights to proceeds of a
written letter of credit can be perfected only by
the secured party's taking possession of the
letter of credit. A security interest in money or
instruments, other than [certificated securities
or] instruments which constitute part of chattel
paper, can be perfected only by the secured
party's taking possession, except as provided in
subsections (4) and (5) of this section and
subsections (2) and (3) of section 42a-9-306, on
proceeds.
(2) During the period that goods are in the
possession of the issuer of a negotiable document
therefor, a security interest in the goods is
perfected by perfecting a security interest in the
document, and any security interest in the goods
otherwise perfected during such period is subject
thereto.
(3) A security interest in goods in the
possession of a bailee other than one who has
issued a negotiable document therefor is perfected
by issuance of a document in the name of the
secured party or by the bailee's receipt of
notification of the secured party's interest or by
filing as to the goods.
(4) A security interest in instruments,
[other than] certificated securities [,] or
negotiable documents is perfected without filing
or the taking of possession for a period of
twenty-one days from the time it attaches to the
extent that it arises for new value given under a
written security agreement.
(5) A security interest remains perfected for
a period of twenty-one days without filing where a
secured party having a perfected security interest
in an instrument, [other than] a certificated
security, a negotiable document or goods in
possession of a bailee other than one who has
issued a negotiable document therefor: (a) Makes
available to the debtor the goods or documents
representing the goods for the purpose of ultimate
sale or exchange or for the purpose of loading,
unloading, storing, shipping, transshipping,
manufacturing, processing or otherwise dealing
with them in a manner preliminary to their sale or
exchange, but priority between conflicting
security interests in the goods is subject to
subsection (3) of section 42a-9-312; or (b)
delivers the instrument OR CERTIFICATED SECURITY
to the debtor for the purpose of ultimate sale or
exchange or of presentation, collection, renewal
or registration of transfer.
(6) After the twenty-one day period in
subsections (4) and (5) perfection depends upon
compliance with applicable provisions of this
article.
Sec. 61. Section 42a-9-305 of the general
statutes is repealed and the following is
substituted in lieu thereof:
A security interest in letters of credit and
advices of credit, goods, instruments, [other than
certificated securities,] money, negotiable
documents or chattel paper may be perfected by the
secured party's taking possession of the
collateral. A security interest in the right to
proceeds of a written letter of credit may be
perfected by the secured party's taking possession
of the letter of credit. If such collateral other
than goods covered by a negotiable document is
held by a bailee, the secured party is deemed to
have possession from the time the bailee receives
notification of the secured party's interest. A
security interest is perfected by possession from
the time possession is taken without relation back
and continues only so long as possession is
retained, unless otherwise specified in this
article. The security interest may be otherwise
perfected as provided in this article before or
after the period of possession by the secured
party.
Sec. 62. Section 42a-9-306 of the general
statutes is repealed and the following is
substituted in lieu thereof:
(1) "Proceeds" includes whatever is received
upon the sale, exchange, collection or other
disposition of collateral or proceeds. Insurance
payable by reason of loss or damage to the
collateral is proceeds, except to the extent that
it is payable to a person other than a party to
the security agreement. Money, checks, deposit
accounts and the like are "cash proceeds". All
other proceeds are "noncash proceeds".
(2) Except where this article otherwise
provides, a security interest continues in
collateral notwithstanding sale, exchange or other
disposition thereof unless the disposition was
authorized by the secured party in the security
agreement or otherwise, and also continues in any
identifiable proceeds including collections
received by the debtor.
(3) The security interest in proceeds is a
continuously perfected security interest if the
interest in the original collateral was perfected
but it ceases to be a perfected security interest
and becomes unperfected ten days after receipt of
the proceeds by the debtor unless (a) a filed
financing statement covers the original collateral
and the proceeds are collateral in which a
security interest may be perfected by filing in
the office or offices where the financing
statement has been filed and, if the proceeds are
acquired with cash proceeds, the description of
collateral in the financing statement indicates
the types of property constituting the proceeds;
or (b) a filed financing statement covers the
original collateral and the proceeds are
identifiable cash proceeds; OR (c) THE ORIGINAL
COLLATERAL WAS INVESTMENT PROPERTY AND THE
PROCEEDS ARE IDENTIFIABLE CASH PROCEEDS; or [(c)]
(d) the security interest in the proceeds is
perfected before the expiration of the ten-day
period. Except as provided in this section, a
security interest in proceeds can be perfected
only by the methods or under the circumstances
permitted in this article for original collateral
of the same type.
(4) In the event of insolvency proceedings
instituted by or against a debtor, a secured party
with a perfected security interest in proceeds has
a perfected security interest only in the
following proceeds: (a) In identifiable noncash
proceeds and in separate deposit accounts
containing only proceeds; (b) in identifiable cash
proceeds in the form of money which is neither
commingled with other money nor deposited in a
deposit account prior to the insolvency
proceedings; (c) in identifiable cash proceeds in
the form of checks and the like which are not
deposited in a deposit account prior to the
insolvency proceedings; and (d) in all cash and
deposit accounts of the debtor, in which proceeds
have been commingled with other funds, but the
perfected security interest under this subdivision
(d) is (i) subject to any right of set-off; and
(ii) limited to an amount not greater than the
amount of any cash proceeds received by the debtor
within ten days before the institution of the
insolvency proceedings less the sum of (A) the
payments to the secured party on account of cash
proceeds received by the debtor during such period
and (B) the cash proceeds received by the debtor
during such period to which the secured party is
entitled under subdivisions (a) to (c), inclusive,
of this subsection.
(5) If a sale of goods results in an account
or chattel paper which is transferred by the
seller to a secured party, and if the goods are
returned to or are repossessed by the seller or
the secured party, the following rules determine
priorities: (a) If the goods were collateral at
the time of sale for an indebtedness of the seller
which is still unpaid, the original security
interest attaches again to the goods and continues
as a perfected security interest if it was
perfected at the time when the goods were sold. If
the security interest was originally perfected by
a filing which is still effective, nothing further
is required to continue the perfected status; in
any other case, the secured party must take
possession of the returned or repossessed goods or
must file. (b) An unpaid transferee of the chattel
paper has a security interest in the goods against
the transferor. Such security interest is prior to
a security interest asserted under paragraph (a)
to the extent that the transferee of the chattel
paper was entitled to priority under section
42a-9-308. (c) An unpaid transferee of the account
has a security interest in the goods against the
transferor. Such security interest is subordinate
to a security interest asserted under subdivision
(a) of this subsection. (d) A security interest of
an unpaid transferee asserted under subdivision
(b) or (c) of this subsection has to be perfected
for protection against creditors of the transferor
and purchasers of the returned or repossessed
goods.
Sec. 63. Section 42a-9-309 of the general
statutes is repealed and the following is
substituted in lieu thereof:
Nothing in this article limits the rights of
a holder in due course of a negotiable instrument,
as defined in section 42a-3-302, or a holder to
whom a negotiable document of title has been duly
negotiated as provided in section 42a-7-501 or a
[bona fide] PROTECTED purchaser of a security as
provided in section [42a-8-302] 42a-8-303, AS
AMENDED BY SECTION 29 OF THIS ACT, and such
holders or purchasers take priority over an
earlier security interest even though perfected.
Filing under this article does not constitute
notice of the security interest to such holders or
purchasers.
Sec. 64. Section 42a-9-312 of the general
statutes is repealed and the following is
substituted in lieu thereof:
(1) The rules of priority stated in other
sections of this part and in the following
sections shall govern when applicable: Section
42a-4-210 with respect to the security interest of
collecting banks in items being collected,
accompanying documents and proceeds; section
42a-9-103a on security interests related to other
jurisdictions; section 42a-9-114 on consignments;
SECTION 55 OF THIS ACT ON SECURITY INTERESTS IN
INVESTMENT PROPERTY.
(2) A perfected security interest in crops
for new value given to enable the debtor to
produce the crops during the production season and
given not more than three months before the crops
become growing crops by planting or otherwise
takes priority over an earlier perfected security
interest to the extent that such earlier interest
secures obligations due more than six months
before the crops become growing crops by planting
or otherwise, even though the person giving new
value had knowledge of the earlier security
interest.
(3) A perfected purchase money security
interest in inventory has priority over a
conflicting security interest in the same
inventory and also has priority in identifiable
cash proceeds received on or before the delivery
of the inventory to a buyer if (a) the purchase
money security interest is perfected at the time
the debtor receives possession of the inventory;
and (b) the purchase money secured party gives
notification in writing to the holder of the
conflicting security interest if the holder had
filed a financing statement covering the same
types of inventory (i) before the date of the
filing made by the purchase money secured party,
or (ii) before the beginning of the twenty-one day
period where the purchase money security interest
is temporarily perfected without filing or
possession; and (c) the holder of the conflicting
security interest receives the notification within
five years before the debtor receives possession
of the inventory; and (d) the notification states
that the person giving the notice has or expects
to acquire a purchase money security interest in
inventory of the debtor, describing such inventory
by item or type.
(4) A purchase money security interest in
collateral other than inventory has priority over
a conflicting security interest in the same
collateral or its proceeds if the purchase money
security interest is perfected at the time the
debtor receives possession of the collateral or
within twenty days thereafter.
(5) In all cases not governed by other rules
stated in this section, including cases of
purchase money security interests which do not
qualify for the special priorities set forth in
subsections (3) and (4) of this section, priority
between conflicting security interests in the same
collateral shall be determined according to the
following rules: (a) Conflicting security
interests rank according to priority in time of
filing or perfection. Priority dates from the time
a filing is first made covering the collateral or
the time the security interest is first perfected,
whichever is earlier, provided there is no period
thereafter when there is neither filing nor
perfection; (b) so long as conflicting security
interests are unperfected, the first to attach has
priority.
(6) For the purposes of subsection (5) of
this section, a date of filing or perfection as to
collateral is also a date of filing or perfection
as to proceeds.
(7) If future advances are made while a
security interest is perfected by filing, the
taking of possession, or under [section 42a-8-321
on securities] SECTION 55 OR 56 OF THIS ACT ON
INVESTMENT PROPERTY, the security interest has the
same priority for the purposes of subsection (5)
of this section with respect to the future
advances as it does with respect to the first
advance. If a commitment is made before or while
the security interest is so perfected, the
security interest has the same priority with
respect to advances made pursuant thereto. In
other cases a perfected security interest has
priority from the date the advance is made.
Sec. 65. Section 42a-1-105 of the general
statutes is repealed and the following is
substituted in lieu thereof:
(1) Except as provided hereafter in this
section, when a transaction bears a reasonable
relation to this state and also to another state
or nation the parties may agree that the law
either of this state or of such other state or
nation shall govern their rights and duties.
Failing such agreement this title applies to
transactions bearing an appropriate relation to
this state.
(2) Where one of the following provisions of
this title specifies the applicable law, that
provision governs and a contrary agreement is
effective only to the extent permitted by the law,
including the conflict of laws rules, so
specified:
Rights of creditors against sold goods.
Section 42a-2-402.
Applicability of the article on bank deposits
and collections. Section 42a-4-102.
Governing law in the article on funds
transfers. Section 42a-4a-507.
Letters of credit. Section 42a-5-116.
Applicability of the article on investment
securities. Section [42a-8-106] 10 OF THIS ACT.
Perfection provisions of the article on
secured transactions. Section 42a-9-103a.
Sec. 66. Subsection (a) of section 42a-4-104
of the general statutes is repealed and the
following is substituted in lieu thereof:
(a) In this article, unless the context
otherwise requires: (1) "Account" means any
deposit or credit account with a bank, including a
demand, time, savings, passbook, share draft, or
like account, other than an account evidenced by a
certificate of deposit; (2) "afternoon" means the
period of a day between noon and midnight; (3)
"banking day" means the part of a day on which a
bank is open to the public for carrying on
substantially all of its banking functions, but
for the purpose of determining a bank's midnight
deadline, as defined in subdivision (10) of this
subsection, shall not include Saturday; (4)
"clearinghouse" means an association of banks or
other payors regularly clearing items; (5)
"customer" means a person having an account with a
bank or for whom a bank has agreed to collect
items, including a bank that maintains an account
at another bank; (6) "documentary draft" means a
draft to be presented for acceptance or payment if
specified documents, certificated securities, as
defined in section 42a-8-102, or instructions for
uncertificated securities, as defined in section
[42a-8-308] 42a-8-102, AS AMENDED BY SECTION 2 OF
THIS ACT, or other certificates, statements, or
the like are to be received by the drawee or other
payor before acceptance or payment of the draft;
(7) "draft" means a draft as defined in section
42a-3-104 or an item, other than an instrument,
that is an order; (8) "drawee" means a person
ordered in a draft to make payment; (9) "item"
means an instrument or a promise or order to pay
money handled by a bank for collection or payment.
The term does not include a payment order governed
by article 4A or a credit or debit card slip; (10)
"midnight deadline" with respect to a bank is
midnight on its next banking day following the
banking day on which it receives the relevant item
or notice or from which the time for taking action
commences to run, whichever is later; (11)
"settle" means to pay in cash, by clearinghouse
settlement, in a charge or credit or by
remittance, or otherwise as agreed. A settlement
may be either provisional or final; (12) "suspends
payments" with respect to a bank means that it has
been closed by order of the supervisory
authorities, that a public officer has been
appointed to take it over, or that it ceases or
refuses to make payments in the ordinary course of
business.
Sec. 67. (NEW) (a) This act does not affect
an action or proceeding commenced before the
effective date of this act.
(b) If a security interest in a security is
perfected as of the effective date of this act,
and the action by which the security interest was
perfected would suffice to perfect a security
interest under this act, no further action is
required to continue perfection. If a security
interest in a security is perfected as of the
effective date of this act but the action by which
the security interest was perfected would not
suffice to perfect a security interests under this
act, the security interest remains perfected for a
period of four months after the effective date of
this act and continues perfected thereafter if
appropriate action to perfect under this act is
taken within that period. If a security interest
is perfected as of the effective date of this act
and the security interest can be perfected by
filing under this act, a financing statement
signed by the secured party instead of the debtor
may be filed within that period to continue
perfection or thereafter to perfect.
Sec. 68. Sections 42a-8-308 to 42a-8-321,
inclusive, and 42a-8-408 of the general statutes
are repealed.
Approved June 26, 1997