House Bill No. 5469
House Bill No. 5469
PUBLIC ACT NO. 98-93
AN ACT CONCERNING 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-8-108 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[A security interest in an uncertificated
security may be evidenced by the registration of
pledge to the secured party or a person designated
by him. There can be no more than one registered
pledge of an uncertificated security at any time.
The registered owner of an uncertificated security
is the person in whose name the security is
registered, even if the security is subject to a
registered pledge. The rights of a registered
pledgee of an uncertificated security under this
article are terminated by the registration of
release.]
(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. 2. Section 9 of public act 97-182 is
repealed and the following is substituted in lieu
thereof:
(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)] SUBSECTION (a) OR (b) OF SECTION
42a-8-108 of the general statutes, AS AMENDED BY
SECTION 1 OF THIS ACT.
(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)] SUBSECTION (a) OR
(b) OF SECTION 42a-8-108 of the general statutes,
AS AMENDED BY SECTION 1 OF THIS ACT.
Sec. 3. Subsection (a) of section 10 of public
act 97-182 is repealed and the following is
substituted in lieu thereof:
(a) The local law of the issuer's
jurisdiction, as specified in subsection (d) of
this section, governs:
(1) The validity of a security;
(2) The rights and duties of the issuer with
respect to registration of transfer;
(3) The effectiveness of registration of
transfer by the issuer;
(4) Whether the issuer owes any duties to an
adverse claimant to a security; and
(5) Whether an adverse claim can be asserted
against a person to whom transfer of a
certificated or uncertificated security is
registered or A person who obtains control of an
uncertificated security.
Sec. 4. Subsection (e) of section 10 of public
act 97-182 is repealed and the following is
substituted in lieu thereof:
(e) The following rules determine a
"securities intermediary's jurisdiction" for
purposes of this section:
(1) If an agreement between the securities
intermediary and its entitlement holder specifies
that it is governed by the law of a particular
jurisdiction, that jurisdiction is the securities
intermediary's jurisdiction.
(2) If an agreement between the securities
intermediary and its entitlement holder does not
specify the governing law as provided in
subdivision (1) of this subsection, but expressly
specifies that the securities account is
maintained at an office in a particular
jurisdiction, that jurisdiction is the securities
intermediary's jurisdiction.
(3) If an agreement between the securities
intermediary and its entitlement holder does not
specify a jurisdiction as provided in subdivision
(1) or (2) of this subsection, the securities
intermediary's jurisdiction is the jurisdiction in
which IS located the office identified in an
account statement as the office serving the
entitlement holder's account.
(4) If an agreement between the securities
intermediary and its entitlement holder does not
specify a jurisdiction as provided in subdivision
(1) or (2) of this subsection and an account
statement does not identify an office serving the
entitlement holder's account as provided in
subdivision (3) of this subsection, the securities
intermediary's jurisdiction is the jurisdiction in
which is located the chief executive office of the
securities intermediary.
Sec. 5. Subsection (f) of section 42a-8-304 of
the general statutes, as amended by section 30 of
public act 97-182, is repealed and the following
is substituted in lieu thereof:
(f) Unless otherwise agreed, a person making
an endorsement assumes only the obligations
provided in section [8 of this act] 42a-8-108, AS
AMENDED BY SECTION 1 OF THIS ACT, and not an
obligation that the security will be honored by
the issuer.
Sec. 6. Subsection (b) of section 42a-8-305 of
the general statutes, as amended by section 31 of
public act 97-182, is repealed and the following
is substituted in lieu thereof:
(b) Unless otherwise agreed, a person
initiating an instruction assumes only the
obligations imposed by section [8 of this act]
42a-8-108, AS AMENDED BY SECTION 1 OF THIS ACT,
and not an obligation that the security will be
honored by the issuer.
Sec. 7. Subsection (a) of section 42a-8-401 of
the general statutes, as amended by section 34 of
public act 97-182, is repealed and the following
is substituted in lieu thereof:
(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 AS PROVIDED
IN SECTION 42a-8-402 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, AS AMENDED BY SECTION 8 OF THIS ACT, or
the issuer has complied with subsection (b) of
section 42a-8-403, AS AMENDED BY SECTION 8 OF THIS
ACT, but no legal process or indemnity bond is
obtained as provided in subsection (d) of section
42a-8-403, AS AMENDED BY SECTION 8 OF THIS ACT;
and
(7) The transfer is in fact rightful or is to
a protected purchaser.
Sec. 8. Subsection (b) of section 42a-8-403 of
the general statutes, as amended by section 36 of
public act 97-182, is repealed and the following
is substituted in lieu thereof:
(b) If a certificated security in registered
form is presented to an issuer with a request to
register transfer or an instruction is presented
to an issuer with a request to register transfer
of an uncertificated security after A demand that
the issuer not register 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.
Sec. 9. Subsection (a) of section 43 of public
act 97-182 is repealed and the following is
substituted in lieu thereof:
(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, EXCEPT
AS OTHERWISE PROVIDED IN SECTION 51 OF PUBLIC ACT
97-182, AS AMENDED BY SECTION 12 OF THIS ACT.
Sec. 10. Subsection (e) of section 43 of
public act 97-182 is repealed and the following is
substituted in lieu thereof:
(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] PURCHASER of a financial asset or interest
therein who gives value, OBTAINS CONTROL and does
not act in collusion with the securities
intermediary in violating the securities
intermediary's obligations under section 44 of
[this act] PUBLIC ACT 97-182.
Sec. 11. Subsection (a) of section 50 of
public act 97-182 is repealed and the following is
substituted in lieu thereof:
(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] PURCHASES a
security entitlement, or an interest therein, from
an entitlement holder if the purchaser gives
value, does not have notice of the adverse claim
[,] and obtains control.
Sec. 12. Section 51 of public act 97-182 is
repealed and the following is substituted in lieu
thereof:
(a) Except as otherwise provided in
[subsection] SUBSECTIONS (b) AND (c) of this
section, if a securities intermediary does not
have sufficient interests in a particular
financial asset to satisfy both its obligations to
entitlement holders who have security entitlements
to that financial asset and its obligation to a
creditor of the securities intermediary who has a
security interest in that financial asset, the
claims of entitlement holders, other than the
creditor, have priority over the claim of the
creditor.
(b) A CLAIM OF A CREDITOR OF A SECURITIES
INTERMEDIARY WHO HAS A SECURITY INTEREST IN A
FINANCIAL ASSET HELD BY A SECURITIES INTERMEDIARY
HAS PRIORITY OVER CLAIMS OF THE SECURITIES
INTERMEDIARY'S ENTITLEMENT HOLDERS WHO HAVE
SECURITY ENTITLEMENTS WITH RESPECT TO THAT
FINANCIAL ASSET IF THE CREDITOR HAS CONTROL OVER
THE FINANCIAL ASSET.
[(b)] (c) If a clearing corporation does not
have sufficient financial assets to satisfy both
its obligations to entitlement holders who have
security entitlements with respect to a financial
asset and its obligation to a creditor of the
clearing corporation who has a security interest
in that financial asset, the claim of the creditor
has priority over the claims of entitlement
holders.
Sec. 13. Subsection (1) of section 55 of
public act 97-182 is repealed and the following is
substituted in lieu thereof:
(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] PUBLIC ACT 97-182. A
secured party has control over a commodity
contract if by agreement among the commodity
customer, the commodity intermediary and the
secured party, the commodity intermediary has
agreed that it will apply any value distributed on
account of the commodity contract as directed by
the secured party without further consent by the
commodity customer. If a commodity customer grants
a security interest in a commodity contract to its
own commodity intermediary, the commodity
intermediary as secured party has control. A
secured party has control over a securities
account or commodity account if the secured party
has control over all security entitlements or
commodity contracts carried in the securities
account or commodity account.
(f) "Investment property" means: (i) A
security, whether certificated or uncertificated;
(ii) a security entitlement; (iii) A SECURITIES
ACCOUNT; (iv) a commodity contract; or [(iv)] (v)
a commodity account.
Sec. 14. Section 8 of public act 97-182 is
repealed.
Sec. 15. This act shall take effect July 1,
1998.
Approved May 22, 1998