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statutes  is  repealed   and   the   following  is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