citation: COM § 7403

text:
(a) A bailee shall deliver the goods to a person entitled under a document of title if the person complies with subdivisions (b) and (c), unless and to the extent that the bailee establishes any of the following:

(1) delivery of the goods to a person whose receipt was rightful as against the claimant;

(2) damage to or delay, loss, or destruction of the goods for which the bailee is not liable;

(3) previous sale or other disposition of the goods in lawful enforcement of a lien or on a warehouse’s lawful termination of storage;

(4) the exercise by a seller of its right to stop delivery pursuant to Section 2705 or by a lessor of its right to stop delivery pursuant to Section 10526;

(5) a diversion, reconsignment, or other disposition pursuant to Section 7303;

(6) release, satisfaction, or any other personal defense against the claimant; or

(7) any other lawful excuse.

(b) A person claiming goods covered by a document of title shall satisfy the bailee’s lien if the bailee so requests or if the bailee is prohibited by law from delivering the goods until the charges are paid.

(c) Unless a person claiming the goods is a person against which the document of title does not confer a right under subdivision (a) of Section 7503:

(1) the person claiming under a document shall surrender possession or control of any outstanding negotiable document covering the goods for cancellation or indication of partial deliveries; and

(2) the bailee shall cancel the document or conspicuously indicate in the document the partial delivery or the bailee is liable to any person to which the document is duly negotiated.


kind: section

code: COM

citation: COM § 7404

text:
A bailee that in good faith has received goods and delivered or otherwise disposed of the goods according to the terms of a document of title or pursuant to this division is not liable for the goods even if:

(1) the person from which the bailee received the goods did not have authority to procure the document or to dispose of the goods; or

(2) the person to which the bailee delivered the goods did not have authority to receive the goods.

history: (History: Repealed and added by Stats. 2006, Ch. 254, Sec. 49. Effective January 1, 2007.)

division: 7. DOCUMENTS OF TITLE

path: 7. DOCUMENTS OF TITLE > 4. Warehouse Receipts and Bills of Lading: General Obligations


citation: COM § 7501

text:
(a) The following rules apply to a negotiable tangible document of title:

(1) If the document’s original terms run to the order of a named person, the document is negotiated by the named person’s indorsement and delivery. After the named person’s indorsement in blank or to bearer, any person may negotiate the document by delivery alone.

(2) If the document’s original terms run to bearer, it is negotiated by delivery alone.

(3) If the document’s original terms run to the order of a named person and it is delivered to the named person, the effect is the same as if the document had been negotiated.

(4) Negotiation of the document after it has been indorsed to a named person requires indorsement by the named person and delivery.

(5) A document is duly negotiated if it is negotiated in the manner stated in this subdivision to a holder that purchases it in good faith, without notice of any defense against or claim to it on the part of any person, and for value, unless it is established that the negotiation is not in the regular course of business or financing or involves receiving the document in settlement or payment of a monetary obligation.

(b) The following rules apply to a negotiable electronic document of title:

(1) If the document’s original terms run to the order of a named person or to bearer, the document is negotiated by delivery of the document to another person. Indorsement by the named person is not required to negotiate the document.

(2) If the document’s original terms run to the order of a named person and the named person has control of the document, the effect is the same as if the document had been negotiated.

(3) A document is duly negotiated if it is negotiated in the manner stated in this subdivision to a holder that purchases it in good faith, without notice of any defense against or claim to it on the part of any person, and for value, unless it is established that the negotiation is not in the regular course of business or financing or involves taking delivery of the document in settlement or payment of a monetary obligation.

(c) Indorsement of a nonnegotiable document of title neither makes it negotiable nor adds to the transferee’s rights.

(d) The naming in a negotiable bill of lading of a person to be notified of the arrival of the goods does not limit the negotiability of the bill or constitute notice to a purchaser of the bill of any interest of that person in the goods.

path: 7. DOCUMENTS OF TITLE > 5. Warehouse Receipts and Bills of Lading: Negotiation and Transfer


citation: COM § 7502

text:
(a) Subject to Sections 7205 and 7503, a holder to which a negotiable document of title has been duly negotiated acquires thereby:

(1) title to the document;

(2) title to the goods;

(3) all rights accruing under the law of agency or estoppel, including rights to goods delivered to the bailee after the document was issued; and

(4) the direct obligation of the issuer to hold or deliver the goods according to the terms of the document free of any defense or claim by the issuer except those arising under the terms of the document or under this division, but in the case of a delivery order, the bailee’s obligation accrues only upon the bailee’s acceptance of the delivery order and the obligation acquired by the holder is that the issuer and any indorser will procure the acceptance of the bailee.

(b) Subject to Section 7503, title and rights acquired by due negotiation are not defeated by any stoppage of the goods represented by the document of title or by surrender of the goods by the bailee and are not impaired even if:

(1) the due negotiation or any prior due negotiation constituted a breach of duty;

(2) any person has been deprived of possession of a negotiable tangible document or control of a negotiable electronic document by misrepresentation, fraud, accident, mistake, duress, loss, theft, or conversion; or

(3) a previous sale or other transfer of the goods or document has been made to a third person.

chapter: 5. Warehouse Receipts and Bills of Lading: Negotiation and Transfer


citation: COM § 7503

text:
(a) A document of title confers no right in goods against a person that before issuance of the document had a legal interest or a perfected security interest in the goods and that did not:

(1) deliver or entrust the goods or any document of title covering the goods to the bailor or the bailor’s nominee with:

(A) actual or apparent authority to ship, store, or sell;

(B) power to obtain delivery under Section 7403; or

(C) power of disposition under Section 2403 or 9320 or subdivision (c) of Section 9321 or subdivision (b) of Section 10304 or subdivision (b) of Section 10305 or other statute or rule of law; or

(2) acquiesce in the procurement by the bailor or its nominee of any document.

(b) Title to goods based upon an unaccepted delivery order is subject to the rights of any person to which a negotiable warehouse receipt or bill of lading covering the goods has been duly negotiated. That title may be defeated under Section 7504 to the same extent as the rights of the issuer or a transferee from the issuer.

(c) Title to goods based upon a bill of lading issued to a freight forwarder is subject to the rights of any person to which a bill issued by the freight forwarder is duly negotiated. However, delivery by the carrier in accordance with Chapter 4 (commencing with Section 7401) pursuant to its own bill of lading discharges the carrier’s obligation to deliver.


citation: COM § 7504

text:
(a) A transferee of a document of title, whether negotiable or nonnegotiable, to which the document has been delivered but not duly negotiated, acquires the title and rights that its transferor had or had actual authority to convey.

(b) In the case of a transfer of a nonnegotiable document of title, until but not after the bailee receives notice of the transfer, the rights of the transferee may be defeated:

(1) by those creditors of the transferor which could treat the transfer as void under Section 2402 or 10308;

(2) by a buyer from the transferor in ordinary course of business if the bailee has delivered the goods to the buyer or received notification of the buyer’s rights;

(3) by a lessee from the transferor in ordinary course of business if the bailee has delivered the goods to the lessee or received notification of the lessee’s rights; or

(4) as against the bailee, by good-faith dealings of the bailee with the transferor.

(c) A diversion or other change of shipping instructions by the consignor in a nonnegotiable bill of lading which causes the bailee not to deliver the goods to the consignee defeats the consignee’s title to the goods if the goods have been delivered to a buyer in ordinary course of business or a lessee in ordinary course of business and, in any event, defeats the consignee’s rights against the bailee.

(d) Delivery of the goods pursuant to a nonnegotiable document of title may be stopped by a seller under Section 2705 or a lessor under Section 10526, subject to the requirements of due notification in those sections. A bailee that honors the seller’s or lessor’s instructions is entitled to be indemnified by the seller or lessor against any resulting loss or expense.


citation: COM § 7505

text: The indorsement of a tangible document of title issued by a bailee does not make the indorser liable for any default by the bailee or previous endorsers.


citation: COM § 7506

text: The transferee of a negotiable tangible document of title has a specifically enforceable right to have its transferor supply any necessary indorsement, but the transfer becomes a negotiation only as of the time the indorsement is supplied.


citation: COM § 7507

text:
If a person negotiates or delivers a document of title for value, otherwise than as a mere intermediary under Section 7508, unless otherwise agreed, the transferor, in addition to any warranty made in selling or leasing the goods, warrants to its immediate purchaser only that:

(1) the document is genuine;

(2) the transferor does not have knowledge of any fact that would impair the document’s validity or worth; and

(3) the negotiation or delivery is rightful and fully effective with respect to the title to the document and the goods it represents.


citation: COM § 7508

text: A collecting bank or other intermediary known to be entrusted with documents of title on behalf of another or with collection of a draft or other claim against delivery of documents warrants by the delivery of the documents only its own good faith and authority even if the collecting bank or other intermediary has purchased or made advances against the claim or draft to be collected.


citation: COM § 7509

text: Whether a document of title is adequate to fulfill the obligations of a contract for sale, a contract for lease, or the conditions of a letter of credit is determined by Division 2 (commencing with Section 2101), Division 5 (commencing with Section 5101), or Division 10 (commencing with Section 10101).


citation: COM § 7601

text:
(a) If a document of title is lost, stolen, or destroyed, a court may order delivery of the goods or issuance of a substitute document and the bailee may without liability to any person comply with the order. If the document was negotiable, a court may not order delivery of the goods or issuance of a substitute document without the claimant’s posting security unless it finds that any person that may suffer loss as a result of nonsurrender of possession or control of the document is adequately protected against the loss. If the document was nonnegotiable, the court may require security. The court may also order payment of the bailee’s reasonable costs and attorney’s fees in any action under this subdivision.

(b) A bailee that, without a court order, delivers goods to a person claiming under a missing negotiable document of title is liable to any person injured thereby. If the delivery is not in good faith, the bailee is liable for conversion. Delivery in good faith is not conversion if the claimant posts security with the bailee in an amount at least double the value of the goods at the time of posting to indemnify any person injured by the delivery which files a notice of claim within one year after the delivery.

path: 7. DOCUMENTS OF TITLE > 6. Warehouse Receipts and Bills Of Lading: Miscellaneous Provisions


citation: COM § 7602

text: Unless a document of title was originally issued upon delivery of the goods by a person that did not have power to dispose of them, a lien does not attach by virtue of any judicial process to goods in the possession of a bailee for which a negotiable document of title is outstanding unless possession or control of the document is first surrendered to the bailee or the document’s negotiation is enjoined. The bailee may not be compelled to deliver the goods pursuant to process until possession or control of the document is surrendered to the bailee or to the court. A purchaser of the document for value without notice of the process or injunction takes free of the lien imposed by judicial process.

chapter: 6. Warehouse Receipts and Bills Of Lading: Miscellaneous Provisions


citation: COM § 7603

text: If more than one person claims title to or possession of the goods, the bailee is excused from delivery until the bailee has a reasonable time to ascertain the validity of the adverse claims or to commence an action for interpleader. The bailee may assert an interpleader either in defending an action for nondelivery of the goods or by original action.


citation: COM § 8101

text: This division may be cited as Uniform Commercial Code—Investment Securities.

history: (History: Repealed and added by Stats. 1996, Ch. 497, Sec. 9. Effective January 1, 1997.)

division: 8. INVESTMENT SECURITIES

chapter: 1. Short Title and General Matters

path: 8. INVESTMENT SECURITIES > 1. Short Title and General Matters


citation: COM § 8102

text:
(a) In this division:

(1) “Adverse claim” means a claim that a claimant has a property interest in a financial asset and that it is a violation of the rights of the claimant for another person to hold, transfer, or deal with the financial asset.

(2) “Bearer form,” as applied to a certificated security, means a form in which the security is payable to the bearer of the security certificate according to its terms but not by reason of an indorsement.

(3) “Broker” means a person defined as a broker or dealer under the federal securities laws, but without excluding a bank acting in that capacity.

(4) “Certificated security” means a security that is represented by a certificate.

(5) “Clearing corporation” means any of the following:

(A) A person that is registered as a “clearing agency” under the federal securities laws.

(B) A federal reserve bank.

(C) 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 either:

(A) Send a signed record.

(B) Transmit information by any mechanism agreed upon by the persons transmitting and receiving the information.

(7) “Entitlement holder” means a person identified in the records of a securities intermediary as the person having a security entitlement against the securities intermediary. If a person acquires a security entitlement by virtue of paragraph (2) or (3) of subdivision (b) of Section 8501, that person is the entitlement holder.

(8) “Entitlement order” means a notification communicated to a securities intermediary directing transfer or redemption of a financial asset to which the entitlement holder has a security entitlement.

(9) “Financial asset,” except as otherwise provided in Section 8103, means any of the following:

(A) A security.

(B) An obligation of a person or a share, participation, or other interest in a person or in property or an enterprise of a person, that is, or is of a type, dealt in or traded on financial markets, or that is recognized in any area in which it is issued or dealt in as a medium for investment.

(C) 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 division. 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.

(10) [Reserved]

(11) “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.

(12) “Instruction” means a notification communicated to the issuer of an uncertificated security that 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 both of the following apply:

(A) The security certificate specifies a person entitled to the security.

(B) 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 either:

(A) A clearing corporation.

(B) 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 8103, 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 that is all of the following:

(A) It is represented by a security certificate in bearer or registered form, or the transfer of it may be registered upon books maintained for that purpose by or on behalf of the issuer.

(B) It is one of a class or series or by its terms is divisible into a class or series of shares, participations, interests, or obligations.

(C) It is either of the following:

(i) It is, or is of a type, dealt in or traded on securities exchanges or securities markets.

(ii) It is a medium for investment and by its terms expressly provides that it is a security governed by this division.

(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 Chapter 5 (commencing with Section 8501).

(18) “Uncertificated security” means a security that is not represented by a certificate.

(b) The following definitions in this division and other divisions apply to this division:

Appropriate person. Section 8107.

Control. Section 8106.

Controllable account. Section 9102.

Controllable electronic record. Section 12102.

Controllable payment intangible. Section 9102.

Delivery. Section 8301.

Investment company security. Section 8103.

Issuer. Section 8201.

Overissue. Section 8210.

Protected purchaser. Section 8303.

Securities account. Section 8501.

(c) In addition, Division 1 (commencing with Section 1101) contains general definitions and principles of construction and interpretation applicable throughout this division.

(d) The characterization of a person, business, or transaction for purposes of this division does not determine the characterization of the person, business, or transaction for purposes of any other law, regulation, or rule.

history: (History: Amended by Stats. 2023, Ch. 210, Sec. 19. (SB 95) Effective January 1, 2024.)


citation: COM § 8103

text:
(a) A share or similar equity interest issued by a corporation, business trust, joint stock company, or similar entity is a security.

(b) An “investment company security” is a security. “Investment company security” means a share or similar equity interest issued by an entity that is registered as an investment company under the federal investment company laws, an interest in a unit investment trust that is so registered, or a face-amount certificate issued by a face-amount certificate company that is so registered. Investment company security does not include an insurance policy or endowment policy or annuity contract issued by an insurance company.

(c) An interest in a partnership or limited liability company is not a security unless it is dealt in or traded on securities exchanges or in securities markets, its terms expressly provide that it is a security governed by this division, 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 division and not by Division 3 (commencing with Section 3101), even though it also meets the requirements of that division. However, a negotiable instrument governed by Division 3 (commencing with Section 3101) 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 paragraph (15) of subdivision (a) of Section 9102, is not a security or a financial asset.

(g) A document of title is not a financial asset unless subparagraph (C) of paragraph (9) of subdivision (a) of Section 8102 applies.

(h) A controllable account, controllable electronic record, or controllable payment intangible is not a financial asset unless subparagraph (C) of paragraph (9) of subdivision (a) of Section 8102 applies.

history: (History: Amended by Stats. 2023, Ch. 210, Sec. 20. (SB 95) Effective January 1, 2024.)


citation: COM § 8104

text:
(a) A person acquires a security or an interest therein, under this division, if either of the following applies:

(1) The person is a purchaser to whom a security is delivered pursuant to Section 8301; or

(2) The person acquires a security entitlement to the security pursuant to Section 8501.

(b) A person acquires a financial asset, other than a security, or an interest therein, under this division, 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 Chapter 5 (commencing with Section 8501), 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 8503.

(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 subdivision (a) or (b).


citation: COM § 8105

text:
(a) A person has notice of an adverse claim if any of the following applies:

(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.

(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 either of the following:

(1) One year after a date set for presentment or surrender for redemption or exchange.

(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 is any of the following:

(1) Whether in bearer or registered form, has been endorsed “for collection” or “for surrender” or for some other purpose not involving transfer.

(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 Division 9 (commencing with Section 9101) is not notice of an adverse claim to a financial asset.


citation: COM § 8106

text:
(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 either of the following applies:

(1) The certificate is endorsed to the purchaser or in blank by an effective endorsement.

(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 either of the following applies:

(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 any of the following apply:

(1) The purchaser becomes the entitlement holder.

(2) The securities intermediary has agreed that it will comply with entitlement orders originated by the purchaser without further consent by the entitlement holder.

(3) Another person, other than the transferor to the purchaser of an interest in the security entitlement, satisfies either of the following conditions:

(A) The person has control of the security entitlement and acknowledges that it has control on behalf of the purchaser.

(B) The person obtains control of the security entitlement after having acknowledged that it will obtain control of the security entitlement on behalf of the purchaser.

(e) If an interest in a security entitlement is granted by the entitlement holder to the entitlement holder’s own securities intermediary, the securities intermediary has control.

(f) A purchaser who has satisfied the requirements of subdivision (c) or (d) has control, even if the registered owner in the case of subdivision (c) or the entitlement holder in the case of subdivision (d) 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 paragraph (2) of subdivision (c) or paragraph (2) of subdivision (d) without the consent of the registered owner or entitlement holder, but an issuer or a securities intermediary is not required to enter into such an agreement even though the registered owner or entitlement holder so directs. An issuer or securities intermediary that has entered into such an agreement is not required to confirm the existence of the agreement to another party unless requested to do so by the registered owner or entitlement holder.

(h) A person that has control under this section is not required to acknowledge that it has control on behalf of a purchaser.

(i) If a person acknowledges that it has or will obtain control on behalf of a purchaser, unless the person otherwise agrees or law other than this division or Division 9 (commencing with Section 9101) otherwise provides, the person does not owe any duty to the purchaser and is not required to confirm the acknowledgment to any other person.

history: (History: Amended by Stats. 2023, Ch. 210, Sec. 21. (SB 95) Effective January 1, 2024.)


citation: COM § 8107

text:
(a) “Appropriate person” means any of the following:

(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 paragraph (1), (2), or (3) 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 the beneficiary of a security, as defined in subdivision (d) of Section 5501 of the Probate Code, registered in beneficiary form, as defined in subdivision (a) of Section 5501 of the Probate Code, if the beneficiary has survived the death of the registered owner or all registered owners.

(5) If the person designated in paragraph (1), (2), or (3) 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 it is made by any of the following:

(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 paragraph (2) of subdivision (c) or paragraph (2) of subdivision (d) of Section 8106.

(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.

(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.

history: (History: Amended by Stats. 1998, Ch. 242, Sec. 1. Effective January 1, 1999.)


citation: COM § 8108

text:
(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, all of the following:

(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.

(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 all of the following:

(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.

(4) At the time the instruction is presented to the issuer, all of the following will be applicable:

(A) The purchaser will be entitled to the registration of transfer.

(B) The transfer will be registered by the issuer free from all liens, security interests, restrictions, and claims other than those specified in the instruction.

(C) The transfer will not violate any restriction on transfer.

(D) 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 all of the following:

(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.

(4) The transfer is otherwise effective and rightful.

(d) A person who endorses a security certificate warrants all of the following to the issuer:

(1) There is no adverse claim to the security.

(2) The endorsement is effective.

(e) A person who originates an instruction for registration of transfer of an uncertificated security warrants all of the following to the issuer:

(1) The instruction is effective.

(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 subdivision (g).

(i) Except as otherwise provided in subdivision (g), a broker acting for a customer makes to the issuer and a purchaser the warranties provided in subdivisions (a) to (f), inclusive. 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 subdivision (a) or (b), 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.


citation: COM § 8109

text:
(a) A person who originates an entitlement order to a securities intermediary warrants all of the following to the securities intermediary:

(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.

(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 subdivision (a) or (b) of Section 8108.

(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 subdivision (a) or (b) of Section 8108.


citation: COM § 8110

text:
(a) The local law of the issuer’s jurisdiction, as specified in subdivision (d), governs the following:

(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.

(5) Whether an adverse claim can be asserted against a person to whom transfer of a certificated or uncertificated security is registered or a person who obtains control of an uncertificated security.

(b) The local law of the securities intermediary’s jurisdiction, as specified in subdivision (e), governs the following:

(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.

(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 paragraphs (2) to (5), inclusive, of subdivision (a).

(e) The following rules determine a “securities intermediary’s jurisdiction” for purposes of this section:

(1) If an agreement between the securities intermediary and its entitlement holder governing the securities account expressly provides that a particular jurisdiction is the security intermediary’s jurisdiction for purposes of this code, that jurisdiction is the securities intermediary’s jurisdiction.

(2) If paragraph (1) does not apply and an agreement between the securities intermediary and its entitlement holder governing the securities account expressly provides that the agreement is governed by the law of a particular jurisdiction, that jurisdiction is the securities intermediary’s jurisdiction.

(3) If neither paragraph (1) nor paragraph (2) applies and an agreement between the securities intermediary and its entitlement holder governing the securities account expressly provides that the securities account is maintained at an office in a particular jurisdiction, that jurisdiction is the securities intermediary’s jurisdiction.

(4) If none of the preceding paragraphs applies, the securities intermediary’s jurisdiction is the jurisdiction in which the office identified in an account statement as the office serving the entitlement holder’s account is located.

(5) If none of the preceding paragraphs applies, the securities intermediary’s jurisdiction is the jurisdiction in which the chief executive office of the securities intermediary is located.

(f) A securities intermediary’s jurisdiction is not determined by the physical location of certificates representing financial assets, or by the jurisdiction in which is organized the issuer of the financial asset with respect to which an entitlement holder has a security entitlement, or by the location of facilities for data processing or other record keeping concerning the account.

(g) The local law of the issuer’s jurisdiction or the securities intermediary’s jurisdiction governs a matter or transaction specified in subdivision (a) or (b) even if the matter or transaction does not bear any relation to the jurisdiction.

history: (History: Amended by Stats. 2023, Ch. 210, Sec. 22. (SB 95) Effective January 1, 2024.)


citation: COM § 8111

text: 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 division and affects another party who does not consent to the rule.

history: (History: Added by Stats. 1996, Ch. 497, Sec. 9. Effective January 1, 1997.)


citation: COM § 8112

text:
(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 subdivision (d). 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 subdivision (d).

(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 subdivision (d).

(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.


citation: COM § 8113

text: 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.


citation: COM § 8114

text:
The following rules apply in an action on a certificated security against the issuer:

(a) Unless specifically denied in the pleadings, each signature on a security certificate or in a necessary endorsement is admitted.

(b) 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.

(c) 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.

(d) 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.


citation: COM § 8115

text:
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 did one or more of the following:

(1) Took the action after it had been served with an injunction, restraining order, or other legal process enjoining it from doing so, issued by a court of competent jurisdiction, and had a reasonable opportunity to act on the injunction, restraining order, or other legal process.

(2) Acted in collusion with the wrongdoer in violating the rights of the adverse claimant.

(3) In the case of a security certificate that has been stolen, acted with notice of the adverse claim.


citation: COM § 8116

text: 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.


citation: COM § 8201

text:
(a) With respect to an obligation on or a defense to a security, an “issuer” includes a person that does any of the following:

(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.

(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.

chapter: 2. Issue and Issuer

path: 8. INVESTMENT SECURITIES > 2. Issue and Issuer


citation: COM § 8202

text:
(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 subdivision 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) Paragraph (1) 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 8205, 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.


citation: COM § 8203

text:
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 either:

(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.

(2) Is not covered by paragraph (1) 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.


citation: COM § 8204

text:
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 either of the following applies:

(1) The security is certificated and the restriction is noted conspicuously on the security certificate.

(2) The security is uncertificated and the registered owner has been notified of the restriction.


citation: COM § 8205

text:
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 one of the following:

(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.

(2) An employee of the issuer, or of any of the persons listed in paragraph (1), entrusted with responsible handling of the security certificate.


citation: COM § 8206

text:
(a) If a security certificate contains the signatures necessary to its issue or transfer but is incomplete in any other respect, the following apply:

(1) Any person may complete it by filling in the blanks as authorized.

(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.


citation: COM § 8207

text:
(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 division does not affect the liability of the registered owner of a security for a call, assessment, or the like.


citation: COM § 8208

text:
(a) A person signing a security certificate as authenticating trustee, registrar, transfer agent, or the like, warrants all of the following to a purchaser for value of the certificated security, if the purchaser is without notice of a particular defect:

(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.

(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 subdivision (a) does not assume responsibility for the validity of the security in other respects.


citation: COM § 8209

text: 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.


citation: COM § 8210

text:
(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 subdivisions (c) and (d), the provisions of this division that 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.


citation: COM § 8301

text:
(a) Delivery of a certificated security to a purchaser occurs when any of the following occur:

(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.

(3) A securities intermediary acting on behalf of the purchaser acquires possession of the security certificate, only if the certificate is in registered form and is (A) registered in the name of the purchaser, (B) payable to the order of the purchaser, or (C) specially endorsed to the purchaser by an effective endorsement and has not been endorsed to the securities intermediary or in blank.

(b) Delivery of an uncertificated security to a purchaser occurs when any of the following occur:

(1) The issuer registers the purchaser as the registered owner, upon original issue or registration of transfer.

(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.

history: (History: Amended by Stats. 1999, Ch. 991, Sec. 33.3. Effective January 1, 2000. Operative July 1, 2001, by Sec. 75 of Ch. 991.)

path: 8. INVESTMENT SECURITIES > 3. Transfer of Certificated and Uncertificated Securities


citation: COM § 8302

text:
(a) Except as otherwise provided in subdivisions (b) and (c), a purchaser of a certificated or uncertificated security acquires all rights in the security that the transferor had or had power to transfer.

(b) A purchaser of a limited interest acquires rights only to the extent of the interest purchased.

(c) A purchaser of a certificated security who as a previous holder had notice of an adverse claim does not improve its position by taking from a protected purchaser.

history: (History: Amended by Stats. 1999, Ch. 991, Sec. 33.4. Effective January 1, 2000. Operative July 1, 2001, by Sec. 75 of Ch. 991.)

chapter: 3. Transfer of Certificated and Uncertificated Securities


citation: COM § 8303

text:
(a) “Protected purchaser” means a purchaser of a certificated or uncertificated security, or of an interest therein, who does all of the following:

(1) Gives value.

(2) Does not have notice of any adverse claim to the security.

(3) Obtains control of the certificated or uncertificated security.

(b) A protected purchaser also acquires its interest in the security free of any adverse claim.

history: (History: Amended by Stats. 2023, Ch. 210, Sec. 23. (SB 95) Effective January 1, 2024.)


citation: COM § 8304

text:
(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 8108 and not an obligation that the security will be honored by the issuer.


citation: COM § 8305

text:
(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 8108 and not an obligation that the security will be honored by the issuer.


citation: COM § 8306

text:
(a) A person who guarantees a signature of an endorser of a security certificate warrants that at the time of signing all of the following were true:

(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.

(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 all of the following were true:

(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.

(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 subdivision (b) and also warrants that at the time the instruction is presented to the issuer all of the following are true:

(1) The person specified in the instruction as the registered owner of the uncertificated security will be the registered owner.

(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 subdivisions (a) and (b) or a special guarantor under subdivision (c) 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 subdivision (a) 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 subdivision (c) 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.


citation: COM § 8307

text: 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.


citation: COM § 8401

text:
(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 the following conditions are met:

(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 8402).

(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 8204.

(6) A demand that the issuer not register transfer has not become effective under Section 8403, or the issuer has complied with subdivision (b) of Section 8403 but no legal process or indemnity bond is obtained as provided in subdivision (d) of Section 8403.

(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.

chapter: 4. Registration

path: 8. INVESTMENT SECURITIES > 4. Registration


citation: COM § 8402

text:
(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 paragraph (4) or (5) of Section 8107, 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.

(5) If the endorsement is made or the instruction is originated by a person not covered by another provision of this subdivision, assurance appropriate to the case corresponding as nearly as may be to the provisions of this subdivision.

(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:

(A) In the case of a fiduciary appointed or qualified by a court, a certificate issued by or under the direction or supervision of the court or an officer thereof and dated within 60 days before the date of presentation for transfer.

(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 an issuer to be responsible or, in the absence of that document or certificate, other evidence the issuer reasonably considers appropriate.


citation: COM § 8403

text:
(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 a demand that the issuer not register transfer has become effective, the issuer shall promptly communicate to (A) the person who initiated the demand at the address provided in the demand and (B) the person who presented the security for registration of transfer or initiated the instruction requesting registration of transfer a notification stating all of the following:

(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.

(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 paragraph (3) of subdivision (b) may not exceed 30 days after the date of communication of the notification. A shorter period may be specified by the issuer if it is not manifestly unreasonable.

(d) An issuer is not liable to a person who initiated a demand that the issuer not register transfer for any loss the person suffers as a result of registration of a transfer pursuant to an effective 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.

(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.


citation: COM § 8404

text:
(a) Except as otherwise provided in Section 8406, 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 in any of the following circumstances:

(1) Pursuant to an ineffective endorsement or instruction.

(2) After a demand that the issuer not register transfer became effective under subdivision (a) of Section 8403(a) and the issuer did not comply with subdivision (b) of Section 8403.

(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.

(4) By an issuer acting in collusion with the wrongdoer.

(b) An issuer that is liable for wrongful registration of transfer under subdivision (a) 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 8210.

(c) Except as otherwise provided in subdivision (a) 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.


citation: COM § 8405

text:
(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 does all of the following:

(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.

(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 8210. 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.


citation: COM § 8406

text: 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 8404 or a claim to a new security certificate under Section 8405.


citation: COM § 8407

text: A person acting as authenticating trustee, transfer agent, registrar, or other agent for an issuer in the registration of a transfer of its securities, in the issue of new security certificates or uncertificated securities, or in the cancellation of surrendered security certificates has the same obligation to the holder or owner of a certificated or uncertificated security with regard to the particular functions performed as the issuer has in regard to those functions.


citation: COM § 8501

text:
(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 subdivisions (d) and (e), a person acquires a security entitlement if a securities intermediary does any of the following:

(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.

(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 subdivision (b) 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.

chapter: 5. Security Entitlements

path: 8. INVESTMENT SECURITIES > 5. Security Entitlements


citation: COM § 8502

text: 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 8501 for value and without notice of the adverse claim.


citation: COM § 8503

text:
(a) To the extent necessary for a securities intermediary to satisfy all security entitlements with respect to a particular financial asset, all interests in that financial asset held by the securities intermediary are held by the securities intermediary for the entitlement holders, are not property of the securities intermediary, and are not subject to claims of creditors of the securities intermediary, except as otherwise provided in Section 8511.

(b) An entitlement holder’s property interest with respect to a particular financial asset under subdivision (a) 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 subdivision (a) may be enforced against the securities intermediary only by exercise of the entitlement holder’s rights under Sections 8505 to 8508, inclusive.

(d) An entitlement holder’s property interest with respect to a particular financial asset under subdivision (a) may be enforced against a purchaser of the financial asset or interest therein only if all of the following conditions are met:

(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 8504 by transferring the financial asset or interest therein to the purchaser.

(4) The purchaser is not protected under subdivision (e). 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 subdivision (a), whether framed in conversion, replevin, constructive trust, equitable lien, or other theory, may not be asserted against any purchaser of a financial asset or interest therein who gives value, obtains control, and does not act in collusion with the securities intermediary in violating the securities intermediary’s obligations under Section 8504.


citation: COM § 8504

text:
(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 subdivision (a).

(c) A securities intermediary satisfies the duty in subdivision (a) if it does either of the following:

(1) The securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary.

(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.


citation: COM § 8505

text:
(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 it does either of the following:

(1) The securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary.

(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.


citation: COM § 8506

text:
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 it does either of the following:

(1) The securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary.

(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.


citation: COM § 8507

text:
(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 it does either of the following:

(1) The securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary.

(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.


citation: COM § 8508

text:
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 it does either of the following:

(1) The securities intermediary acts as agreed upon by the entitlement holder and the securities intermediary.

(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.


citation: COM § 8509

text:
(a) If the substance of a duty imposed upon a securities intermediary by Sections 8504 to 8508, inclusive, is the subject of a federal 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 8504 to 8508, inclusive, is subject to the following:

(1) Rights of the securities intermediary arising out of a security interest under a security agreement with the entitlement holder or otherwise.

(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 8504 to 8508, inclusive, do not require a securities intermediary to take any action that is prohibited by other statute, regulation, or rule.


citation: COM § 8510

text:
(a) In a case not covered by the priority rules in Division 9 (commencing with Section 9101) or the rules stated in subdivision (c), an action based on an adverse claim to a financial asset or security entitlement, whether framed in conversion, replevin, constructive trust, equitable lien, or other theory, may not be asserted against a person who purchases a security entitlement, or an interest therein, from an entitlement holder if the purchaser gives value, does not have notice of the adverse claim, and obtains control.

(b) If an adverse claim could not have been asserted against an entitlement holder under Section 8502, 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 Division 9 (commencing with Section 9101), a purchaser for value of a security entitlement, or an interest therein, who obtains control has priority over a purchaser of a security entitlement, or an interest therein, who does not obtain control. Except as otherwise provided in subdivision (d), purchasers who have control rank according to priority in time of any of the following:

(1) The purchaser’s becoming the person for whom the securities account, in which the security entitlement is carried, is maintained, if the purchaser obtained control under paragraph (1) of subdivision (d) of Section 8106.

(2) The securities intermediary’s agreement to comply with the purchaser’s entitlement orders with respect to security entitlements carried or to be carried in the securities account in which the security entitlement is carried, if the purchaser obtained control under paragraph (2) of subdivision (d) of Section 8106.

(3) If the purchaser obtained control through another person under paragraph (3) of subdivision (d) of Section 8106, the time on which priority would be based under this subdivision if the other person were the secured party.

(d) A securities intermediary as purchaser has priority over a conflicting purchaser who has control unless otherwise agreed by the securities intermediary.

history: (History: Amended by Stats. 1999, Ch. 991, Sec. 33.41. Effective January 1, 2000. Operative July 1, 2001, by Sec. 75 of Ch. 991.)


citation: COM § 8511

text:
(a) Except as otherwise provided in subdivisions (b) and (c), if a securities intermediary does not have sufficient interests in a particular financial asset to satisfy both its obligations to entitlement holders who have security entitlements to that financial asset and its obligation to a creditor of the securities intermediary who has a security interest in that financial asset, the claims of entitlement holders, other than the creditor, have priority over the claim of the creditor.

(b) A claim of a creditor of a securities intermediary who has a security interest in a financial asset held by a securities intermediary has priority over claims of the securities intermediary’s entitlement holders who have security entitlements with respect to that financial asset if the creditor has control over the financial asset.

(c) If a clearing corporation does not have sufficient financial assets to satisfy both its obligations to entitlement holders who have security entitlements with respect to a financial asset and its obligation to a creditor of the clearing corporation who has a security interest in that financial asset, the claim of the creditor has priority over the claims of entitlement holders.


citation: COM § 8601

text: This division becomes operative January 1, 1997.

chapter: 6. Transition Provisions

path: 8. INVESTMENT SECURITIES > 6. Transition Provisions


citation: COM § 8603

text:
(a) This division does not affect an action or proceeding commenced before this division becomes operative.

(b) If a security interest in a security is perfected at the date this division becomes operative, and the action by which the security interest was perfected would suffice to perfect a security interest under this division, no further action is required to continue perfection. If a security interest in a security is perfected at the date this division takes effect but the action by which the security interest was perfected would not suffice to perfect a security interest under this division, the security interest remains perfected for a period of four months after the operative date and continues perfected thereafter if appropriate action to perfect under this division is taken within that period. If a security interest is perfected at the date this division becomes operative and the security interest can be perfected by filing under Division 9 (commencing with Section 9101), 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 and that financing statement shall contain a statement that it is being filed pursuant to this section.

history: (History: Amended by Stats. 1999, Ch. 991, Sec. 33.5. Effective January 1, 2000. Operative July 1, 2001, by Sec. 75 of Ch. 991.)


citation: COM § 9101

text: This division may be cited as the Uniform Commercial Code-Secured Transactions.

history: (History: Repealed and added by Stats. 1999, Ch. 991, Sec. 35. Effective January 1, 2000. Operative July 1, 2001, by Sec. 75 of Ch. 991 and Section 9701.)

division: 9. SECURED TRANSACTIONS

chapter: 1. General Provisions

path: 9. SECURED TRANSACTIONS > 1. General Provisions