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PAG LIN 1 1 Section 1. Section 511.8, subsection 21, paragraph a, 1 2 subparagraph (1), Code 1995, is amended to read as follows: 1 3 (1) "Clearing corporation" means a corporation as defined 1 4 in section 554.8102, subsection 3. 1 5 Sec. 2. Section 515.35, subsection 2, paragraphs b and c, 1 6 Code 1995, are amended to read as follows: 1 7 b. "Clearing corporation" means as defined in section 1 8 554.8102, subsection 3. 1 9 c. "Custodian bank" meansas defined in section 554.8102,1 10subsection 4a bank or trust company that is supervised and 1 11 examined by state or federal authority having supervision over 1 12 banks and is acting as custodian for a clearing corporation. 1 13 Sec. 3. Section 518.14, subsection 2, paragraph c, Code 1 14 Supplement 1995, is amended to read as follows: 1 15 c. "Custodian bank" means as defined in section554.81021 16 515.35. 1 17 Sec. 4. Section 518A.12, subsection 2, paragraph c, Code 1 18 Supplement 1995, is amended to read as follows: 1 19 c. "Custodian bank" means as defined in section554.81021 20 515.35. 1 21 Sec. 5. Section 554.1105, subsection 2, Code 1995, is 1 22 amended to read as follows: 1 23 2. Where one of the following provisions of this chapter 1 24 specifies the applicable law, that provision governs and a 1 25 contrary agreement is effective only to the extent permitted 1 26 by the law (including the conflict of laws rules) so 1 27 specified: 1 28 Rights of creditors against sold goods. Section 554.2402. 1 29 Applicability of the Article on Bank Deposits and 1 30 Collections. Section 554.4102. 1 31 Applicability of the Article on Investment Securities. 1 32 Section554.8106554.8110. 1 33 Perfection provisions of the Article on Secured 1 34 Transactions. Section 554.9103. 1 35 Governing law in the Article on Funds Transfers. Section 2 1 554.12507. 2 2 Applicability of the Article on Leases. Sections 554.13105 2 3 and 554.13106. 2 4 Sec. 6. Section 554.1206, subsection 2, Code 1995, is 2 5 amended to read as follows: 2 6 2. Subsection 1 of this section does not apply to 2 7 contracts for the sale of goods (section 554.2201) nor of 2 8 securities (section554.8319554.8113) nor to security 2 9 agreements (section 554.9203). 2 10 Sec. 7. Section 554.4104, subsection 1, paragraph f, Code 2 11 Supplement 1995, is amended to read as follows: 2 12 f. "Documentary draft" means a draft to be presented for 2 13 acceptance or payment if specified documents, certificated 2 14 securities (section 554.8102) or instructions for 2 15 uncertificated securities (section554.8308554.8102), or 2 16 other certificates, statements, or the like are to be received 2 17 by the drawee or other payor before acceptance or payment of 2 18 the draft. 2 19 Sec. 8. Section 554.5114, subsection 2, unnumbered 2 20 paragraph 1, Code 1995, is amended to read as follows: 2 21 Unless otherwise agreed when documents appear on their face 2 22 to comply with the terms of a credit but a required document 2 23 does not in fact conform to the warranties made on negotiation 2 24 or transfer of a document of title (section 554.7507) or of a 2 25 certificated security (section554.8306554.8108) or is forged 2 26 or fraudulent or there is fraud in the transaction: 2 27 Sec. 9. Section 554.5114, subsection 2, paragraph a, Code 2 28 1995, is amended to read as follows: 2 29 a. the issuer must honor the draft or demand for payment 2 30 if honor is demanded by a negotiating bank or other holder of 2 31 the draft or demand which has taken the draft or demand under 2 32 the credit and under circumstances which would make it a 2 33 holder in due course (section 554.3302) and in an appropriate 2 34 case would make it a person to whom a document of title has 2 35 been duly negotiated (section 554.7502) or abona fide3 1 purchaser of a certificated or uncertificated security who 3 2 acquires rights in a security (section 554.8302); and 3 3 PART 1 3 4 SHORT TITLE AND GENERAL MATTERS 3 5 Sec. 10. Section 554.8102, Code 1995, is amended by 3 6 striking the section and inserting in lieu thereof the 3 7 following: 3 8 554.8102 DEFINITIONS AND INDEX OF DEFINITIONS. 3 9 1. In this Article: 3 10 a. "Adverse claim" means a claim that a claimant has a 3 11 property interest in a financial asset and that it is a 3 12 violation of the rights of the claimant for another person to 3 13 hold, transfer, or deal with the financial asset. 3 14 b. "Bearer form", as applied to a certificated security, 3 15 means a form in which the security is payable to the bearer of 3 16 the security certificate according to its terms but not by 3 17 reason of an indorsement. 3 18 c. "Broker" means a person defined as a broker or dealer 3 19 under the federal securities laws, but without excluding a 3 20 bank acting in that capacity. 3 21 d. "Certificated security" means a security that is 3 22 represented by a certificate. 3 23 e. "Clearing corporation" means: 3 24 (1) a person that is registered as a "clearing agency" 3 25 under the federal securities laws; 3 26 (2) a federal reserve bank; or 3 27 (3) any other person that provides clearance or settlement 3 28 services with respect to financial assets that would require 3 29 it to register as a clearing agency under the federal 3 30 securities laws but for an exclusion or exemption from the 3 31 registration requirement, if its activities as a clearing 3 32 corporation, including promulgation of rules, are subject to 3 33 regulation by a federal or state governmental authority. 3 34 f. "Communicate" means to: 3 35 (1) send a signed writing; or 4 1 (2) transmit information by any mechanism agreed upon by 4 2 the persons transmitting and receiving the information. 4 3 g. "Entitlement holder" means a person identified in the 4 4 records of a securities intermediary as the person having a 4 5 security entitlement against the securities intermediary. If 4 6 a person acquires a security entitlement by virtue of section 4 7 554.8501, subsection 2, paragraph "b" or "c", that person is 4 8 the entitlement holder. 4 9 h. "Entitlement order" means a notification communicated 4 10 to a securities intermediary directing transfer or redemption 4 11 of a financial asset to which the entitlement holder has a 4 12 security entitlement. 4 13 i. "Financial asset", except as otherwise provided in 4 14 section 554.8103, means: 4 15 (1) a security; 4 16 (2) an obligation of a person or a share, participation, 4 17 or other interest in a person or in property or an enterprise 4 18 of a person, which is, or is of a type, dealt in or traded on 4 19 financial markets, or which is recognized in any area in which 4 20 it is issued or dealt in as a medium for investment; or 4 21 (3) any property that is held by a securities intermediary 4 22 for another person in a securities account if the securities 4 23 intermediary has expressly agreed with the other person that 4 24 the property is to be treated as a financial asset under this 4 25 Article. 4 26 As context requires, the term means either the interest 4 27 itself or the means by which a person's claim to it is 4 28 evidenced, including a certificated or uncertificated 4 29 security, a security certificate, or a security entitlement. 4 30 j. "Good faith", for purposes of the obligation of good 4 31 faith in the performance or enforcement of contracts or duties 4 32 within this Article, means honesty in fact and the observance 4 33 of reasonable commercial standards of fair dealing. 4 34 k. "Indorsement" means a signature that alone or 4 35 accompanied by other words is made on a security certificate 5 1 in registered form or on a separate document for the purpose 5 2 of assigning, transferring, or redeeming the security or 5 3 granting a power to assign, transfer, or redeem it. 5 4 l. "Instruction" means a notification communicated to the 5 5 issuer of an uncertificated security which directs that the 5 6 transfer of the security be registered or that the security be 5 7 redeemed. 5 8 m. "Registered form", as applied to a certificated 5 9 security, means a form in which: 5 10 (1) the security certificate specifies a person entitled 5 11 to the security; and 5 12 (2) a transfer of the security may be registered upon 5 13 books maintained for that purpose by or on behalf of the 5 14 issuer, or the security certificate so states. 5 15 n. "Securities intermediary" means: 5 16 (1) a clearing corporation; or 5 17 (2) a person, including a bank or broker, that in the 5 18 ordinary course of its business maintains securities accounts 5 19 for others and is acting in that capacity. 5 20 o. "Security", except as otherwise provided in section 5 21 554.8103, means an obligation of an issuer or a share, 5 22 participation, or other interest in an issuer or in property 5 23 or an enterprise of an issuer: 5 24 (1) which is represented by a security certificate in 5 25 bearer or registered form, or the transfer of which may be 5 26 registered upon books maintained for that purpose by or on 5 27 behalf of the issuer; 5 28 (2) which is one of a class or series or by its terms is 5 29 divisible into a class or series of shares, participations, 5 30 interests, or obligations; and 5 31 (3) which: 5 32 (a) is, or is of a type, dealt in or traded on securities 5 33 exchanges or securities markets; or 5 34 (b) is a medium for investment and by its terms expressly 5 35 provides that it is a security governed by this Article. 6 1 p. "Security certificate" means a certificate representing 6 2 a security. 6 3 q. "Security entitlement" means the rights and property 6 4 interest of an entitlement holder with respect to a financial 6 5 asset specified in Part 5. 6 6 r. "Uncertificated security" means a security that is not 6 7 represented by a certificate. 6 8 2. Other definitions applying to this Article and the 6 9 sections in which they appear are: 6 10 Appropriate person .............. Section 554.8107 6 11 Control ......................... Section 554.8106 6 12 Delivery ........................ Section 554.8301 6 13 Investment company 6 14 security ........................ Section 554.8103 6 15 Issuer .......................... Section 554.8201 6 16 Overissue ....................... Section 554.8210 6 17 Protected purchaser ............. Section 554.8303 6 18 Securities account .............. Section 554.8501 6 19 3. In addition, Article 1 contains general definitions and 6 20 principles of construction and interpretation applicable 6 21 throughout this Article. 6 22 4. The characterization of a person, business, or 6 23 transaction for purposes of this Article does not determine 6 24 the characterization of the person, business, or transaction 6 25 for purposes of any other law, regulation, or rule. 6 26 Sec. 11. Section 554.8103, Code 1995, is amended by 6 27 striking the section and inserting in lieu thereof the 6 28 following: 6 29 554.8103 RULES FOR DETERMINING WHETHER CERTAIN OBLIGATIONS 6 30 AND INTERESTS ARE SECURITIES OR FINANCIAL ASSETS. 6 31 1. A share or similar equity interest issued by a 6 32 corporation, business trust, joint stock company, or similar 6 33 entity is a security. 6 34 2. An "investment company security" is a security. 6 35 "Investment company security" means a share or similar equity 7 1 interest issued by an entity that is registered as an 7 2 investment company under the federal investment company laws, 7 3 an interest in a unit investment trust that is so registered, 7 4 or a face-amount certificate issued by a face-amount 7 5 certificate company that is so registered. Investment company 7 6 security does not include an insurance policy or endowment 7 7 policy or annuity contract issued by an insurance company. 7 8 3. An interest in a partnership or limited liability 7 9 company is not a security unless it is dealt in or traded on 7 10 securities exchanges or in securities markets, its terms 7 11 expressly provide that it is a security governed by this 7 12 Article, or it is an investment company security. However, an 7 13 interest in a partnership or limited liability company is a 7 14 financial asset if it is held in a securities account. 7 15 4. A writing that is a security certificate is governed by 7 16 this Article and not by Article 3, even though it also meets 7 17 the requirements of that Article. However, a negotiable 7 18 instrument governed by Article 3 is a financial asset if it is 7 19 held in a securities account. 7 20 5. An option or similar obligation issued by a clearing 7 21 corporation to its participants is not a security, but is a 7 22 financial asset. 7 23 6. A commodity contract, as defined in section 554.9115, 7 24 is not a security or a financial asset. 7 25 Sec. 12. Section 554.8104, Code 1995, is amended by 7 26 striking the section and inserting in lieu thereof the 7 27 following: 7 28 554.8104 ACQUISITION OF SECURITY OR FINANCIAL ASSET OR 7 29 INTEREST THEREIN. 7 30 1. A person acquires a security or an interest therein, 7 31 under this Article, if: 7 32 a. the person is a purchaser to whom a security is 7 33 delivered pursuant to section 554.8301; or 7 34 b. the person acquires a security entitlement to the 7 35 security pursuant to section 554.8501. 8 1 2. A person acquires a financial asset, other than a 8 2 security, or an interest therein, under this Article, if the 8 3 person acquires a security entitlement to the financial asset. 8 4 3. A person who acquires a security entitlement to a 8 5 security or other financial asset has the rights specified in 8 6 Part 5, but is a purchaser of any security, security 8 7 entitlement, or other financial asset held by the securities 8 8 intermediary only to the extent provided in section 554.8503. 8 9 4. Unless the context shows that a different meaning is 8 10 intended, a person who is required by other law, regulation, 8 11 rule, or agreement to transfer, deliver, present, surrender, 8 12 exchange, or otherwise put in the possession of another person 8 13 a security or financial asset satisfies that requirement by 8 14 causing the other person to acquire an interest in the 8 15 security or financial asset pursuant to subsection 1 or 2. 8 16 Sec. 13. Section 554.8105, Code 1995, is amended by 8 17 striking the section and inserting in lieu thereof the 8 18 following: 8 19 554.8105 NOTICE OF ADVERSE CLAIM. 8 20 1. A person has notice of an adverse claim if: 8 21 a. the person knows of the adverse claim; 8 22 b. the person is aware of facts sufficient to indicate 8 23 that there is a significant probability that the adverse claim 8 24 exists and deliberately avoids information that would 8 25 establish the existence of the adverse claim; or 8 26 c. the person has a duty, imposed by statute or 8 27 regulation, to investigate whether an adverse claim exists, 8 28 and the investigation so required would establish the 8 29 existence of the adverse claim. 8 30 2. Having knowledge that a financial asset or interest 8 31 therein is or has been transferred by a representative imposes 8 32 no duty of inquiry into the rightfulness of a transaction and 8 33 is not notice of an adverse claim. However, a person who 8 34 knows that a representative has transferred a financial asset 8 35 or interest therein in a transaction that is, or whose 9 1 proceeds are being used, for the individual benefit of the 9 2 representative or otherwise in breach of duty has notice of an 9 3 adverse claim. 9 4 3. An act or event that creates a right to immediate 9 5 performance of the principal obligation represented by a 9 6 security certificate or sets a date on or after which the 9 7 certificate is to be presented or surrendered for redemption 9 8 or exchange does not itself constitute notice of an adverse 9 9 claim except in the case of a transfer more than: 9 10 a. one year after a date set for presentment or surrender 9 11 for redemption or exchange; or 9 12 b. six months after a date set for payment of money 9 13 against presentation or surrender of the certificate, if money 9 14 was available for payment on that date. 9 15 4. A purchaser of a certificated security has notice of an 9 16 adverse claim if the security certificate: 9 17 a. whether in bearer or registered form, has been indorsed 9 18 "for collection" or "for surrender" or for some other purpose 9 19 not involving transfer; or 9 20 b. is in bearer form and has on it an unambiguous 9 21 statement that it is the property of a person other than the 9 22 transferor, but the mere writing of a name on the certificate 9 23 is not such a statement. 9 24 5. Filing of a financing statement under Article 9 is not 9 25 notice of an adverse claim to a financial asset. 9 26 Sec. 14. Section 554.8106, Code 1995, is amended by 9 27 striking the section and inserting in lieu thereof the 9 28 following: 9 29 554.8106 CONTROL. 9 30 1. A purchaser has "control" of a certificated security in 9 31 bearer form if the certificated security is delivered to the 9 32 purchaser. 9 33 2. A purchaser has "control" of a certificated security in 9 34 registered form if the certificated security is delivered to 9 35 the purchaser, and: 10 1 a. the certificate is indorsed to the purchaser or in 10 2 blank by an effective indorsement; or 10 3 b. the certificate is registered in the name of the 10 4 purchaser, upon original issue or registration of transfer by 10 5 the issuer. 10 6 3. A purchaser has "control" of an uncertificated security 10 7 if: 10 8 a. the uncertificated security is delivered to the 10 9 purchaser; or 10 10 b. the issuer has agreed that it will comply with 10 11 instructions originated by the purchaser without further 10 12 consent by the registered owner. 10 13 4. A purchaser has "control" of a security entitlement if: 10 14 a. the purchaser becomes the entitlement holder; or 10 15 b. the securities intermediary has agreed that it will 10 16 comply with entitlement orders originated by the purchaser 10 17 without further consent by the entitlement holder. 10 18 5. If an interest in a security entitlement is granted by 10 19 the entitlement holder to the entitlement holder's own 10 20 securities intermediary, the securities intermediary has 10 21 control. 10 22 6. A purchaser who has satisfied the requirements of 10 23 subsection 3, paragraph "b", or subsection 4, paragraph "b", 10 24 has control even if the registered owner in the case of 10 25 subsection 3, paragraph "b", or the entitlement holder in the 10 26 case of subsection 4, paragraph "b", retains the right to make 10 27 substitutions for the uncertificated security or security 10 28 entitlement, to originate instructions or entitlement orders 10 29 to the issuer or securities intermediary, or otherwise to deal 10 30 with the uncertificated security or security entitlement. 10 31 7. An issuer or a securities intermediary may not enter 10 32 into an agreement of the kind described in subsection 3, 10 33 paragraph "b", or subsection 4, paragraph "b", without the 10 34 consent of the registered owner or entitlement holder, but an 10 35 issuer or a securities intermediary is not required to enter 11 1 into such an agreement even though the registered owner or 11 2 entitlement holder so directs. An issuer or securities 11 3 intermediary that has entered into such an agreement is not 11 4 required to confirm the existence of the agreement to another 11 5 party unless requested to do so by the registered owner or 11 6 entitlement holder. 11 7 Sec. 15. Section 554.8107, Code 1995, is amended by 11 8 striking the section and inserting in lieu thereof the 11 9 following: 11 10 554.8107 WHETHER INDORSEMENT, INSTRUCTION, OR ENTITLEMENT 11 11 ORDER IS EFFECTIVE. 11 12 1. "Appropriate person" means: 11 13 a. with respect to an indorsement, the person specified by 11 14 a security certificate or by an effective special indorsement 11 15 to be entitled to the security; 11 16 b. with respect to an instruction, the registered owner of 11 17 an uncertificated security; 11 18 c. with respect to an entitlement order, the entitlement 11 19 holder; 11 20 d. if the person designated in paragraph "a", "b", or "c" 11 21 is deceased, the designated person's successor taking under 11 22 other law or the designated person's personal representative 11 23 acting for the estate of the decedent; or 11 24 e. if the person designated in paragraph "a", "b", or "c" 11 25 lacks capacity, the designated person's guardian, conservator, 11 26 or other similar representative who has power under other law 11 27 to transfer the security or financial asset. 11 28 2. An indorsement, instruction, or entitlement order is 11 29 effective if: 11 30 a. it is made by the appropriate person; 11 31 b. it is made by a person who has power under the law of 11 32 agency to transfer the security or financial asset on behalf 11 33 of the appropriate person, including, in the case of an 11 34 instruction or entitlement order, a person who has control 11 35 under section 554.8106, subsection 3, paragraph "b", or 12 1 subsection 4, paragraph "b"; or 12 2 c. the appropriate person has ratified it or is otherwise 12 3 precluded from asserting its ineffectiveness. 12 4 3. An indorsement, instruction, or entitlement order made 12 5 by a representative is effective even if: 12 6 a. the representative has failed to comply with a 12 7 controlling instrument or with the law of the state having 12 8 jurisdiction of the representative relationship, including any 12 9 law requiring the representative to obtain court approval of 12 10 the transaction; or 12 11 b. the representative's action in making the indorsement, 12 12 instruction, or entitlement order or using the proceeds of the 12 13 transaction is otherwise a breach of duty. 12 14 4. If a security is registered in the name of or specially 12 15 indorsed to a person described as a representative, or if a 12 16 securities account is maintained in the name of a person 12 17 described as a representative, an indorsement, instruction, or 12 18 entitlement order made by the person is effective even though 12 19 the person is no longer serving in the described capacity. 12 20 5. Effectiveness of an indorsement, instruction, or 12 21 entitlement order is determined as of the date the 12 22 indorsement, instruction, or entitlement order is made, and an 12 23 indorsement, instruction, or entitlement order does not become 12 24 ineffective by reason of any later change of circumstances. 12 25 Sec. 16. Section 554.8108, Code 1995, is amended by 12 26 striking the section and inserting in lieu thereof the 12 27 following: 12 28 554.8108 WARRANTIES IN DIRECT HOLDING. 12 29 1. A person who transfers a certificated security to a 12 30 purchaser for value warrants to the purchaser, and an 12 31 indorser, if the transfer is by indorsement, warrants to any 12 32 subsequent purchaser, that: 12 33 a. the certificate is genuine and has not been materially 12 34 altered; 12 35 b. the transferor or indorser does not know of any fact 13 1 that might impair the validity of the security; 13 2 c. there is no adverse claim to the security; 13 3 d. the transfer does not violate any restriction on 13 4 transfer; 13 5 e. if the transfer is by indorsement, the indorsement is 13 6 made by an appropriate person, or if the indorsement is by an 13 7 agent, the agent has actual authority to act on behalf of the 13 8 appropriate person; and 13 9 f. the transfer is otherwise effective and rightful. 13 10 2. A person who originates an instruction for registration 13 11 of transfer of an uncertificated security to a purchaser for 13 12 value warrants to the purchaser that: 13 13 a. the instruction is made by an appropriate person, or if 13 14 the instruction is by an agent, the agent has actual authority 13 15 to act on behalf of the appropriate person; 13 16 b. the security is valid; 13 17 c. there is no adverse claim to the security; and 13 18 d. at the time the instruction is presented to the issuer: 13 19 (1) the purchaser will be entitled to the registration of 13 20 transfer; 13 21 (2) the transfer will be registered by the issuer free 13 22 from all liens, security interests, restrictions, and claims 13 23 other than those specified in the instruction; 13 24 (3) the transfer will not violate any restriction on 13 25 transfer; and 13 26 (4) the requested transfer will otherwise be effective and 13 27 rightful. 13 28 3. A person who transfers an uncertificated security to a 13 29 purchaser for value and does not originate an instruction in 13 30 connection with the transfer warrants that: 13 31 a. the uncertificated security is valid; 13 32 b. there is no adverse claim to the security; 13 33 c. the transfer does not violate any restriction on 13 34 transfer; and 13 35 d. the transfer is otherwise effective and rightful. 14 1 4. A person who indorses a security certificate warrants 14 2 to the issuer that: 14 3 a. there is no adverse claim to the security; and 14 4 b. the indorsement is effective. 14 5 5. A person who originates an instruction for registration 14 6 of transfer of an uncertificated security warrants to the 14 7 issuer that: 14 8 a. the instruction is effective; and 14 9 b. at the time the instruction is presented to the issuer 14 10 the purchaser will be entitled to the registration of 14 11 transfer. 14 12 6. A person who presents a certificated security for 14 13 registration of transfer or for payment or exchange warrants 14 14 to the issuer that the person is entitled to the registration, 14 15 payment, or exchange, but a purchaser for value and without 14 16 notice of adverse claims to whom transfer is registered 14 17 warrants only that the person has no knowledge of any 14 18 unauthorized signature in a necessary indorsement. 14 19 7. If a person acts as agent of another in delivering a 14 20 certificated security to a purchaser, the identity of the 14 21 principal was known to the person to whom the certificate was 14 22 delivered, and the certificate delivered by the agent was 14 23 received by the agent from the principal or received by the 14 24 agent from another person at the direction of the principal, 14 25 the person delivering the security certificate warrants only 14 26 that the delivering person has authority to act for the 14 27 principal and does not know of any adverse claim to the 14 28 certificated security. 14 29 8. A secured party who redelivers a security certificate 14 30 received, or after payment and on order of the debtor delivers 14 31 the security certificate to another person, makes only the 14 32 warranties of an agent under subsection 7. 14 33 9. Except as otherwise provided in subsection 7, a broker 14 34 acting for a customer makes to the issuer and a purchaser the 14 35 warranties provided in subsections 1 through 6. A broker that 15 1 delivers a security certificate to its customer, or causes its 15 2 customer to be registered as the owner of an uncertificated 15 3 security, makes to the customer the warranties provided in 15 4 subsection 1 or 2, and has the rights and privileges of a 15 5 purchaser under this section. The warranties of and in favor 15 6 of the broker acting as an agent are in addition to applicable 15 7 warranties given by and in favor of the customer. 15 8 Sec. 17. NEW SECTION. 554.8109 WARRANTIES IN INDIRECT 15 9 HOLDING. 15 10 1. A person who originates an entitlement order to a 15 11 securities intermediary warrants to the securities 15 12 intermediary that: 15 13 a. the entitlement order is made by an appropriate person, 15 14 or if the entitlement order is by an agent, the agent has 15 15 actual authority to act on behalf of the appropriate person; 15 16 and 15 17 b. there is no adverse claim to the security entitlement. 15 18 2. A person who delivers a security certificate to a 15 19 securities intermediary for credit to a securities account or 15 20 originates an instruction with respect to an uncertificated 15 21 security directing that the uncertificated security be 15 22 credited to a securities account makes to the securities 15 23 intermediary the warranties specified in section 554.8108, 15 24 subsection 1 or 2. 15 25 3. If a securities intermediary delivers a security 15 26 certificate to its entitlement holder or causes its 15 27 entitlement holder to be registered as the owner of an 15 28 uncertificated security, the securities intermediary makes to 15 29 the entitlement holder the warranties specified in section 15 30 554.8108, subsection 1 or 2. 15 31 Sec. 18. NEW SECTION. 554.8110 APPLICABILITY – CHOICE 15 32 OF LAW. 15 33 1. The local law of the issuer's jurisdiction, as 15 34 specified in subsection 4, governs: 15 35 a. the validity of a security; 16 1 b. the rights and duties of the issuer with respect to 16 2 registration of transfer; 16 3 c. the effectiveness of registration of transfer by the 16 4 issuer; 16 5 d. whether the issuer owes any duties to an adverse 16 6 claimant to a security; and 16 7 e. whether an adverse claim can be asserted against a 16 8 person to whom transfer of a certificated or uncertificated 16 9 security is registered or a person who obtains control of an 16 10 uncertificated security. 16 11 2. The local law of the securities intermediary's 16 12 jurisdiction, as specified in subsection 5, governs: 16 13 a. acquisition of a security entitlement from the 16 14 securities intermediary; 16 15 b. the rights and duties of the securities intermediary 16 16 and entitlement holder arising out of a security entitlement; 16 17 c. whether the securities intermediary owes any duties to 16 18 an adverse claimant to a security entitlement; and 16 19 d. whether an adverse claim can be asserted against a 16 20 person who acquires a security entitlement from the securities 16 21 intermediary or a person who purchases a security entitlement 16 22 or interest therein from an entitlement holder. 16 23 3. The local law of the jurisdiction in which a security 16 24 certificate is located at the time of delivery governs whether 16 25 an adverse claim can be asserted against a person to whom the 16 26 security certificate is delivered. 16 27 4. "Issuer's jurisdiction" means the jurisdiction under 16 28 which the issuer of the security is organized or, if permitted 16 29 by the law of that jurisdiction, the law of another 16 30 jurisdiction specified by the issuer. An issuer organized 16 31 under the law of this state may specify the law of another 16 32 jurisdiction as the law governing the matters specified in 16 33 subsection 1, paragraphs "b" through "e". 16 34 5. The following rules determine a "securities 16 35 intermediary's jurisdiction" for purposes of this section: 17 1 a. if an agreement between the securities intermediary and 17 2 its entitlement holder specifies that it is governed by the 17 3 law of a particular jurisdiction, that jurisdiction is the 17 4 securities intermediary's jurisdiction. 17 5 b. if an agreement between the securities intermediary and 17 6 its entitlement holder does not specify the governing law as 17 7 provided in paragraph "a", but expressly specifies that the 17 8 securities account is maintained at an office in a particular 17 9 jurisdiction, that jurisdiction is the securities 17 10 intermediary's jurisdiction. 17 11 c. if an agreement between the securities intermediary and 17 12 its entitlement holder does not specify a jurisdiction as 17 13 provided in paragraph "a" or "b", the securities 17 14 intermediary's jurisdiction is the jurisdiction in which is 17 15 located the office identified in an account statement as the 17 16 office serving the entitlement holder's account. 17 17 d. if an agreement between the securities intermediary and 17 18 its entitlement holder does not specify a jurisdiction as 17 19 provided in paragraph "a" or "b" and an account statement does 17 20 not identify an office serving the entitlement holder's 17 21 account as provided in paragraph "c", the securities 17 22 intermediary's jurisdiction is the jurisdiction in which is 17 23 located the chief executive office of the securities 17 24 intermediary. 17 25 6. A securities intermediary's jurisdiction is not 17 26 determined by the physical location of certificates 17 27 representing financial assets, or by the jurisdiction in which 17 28 is organized the issuer of the financial asset with respect to 17 29 which an entitlement holder has a security entitlement, or by 17 30 the location of facilities for data processing or other record 17 31 keeping concerning the account. 17 32 Sec. 19. NEW SECTION. 554.8111 CLEARING CORPORATION 17 33 RULES. 17 34 A rule adopted by a clearing corporation governing rights 17 35 and obligations among the clearing corporation and its 18 1 participants in the clearing corporation is effective even if 18 2 the rule conflicts with this Article and affects another party 18 3 who does not consent to the rule. 18 4 Sec. 20. NEW SECTION. 554.8112 CREDITOR'S LEGAL PROCESS. 18 5 1. The interest of a debtor in a certificated security may 18 6 be reached by a creditor only by actual seizure of the 18 7 security certificate by the officer making the attachment or 18 8 levy, except as otherwise provided in subsection 4. However, 18 9 a certificated security for which the certificate has been 18 10 surrendered to the issuer may be reached by a creditor by 18 11 legal process upon the issuer. 18 12 2. The interest of a debtor in an uncertificated security 18 13 may be reached by a creditor only by legal process upon the 18 14 issuer at its chief executive office in the United States, 18 15 except as otherwise provided in subsection 4. 18 16 3. The interest of a debtor in a security entitlement may 18 17 be reached by a creditor only by legal process upon the 18 18 securities intermediary with whom the debtor's securities 18 19 account is maintained, except as otherwise provided in 18 20 subsection 4. 18 21 4. The interest of a debtor in a certificated security for 18 22 which the certificate is in the possession of a secured party, 18 23 or in an uncertificated security registered in the name of a 18 24 secured party, or a security entitlement maintained in the 18 25 name of a secured party, may be reached by a creditor by legal 18 26 process upon the secured party. 18 27 5. A creditor whose debtor is the owner of a certificated 18 28 security, uncertificated security, or security entitlement is 18 29 entitled to aid from a court of competent jurisdiction, by 18 30 injunction or otherwise, in reaching the certificated 18 31 security, uncertificated security, or security entitlement or 18 32 in satisfying the claim by means allowed at law or in equity 18 33 in regard to property that cannot readily be reached by other 18 34 legal process. 18 35 Sec. 21. NEW SECTION. 554.8113 STATUTE OF FRAUDS 19 1 INAPPLICABLE. 19 2 A contract or modification of a contract for the sale or 19 3 purchase of a security is enforceable whether or not there is 19 4 a writing signed or record authenticated by a party against 19 5 whom enforcement is sought, even if the contract or 19 6 modification is not capable of performance within one year of 19 7 its making. 19 8 Sec. 22. NEW SECTION. 554.8114 EVIDENTIARY RULES 19 9 CONCERNING CERTIFICATED SECURITIES. 19 10 The following rules apply in an action on a certificated 19 11 security against the issuer: 19 12 1. Unless specifically denied in the pleadings, each 19 13 signature on a security certificate or in a necessary 19 14 indorsement is admitted. 19 15 2. If the effectiveness of a signature is put in issue, 19 16 the burden of establishing effectiveness is on the party 19 17 claiming under the signature, but the signature is presumed to 19 18 be genuine or authorized. 19 19 3. If signatures on a security certificate are admitted or 19 20 established, production of the certificate entitles a holder 19 21 to recover on it unless the defendant establishes a defense or 19 22 a defect going to the validity of the security. 19 23 4. If it is shown that a defense or defect exists, the 19 24 plaintiff has the burden of establishing that the plaintiff or 19 25 some person under whom the plaintiff claims is a person 19 26 against whom the defense or defect cannot be asserted. 19 27 Sec. 23. NEW SECTION. 554.8115 SECURITIES INTERMEDIARY 19 28 AND OTHERS NOT LIABLE TO ADVERSE CLAIMANT. 19 29 A securities intermediary that has transferred a financial 19 30 asset pursuant to an effective entitlement order, or a broker 19 31 or other agent or bailee that has dealt with a financial asset 19 32 at the direction of its customer or principal, is not liable 19 33 to a person having an adverse claim to the financial asset, 19 34 unless the securities intermediary, or broker or other agent 19 35 or bailee: 20 1 1. took the action after it had been served with an 20 2 injunction, restraining order, or other legal process 20 3 enjoining it from doing so, issued by a court of competent 20 4 jurisdiction, and had a reasonable opportunity to act on the 20 5 injunction, restraining order, or other legal process; or 20 6 2. acted in collusion with the wrongdoer in violating the 20 7 rights of the adverse claimant; or 20 8 3. in the case of a security certificate that has been 20 9 stolen, acted with notice of the adverse claim. 20 10 PART 2 20 11 ISSUE AND ISSUER 20 12 Sec. 24. Section 554.8201, Code 1995, is amended to read 20 13 as follows: 20 14 554.8201 "ISSUER". 20 15 1. With respect toobligationsan obligation on or 20 16defensesa defense to a security, an "issuer" includes a 20 17 personwhothat: 20 18 a. places or authorizes the placing ofthat person'sits 20 19 name on acertificatedsecurity(otherwisecertificate, other 20 20 than as authenticating trustee, registrar, transfer agent, or 20 21 the like), to evidencethat it representsa share, 20 22 participation, or other interest inthat person'sits property 20 23 or in an enterprise, or to evidencethat person'sits duty to 20 24 perform an obligation represented by thecertificated security20 25 certificate; 20 26 b. createssharesa share,participationsparticipation or 20 27 otherinterestsinterest inthe person'sits property or in an 20 28 enterprise, or undertakesobligationsan obligation,which20 29shares, participations, interests, or obligations arethat is 20 30 an uncertificatedsecuritiessecurity; 20 31 c. directly or indirectly creates a fractionalinterests20 32 interest inthat person'sits rights or property,whichif the 20 33 fractionalinterests areinterest is represented by 20 34certificated securitiesa security certificate; or 20 35 d. becomes responsible for, or in place of,any other21 1 another person described as an issuer in this section. 21 2 2. With respect toobligationsan obligation on or 21 3defensesdefense to a security, a guarantor is an issuer to 21 4 the extent ofthe guarantor's guarantyits guaranty, whether 21 5 or notthe guarantor'sits obligation is noted on a 21 6certificatedsecurityor on statements of uncertificated21 7securities sent pursuant to section 554.8408certificate. 21 8 3. With respect to a registration of a transfer,pledge,21 9or release (Part 4 of this Article), "issuer"issuer means a 21 10 person on whose behalf transfer books are maintained. 21 11 Sec. 25. Section 554.8202, Code 1995, is amended to read 21 12 as follows: 21 13 554.8202 ISSUER'S RESPONSIBILITY AND DEFENSES – NOTICE OF 21 14 DEFECT OR DEFENSE. 21 15 1. Even against a purchaser for value and without notice, 21 16 the terms of a certificated security include:21 17a. if the security is certificated, those stated on the21 18security;21 19b. if the security is uncertificated, those contained in21 20the initial transaction statement sent to such purchaser, or21 21if the purchaser's interest is transferred to the purchaser21 22other than by registration of transfer, pledge, or release,21 23the initial transaction statement sent to the registered owner21 24or registered pledgee; and21 25c. those made part of the security by reference, on the21 26certificated security or in the initial transaction statement,21 27 terms stated on the certificate and terms made part of the 21 28 security by reference on the certificate to another 21 29 instrument, indenture, or document or to a constitution, 21 30 statute, ordinance, rule, regulation, order, or the like, to 21 31 the extentthatthe terms referred to do not conflict withthe21 32 terms stated on thecertificated security or contained in the21 33initial statementcertificate. A reference under this 21 34paragraphsubsection does not of itself charge a purchaser for 21 35 value with notice of a defect going to the validity of the 22 1 security, eventhough the certificated security or statement22 2 if the certificate expressly states that a person accepting it 22 3 admits notice. The terms of an uncertificated security, 22 4 include those stated in any instrument, indenture, or document 22 5 or in a constitution, statute, ordinance, rule, regulation, 22 6 order, or the like pursuant to which the security is issued. 22 7 2. The following rules apply if an issuer asserts that a 22 8 security is not valid: 22 9 a. Acertificatedsecurityin the hands of a purchaser for22 10value or an uncertificated security as to which an initial22 11transaction statement has been sent to a purchaser for value,22 12 other thana securityone issued by a government or 22 13 governmental subdivision, agency, orunitinstrumentality, 22 14 even though issued with a defect going to its validity, is 22 15 validwith respect to thein the hands of a purchaserif the22 16purchaser isfor value and without notice of the particular 22 17 defect unless the defect involves a violation of a 22 18 constitutionalprovisions, in whichprovision. In that case, 22 19 the security is validwith respect to a subsequentin the 22 20 hands of a purchaser for value and without notice of the 22 21 defect, other than one who takes by original issue. 22 22 b.This subsectionParagraph "a" applies to an issuer that 22 23 is a government or governmental subdivision, agency, orunit22 24 instrumentality only ifeitherthere has been substantial 22 25 compliance with the legal requirements governing the issue or 22 26 the issuer has received a substantial consideration for the 22 27 issue as a whole or for the particular security and a stated 22 28 purpose of the issue is one for which the issuer has power to 22 29 borrow money or issue the security. 22 30 3. Except as otherwise provided inthe case of certain22 31unauthorized signatures (section 554.8205), lack of 22 32 genuineness of a certificated securityor an initial22 33transaction statementis a complete defense, even against a 22 34 purchaser for value and without notice. 22 35 4. All other defenses of the issuer of acertificated or23 1uncertificatedsecurity, including nondelivery and conditional 23 2 delivery of a certificated security, are ineffective against a 23 3 purchaser for value who has taken the certificated security 23 4 without notice of the particular defense. 23 5 5.Nothing in thisThis sectionshall be construed todoes 23 6 not affect the right of a party to cancel a contract for a 23 7 security "when, as and if issued" ora"when distributed" 23 8contract to cancel the contractin the event of a material 23 9 change in the character of the security that is the subject of 23 10 the contract or in the plan or arrangement pursuant to which 23 11 the security is to be issued or distributed. 23 12 6. If a security is held by a securities intermediary 23 13 against whom an entitlement holder has a security entitlement 23 14 with respect to the security, the issuer may not assert any 23 15 defense that the issuer could not assert if the entitlement 23 16 holder held the security directly. 23 17 Sec. 26. Section 554.8203, Code 1995, is amended to read 23 18 as follows: 23 19 554.8203 STALENESS AS NOTICE OFDEFECTSDEFECT ORDEFENSES23 20 DEFENSE. 23 211.After an act or event, other than a call that has been 23 22 revoked, creating a right to immediate performance of the 23 23 principal obligation represented by a certificated security or 23 24that setssetting a date on or after which the security is to 23 25 be presented or surrendered for redemption or exchange, a 23 26 purchaser is charged with notice of any defect in its issue or 23 27 defense of the issuer, if the act or event: 23 28a.1.the act or event is one requiringrequires the 23 29 payment of money, the delivery of a certificatedsecurities23 30 security, the registration of transfer of an uncertificated 23 31securitiessecurity, or any ofthesethem on presentation or 23 32 surrender of thecertificatedsecurity certificate, thefunds23 33 money orsecurities aresecurity is available on the date set 23 34 for payment or exchange, and the purchaser takes the security 23 35 more than one year after that date;andor 24 1b.2.the act or eventis not covered byparagraph "a"24 2 subsection 1 and the purchaser takes the security more than 24 3 two years after the date set for surrender or presentation or 24 4 the date on which performance became due. 24 52. A call that has been revoked is not within subsection24 61.24 7 Sec. 27. Section 554.8204, Code 1995, is amended to read 24 8 as follows: 24 9 554.8204 EFFECT OF ISSUER'SRESTRICTIONSRESTRICTION ON 24 10 TRANSFER. 24 11 A restriction on transfer of a security imposed by the 24 12 issuer, eventhoughif otherwise lawful, is ineffective 24 13 againstanya person withoutactualknowledge ofitthe 24 14 restriction unless: 24 15a.1. the security is certificated and the restriction is 24 16 noted conspicuouslythereonon the security certificate; or 24 17b.2. the security is uncertificated anda notation of the24 18restriction is contained in the initial transaction statement24 19sent to the person or, if the person's interest is transferred24 20to the person other than by registration of transfer, pledge,24 21or release, the initial transaction statement sent to the24 22registered owner or the registered pledgeethe registered 24 23 owner has been notified of the restriction. 24 24 Sec. 28. Section 554.8205, Code 1995, is amended to read 24 25 as follows: 24 26 554.8205 EFFECT OF UNAUTHORIZED SIGNATURE ONCERTIFICATED24 27 SECURITYOR INITIAL TRANSACTION STATEMENTCERTIFICATE. 24 28 An unauthorized signature placed on acertificatedsecurity 24 29prior tocertificate or in the course of issueor placed on an24 30initial transaction statementis ineffective, but the 24 31 signature is effective in favor of a purchaser for value of 24 32 the certificated securityor a purchaser for value of an24 33uncertificated security to whom such initial transaction24 34statement has been sent,if the purchaser is without notice of 24 35 the lack of authority andifthe signing has been done by: 25 1a.1. an authenticating trustee, registrar, transfer agent 25 2 or other person entrusted by the issuer with the signing of 25 3 the security, of similar securities, or of initial transaction25 4statementscertificate or of similar security certificates, or 25 5 the immediate preparation for signing of any of them; or 25 6b.2. an employee of the issuer, or of any of the 25 7foregoingpersons listed in subsection 1, entrusted with 25 8 responsible handling of the securityor initial transaction25 9statementcertificate. 25 10 Sec. 29. Section 554.8206, Code 1995, is amended to read 25 11 as follows: 25 12 554.8206 COMPLETION OR ALTERATION OFCERTIFICATEDSECURITY 25 13OR INITIAL TRANSACTION STATEMENTCERTIFICATE. 25 14 1. If acertificatedsecurity certificate contains the 25 15 signatures necessary to its issue or transfer but is 25 16 incomplete in any other respect: 25 17 a. any person may complete it by filling in the blanks as 25 18 authorized; and 25 19 b. eventhoughif the blanks are incorrectly filled in, 25 20 the security certificate as completed is enforceable by a 25 21 purchaser who took it for value and without notice of the 25 22 incorrectness. 25 23 2. A completecertificatedsecurity certificate that has 25 24 been improperly altered, eventhoughif fraudulently, remains 25 25 enforceable, but only according to its original terms. 25 263. If an initial transaction statement contains the25 27signatures necessary to its validity, but is incomplete in any25 28other respect:25 29a. any person may complete it by filling in the blanks as25 30authorized; and25 31b. even though the blanks are incorrectly filled in, the25 32statement as completed is effective in favor of the person to25 33whom it is sent if the person purchased the security referred25 34to therein for value and without notice of the incorrectness.25 354. A complete initial transaction statement that has been26 1improperly altered, even though fraudulently, is effective in26 2favor of a purchaser to whom it has been sent, but only26 3according to its original terms.26 4 Sec. 30. Section 554.8207, Code 1995, is amended to read 26 5 as follows: 26 6 554.8207 RIGHTS AND DUTIES OF ISSUER WITH RESPECT TO 26 7 REGISTERED OWNERS. 26 8 1.Prior toBefore due presentment for registration of 26 9 transfer of a certificated security in registered form, or of 26 10 an instruction requesting registration of transfer of an 26 11 uncertificated security, the issuer or indenture trustee may 26 12 treat the registered owner as the person exclusively entitled 26 13 to vote,toreceive notifications, and otherwisetoexercise 26 14 all the rights and powers of an owner. 26 152. Subject to the provisions of subsections 3, 4, and 6,26 16the issuer or indenture trustee may treat the registered owner26 17of an uncertificated security as the person exclusively26 18entitled to vote, to receive notifications, and otherwise to26 19exercise all the rights and powers of an owner.26 203.2.TheThis Article does not affect the liability of 26 21 the registered owner ofan uncertificateda securitythat is26 22subject to a registered pledge is not entitled to registration26 23of transfer prior to the due presentment to the issuer of a26 24release instructionfor a call, assessment, or the like.The26 25exercise of conversion rights with respect to a convertible26 26uncertificated security is a transfer within the meaning of26 27this section.26 284. Upon due presentment of a transfer instruction from the26 29registered pledgee of an uncertificated security, the issuer26 30shall:26 31a. register the transfer of the security to the new owner26 32free of pledge, if the instruction specifies a new owner (who26 33may be the registered pledgee) and does not specify a pledgee;26 34b. register the transfer of the security to the new owner26 35subject to the interest of the existing pledgee, if the27 1instruction specifies a new owner and the existing pledgee; or27 2c. register the release of the security from the existing27 3pledge and register the pledge of the security to the other27 4pledgee, if the instruction specifies the existing owner and27 5another pledgee.27 65. Continuity of perfection of a security interest is not27 7broken by registration of transfer under subsection (4)(b) or27 8by registration of release and pledge under subsection (4)(c),27 9if the security interest is assigned.27 106. If an uncertificated security is subject to a27 11registered pledge:27 12a. any uncertificated securities issued in exchange for or27 13distributed with respect to the pledged security shall be27 14registered subject to the pledge;27 15b. any certificated securities issued in exchange for or27 16distributed with respect to the pledged security shall be27 17delivered to the registered pledgee; and27 18c. any money paid in exchange for or in redemption of part27 19or all of the security shall be paid to the registered27 20pledgee.27 217. Nothing in this Article shall be construed to affect27 22the liability of the registered owner of a security for calls,27 23assessments, or the like.27 24 Sec. 31. Section 554.8208, Code 1995, is amended to read 27 25 as follows: 27 26 554.8208 EFFECT OF SIGNATURE OF AUTHENTICATING TRUSTEE, 27 27 REGISTRAR, OR TRANSFER AGENT. 27 28 1. A personplacing that person's signature uponsigning a 27 29certificatedsecurityor an initial transaction statement27 30 certificate, as authenticating trustee, registrar, transfer 27 31 agent, or the like, warrants to a purchaser for value of the 27 32 certificated security,or a purchaser for value of an27 33uncertificated security to whom the initial transaction27 34statement has been sent,if the purchaser is without notice of 27 35 the particular defect, that: 28 1 a. thecertificated security or initial transaction28 2statementcertificate is genuine; 28 3 b.thatthe person's own participation in the issueor28 4registration of transfer, pledge, or releaseof the security 28 5 is withinthatthe person's capacity and within the scope of 28 6 the authority received bythatthe person from the issuer; and 28 7 c.thatthe person has reasonable grounds to believe that 28 8 the certificated security is in the form and within the amount 28 9 the issuer is authorized to issue. 28 10 2. Unless otherwise agreed, a personby so placing that28 11person's signaturesigning under subsection 1 does not assume 28 12 responsibility for the validity of the security in other 28 13 respects. 28 14 Sec. 32. NEW SECTION. 554.8209 ISSUER'S LIEN. 28 15 A lien in favor of an issuer upon a certificated security 28 16 is valid against a purchaser only if the right of the issuer 28 17 to the lien is noted conspicuously on the security 28 18 certificate. 28 19 Sec. 33. NEW SECTION. 554.8210 OVERISSUE. 28 20 1. In this section, "overissue" means the issue of 28 21 securities in excess of the amount the issuer has corporate 28 22 power to issue, but an overissue does not occur if appropriate 28 23 action has cured the overissue. 28 24 2. Except as otherwise provided in subsections 3 and 4, 28 25 the provisions of this Article which validate a security or 28 26 compel its issue or reissue do not apply to the extent that 28 27 validation, issue, or reissue would result in overissue. 28 28 3. If an identical security not constituting an overissue 28 29 is reasonably available for purchase, a person entitled to 28 30 issue or validation may compel the issuer to purchase the 28 31 security and deliver it if certificated or register its 28 32 transfer if uncertificated, against surrender of any security 28 33 certificate the person holds. 28 34 4. If a security is not reasonably available for purchase, 28 35 a person entitled to issue or validation may recover from the 29 1 issuer the price the person or the last purchaser for value 29 2 paid for it with interest from the date of the person's 29 3 demand. 29 4 PART 3 29 5 TRANSFER OF CERTIFICATED 29 6 AND UNCERTIFICATED SECURITIES 29 7 Sec. 34. Section 554.8301, Code 1995, is amended by 29 8 striking the section and inserting in lieu thereof the 29 9 following: 29 10 554.8301 DELIVERY. 29 11 1. Delivery of a certificated security to a purchaser 29 12 occurs when: 29 13 a. the purchaser acquires possession of the security 29 14 certificate; 29 15 b. another person, other than a securities intermediary, 29 16 either acquires possession of the security certificate on 29 17 behalf of the purchaser or, having previously acquired 29 18 possession of the certificate, acknowledges that it holds for 29 19 the purchaser; or 29 20 c. a securities intermediary acting on behalf of the 29 21 purchaser acquires possession of the security certificate, 29 22 only if the certificate is in registered form and has been 29 23 specially indorsed to the purchaser by an effective 29 24 indorsement. 29 25 2. Delivery of an uncertificated security to a purchaser 29 26 occurs when: 29 27 a. the issuer registers the purchaser as the registered 29 28 owner, upon original issue or registration of transfer; or 29 29 b. another person, other than a securities intermediary, 29 30 either becomes the registered owner of the uncertificated 29 31 security on behalf of the purchaser or, having previously 29 32 become the registered owner, acknowledges that it holds for 29 33 the purchaser. 29 34 Sec. 35. Section 554.8302, Code 1995, is amended by 29 35 striking the section and inserting in lieu thereof the 30 1 following: 30 2 554.8302 RIGHTS OF PURCHASER. 30 3 1. Except as otherwise provided in subsections 2 and 3, 30 4 upon delivery of a certificated or uncertificated security to 30 5 a purchaser, the purchaser acquires all rights in the security 30 6 that the transferor had or had power to transfer. 30 7 2. A purchaser of a limited interest acquires rights only 30 8 to the extent of the interest purchased. 30 9 3. A purchaser of a certificated security who as a 30 10 previous holder had notice of an adverse claim does not 30 11 improve its position by taking from a protected purchaser. 30 12 Sec. 36. Section 554.8303, Code 1995, is amended by 30 13 striking the section and inserting in lieu thereof the 30 14 following: 30 15 554.8303 PROTECTED PURCHASER. 30 16 1. "Protected purchaser" means a purchaser of a 30 17 certificated or uncertificated security, or of an interest 30 18 therein, who: 30 19 a. gives value; 30 20 b. does not have notice of any adverse claim to the 30 21 security; and 30 22 c. obtains control of the certificated or uncertificated 30 23 security. 30 24 2. In addition to acquiring the rights of a purchaser, a 30 25 protected purchaser also acquires its interest in the security 30 26 free of any adverse claim. 30 27 Sec. 37. Section 554.8304, Code 1995, is amended by 30 28 striking the section and inserting in lieu thereof the 30 29 following: 30 30 554.8304 INDORSEMENT. 30 31 1. An indorsement may be in blank or special. An 30 32 indorsement in blank includes an indorsement to bearer. A 30 33 special indorsement specifies to whom a security is to be 30 34 transferred or who has power to transfer it. A holder may 30 35 convert a blank indorsement to a special indorsement. 31 1 2. An indorsement purporting to be only of part of a 31 2 security certificate representing units intended by the issuer 31 3 to be separately transferable is effective to the extent of 31 4 the indorsement. 31 5 3. An indorsement, whether special or in blank, does not 31 6 constitute a transfer until delivery of the certificate on 31 7 which it appears or, if the indorsement is on a separate 31 8 document, until delivery of both the document and the 31 9 certificate. 31 10 4. If a security certificate in registered form has been 31 11 delivered to a purchaser without a necessary indorsement, the 31 12 purchaser may become a protected purchaser only when the 31 13 indorsement is supplied. However, against a transferor, a 31 14 transfer is complete upon delivery and the purchaser has a 31 15 specifically enforceable right to have any necessary 31 16 indorsement supplied. 31 17 5. An indorsement of a security certificate in bearer form 31 18 may give notice of an adverse claim to the certificate, but it 31 19 does not otherwise affect a right to registration that the 31 20 holder possesses. 31 21 6. Unless otherwise agreed, a person making an indorsement 31 22 assumes only the obligations provided in section 554.8108 and 31 23 not an obligation that the security will be honored by the 31 24 issuer. 31 25 Sec. 38. Section 554.8305, Code 1995, is amended by 31 26 striking the section and inserting in lieu thereof the 31 27 following: 31 28 554.8305 INSTRUCTION. 31 29 1. If an instruction has been originated by an appropriate 31 30 person but is incomplete in any other respect, any person may 31 31 complete it as authorized and the issuer may rely on it as 31 32 completed, even though it has been completed incorrectly. 31 33 2. Unless otherwise agreed, a person initiating an 31 34 instruction assumes only the obligations imposed by section 31 35 554.8108 and not an obligation that the security will be 32 1 honored by the issuer. 32 2 Sec. 39. Section 554.8306, Code 1995, is amended by 32 3 striking the section and inserting in lieu thereof the 32 4 following: 32 5 554.8306 EFFECT OF GUARANTEEING SIGNATURE, INDORSEMENT, OR 32 6 INSTRUCTION. 32 7 1. A person who guarantees a signature of an indorser of a 32 8 security certificate warrants that at the time of signing: 32 9 a. the signature was genuine; 32 10 b. the signer was an appropriate person to indorse, or if 32 11 the signature is by an agent, the agent had actual authority 32 12 to act on behalf of the appropriate person; and 32 13 c. the signer had legal capacity to sign. 32 14 2. A person who guarantees a signature of the originator 32 15 of an instruction warrants that at the time of signing: 32 16 a. the signature was genuine; 32 17 b. the signer was an appropriate person to originate the 32 18 instruction, or if the signature is by an agent, the agent had 32 19 actual authority to act on behalf of the appropriate person, 32 20 if the person specified in the instruction as the registered 32 21 owner was, in fact, the registered owner, as to which fact the 32 22 signature guarantor does not make a warranty; and 32 23 c. the signer had legal capacity to sign. 32 24 3. A person who specially guarantees the signature of an 32 25 originator of an instruction makes the warranties of a 32 26 signature guarantor under subsection 2 and also warrants that 32 27 at the time the instruction is presented to the issuer: 32 28 a. the person specified in the instruction as the 32 29 registered owner of the uncertificated security will be the 32 30 registered owner; and 32 31 b. the transfer of the uncertificated security requested 32 32 in the instruction will be registered by the issuer free from 32 33 all liens, security interests, restrictions, and claims other 32 34 than those specified in the instruction. 32 35 4. A guarantor under subsections 1 and 2 or a special 33 1 guarantor under subsection 3 does not otherwise warrant the 33 2 rightfulness of the transfer. 33 3 5. A person who guarantees an indorsement of a security 33 4 certificate makes the warranties of a signature guarantor 33 5 under subsection 1 and also warrants the rightfulness of the 33 6 transfer in all respects. 33 7 6. A person who guarantees an instruction requesting the 33 8 transfer of an uncertificated security makes the warranties of 33 9 a special signature guarantor under subsection 3 and also 33 10 warrants the rightfulness of the transfer in all respects. 33 11 7. An issuer may not require a special guaranty of 33 12 signature, a guaranty of indorsement, or a guaranty of 33 13 instruction as a condition to registration of transfer. 33 14 8. The warranties under this section are made to a person 33 15 taking or dealing with the security in reliance on the 33 16 guaranty, and the guarantor is liable to the person for loss 33 17 resulting from their breach. An indorser or originator of an 33 18 instruction whose signature, indorsement, or instruction has 33 19 been guaranteed is liable to a guarantor for any loss suffered 33 20 by the guarantor as a result of breach of the warranties of 33 21 the guarantor. 33 22 Sec. 40. Section 554.8307, Code 1995, is amended by 33 23 striking the section and inserting in lieu thereof the 33 24 following: 33 25 554.8307 PURCHASER'S RIGHT TO REQUISITES FOR REGISTRATION 33 26 OF TRANSFER. 33 27 Unless otherwise agreed, the transferor of a security on 33 28 due demand shall supply the purchaser with proof of authority 33 29 to transfer or with any other requisite necessary to obtain 33 30 registration of the transfer of the security, but if the 33 31 transfer is not for value, a transferor need not comply unless 33 32 the purchaser pays the necessary expenses. If the transferor 33 33 fails within a reasonable time to comply with the demand, the 33 34 purchaser may reject or rescind the transfer. 33 35 PART 4 34 1 REGISTRATION 34 2 Sec. 41. Section 554.8401, Code 1995, is amended to read 34 3 as follows: 34 4 554.8401 DUTY OF ISSUER TO REGISTER TRANSFER, PLEDGE, OR34 5RELEASE. 34 6 1. If a certificated security in registered form is 34 7 presented tothean issuer with a request to register transfer 34 8 or an instruction is presented tothean issuer with a request 34 9 to register transfer,pledge, or releasethe issuer shall 34 10 register the transfer, pledge, or releaseas requested if: 34 11 a.the security is endorsed or the instruction was34 12originated by the appropriate person or persons (section34 13554.8308)under the terms of the security the person seeking 34 14 registration of transfer is eligible to have the security 34 15 registered in its name; 34 16 b. the indorsement or instruction is made by the 34 17 appropriate person or by an agent who has actual authority to 34 18 act on behalf of the appropriate person; 34 19b.c. reasonable assurance is given thatthose34 20endorsementsthe indorsement orinstructions areinstruction 34 21 is genuine andeffectiveauthorized (section 554.8402); 34 22c. the issuer has no duty as to adverse claims or has34 23discharged the duty (section 554.8403);34 24 d. any applicable law relating to the collection of taxes 34 25 has been complied with;and34 26 e. the transfer, pledge, or release is in fact rightful or34 27is to a bona fide purchaserdoes not violate any restriction 34 28 on transfer imposed by the issuer in accordance with section 34 29 554.8204. 34 30 f. a demand that the issuer not register transfer has not 34 31 become effective under section 554.8403, or the issuer has 34 32 complied with section 554.8403, subsection 2, but no legal 34 33 process or indemnity bond is obtained as provided in section 34 34 554.8403, subsection 4; and 34 35 g. the transfer is in fact rightful or is to a protected 35 1 purchaser. 35 2 2. If an issuer is under a duty to register a transfer,35 3pledge, or releaseof a security, the issuer isalsoliable to 35 4thea person presenting a certificated security or an 35 5 instruction for registration orthatto the person's principal 35 6 for loss resulting fromanyunreasonable delay in registration 35 7 orfromfailure or refusal to register the transfer, pledge,35 8or release. 35 9 Sec. 42. Section 554.8402, Code 1995, is amended to read 35 10 as follows: 35 11 554.8402 ASSURANCE THATENDORSEMENTS AND INSTRUCTIONS ARE35 12 INDORSEMENT OR INSTRUCTION IS EFFECTIVE. 35 13 1.TheAn issuer may require the following assurance that 35 14 each necessaryendorsement of a certificated security35 15 indorsement or each instruction(section 554.8308)is genuine 35 16 andeffectiveauthorized: 35 17 a. in all cases, a guarantee of the signature(section35 18554.8312, subsection 1 or 2)of the personendorsing a35 19certificated securitymaking an indorsement or originating an 35 20 instruction including, in the case of an instruction,a35 21warranty of the taxpayer identification number or, in the35 22absence thereof, otherreasonable assurance of identity; 35 23 b. if theendorsementindorsement is made or the 35 24 instruction is originated by an agent, appropriate assurance 35 25 of actual authority to sign; 35 26 c. if theendorsementindorsement is made or the 35 27 instruction is originated by a fiduciary,pursuant to section 35 28 554.8107, subsection 1, paragraph "d" or subsection 1, 35 29 paragraph "e", appropriate evidence of appointment or 35 30 incumbency; 35 31 d. if there is more than one fiduciary, reasonable 35 32 assurance that all who are required to sign have done so; and 35 33 e. if theendorsementindorsement is made or the 35 34 instruction is originated by a person not covered byany of35 35the foregoinganother provision of this subsection, assurance 36 1 appropriate to the case corresponding as nearly as may be to 36 2 theforegoingprovisions of this subsection. 36 3 2. An issuer may elect to require reasonable assurance 36 4 beyond that specified in this section. 36 5 3. In this section: 36 62.a.A "guarantee"Guaranty of the signature"in36 7subsection 1means aguaranteeguaranty signed by or on behalf 36 8 of a person reasonably believed by the issuer to be 36 9 responsible.TheAn issuer may adopt standards with respect 36 10 to responsibility if they are not manifestly unreasonable. 36 113.b. "Appropriate evidence of appointment or incumbency" 36 12in subsection 1means 36 13a.(1) in the case of a fiduciary appointed or qualified 36 14 by a court, a certificate issued by or under the direction or 36 15 supervision ofthatthe court or an officerof that court36 16 thereof and dated withinone hundred eightysixty days before 36 17 the date of presentation for transfer, pledge, or release; or 36 18b.(2) in any other case, a copy of a document showing the 36 19 appointment or a certificate issued by or on behalf of a 36 20 person reasonably believed bythean issuer to be responsible 36 21 or, in the absence of that document or certificate, other 36 22 evidence the issuer reasonablydeemed by the issuer to be36 23 considers appropriate.The issuer may adopt standards with36 24respect to the evidence if they are not manifestly36 25unreasonable. The issuer is not charged with notice of the36 26contents of any document obtained pursuant to this paragraph36 27"b" except to the extent that the contents relate directly to36 28the appointment or incumbency.36 294. The issuer may elect to require reasonable assurance36 30beyond that specified in this section, but if it does so and,36 31for a purpose other than that specified in subsection 3 "b",36 32both requires and obtains a copy of a will, trust, indenture,36 33articles of copartnership, bylaws, or other controlling36 34instrument, it is charged with notice of all matters contained36 35therein affecting the transfer, pledge, or release.37 1 Sec. 43. Section 554.8403, Code 1995, is amended by 37 2 striking the section and inserting in lieu thereof the 37 3 following: 37 4 554.8403 DEMAND THAT ISSUER NOT REGISTER TRANSFER. 37 5 1. A person who is an appropriate person to make an 37 6 indorsement or originate an instruction may demand that the 37 7 issuer not register transfer of a security by communicating to 37 8 the issuer a notification that identifies the registered owner 37 9 and the issue of which the security is a part and provides an 37 10 address for communications directed to the person making the 37 11 demand. The demand is effective only if it is received by the 37 12 issuer at a time and in a manner affording the issuer 37 13 reasonable opportunity to act on it. 37 14 2. If a certificated security in registered form is 37 15 presented to an issuer with a request to register transfer or 37 16 an instruction is presented to an issuer with a request to 37 17 register transfer of an uncertificated security after a demand 37 18 that the issuer not register transfer has become effective, 37 19 the issuer shall promptly communicate to (i) the person who 37 20 initiated the demand at the address provided in the demand, 37 21 and (ii) the person who presented the security for 37 22 registration of transfer or initiated the instruction 37 23 requesting registration of transfer a notification stating 37 24 that: 37 25 a. the certificated security has been presented for 37 26 registration of transfer or the instruction for registration 37 27 of transfer of the uncertificated security has been received; 37 28 b. a demand that the issuer not register transfer had 37 29 previously been received; and 37 30 c. the issuer will withhold registration of transfer for a 37 31 period of time stated in the notification in order to provide 37 32 the person who initiated the demand an opportunity to obtain 37 33 legal process or an indemnity bond. 37 34 3. The period described in subsection 2, paragraph "c", 37 35 may not exceed thirty days after the date of communication of 38 1 the notification. A shorter period may be specified by the 38 2 issuer if it is not manifestly unreasonable. 38 3 4. An issuer is not liable to a person who initiated a 38 4 demand that the issuer not register transfer for any loss the 38 5 person suffers as a result of registration of a transfer 38 6 pursuant to an effective indorsement or instruction if the 38 7 person who initiated the demand does not, within the time 38 8 stated in the issuer's communication, either: 38 9 a. obtain an appropriate restraining order, injunction, or 38 10 other process from a court of competent jurisdiction enjoining 38 11 the issuer from registering the transfer; or 38 12 b. file with the issuer an indemnity bond, sufficient in 38 13 the issuer's judgment to protect the issuer and any transfer 38 14 agent, registrar, or other agent of the issuer involved from 38 15 any loss it or they may suffer by refusing to register the 38 16 transfer. 38 17 5. This section does not relieve an issuer from liability 38 18 for registering transfer pursuant to an indorsement or 38 19 instruction that was not effective. 38 20 Sec. 44. Section 554.8404, Code 1995, is amended by 38 21 striking the section and inserting in lieu thereof the 38 22 following: 38 23 554.8404 WRONGFUL REGISTRATION. 38 24 1. Except as otherwise provided in section 554.8406, an 38 25 issuer is liable for wrongful registration of transfer if the 38 26 issuer has registered a transfer of a security to a person not 38 27 entitled to it, and the transfer was registered: 38 28 a. pursuant to an ineffective indorsement or instruction; 38 29 b. after a demand that the issuer not register transfer 38 30 became effective under section 554.8403, subsection 1, and the 38 31 issuer did not comply with section 554.8403, subsection 2; 38 32 c. after the issuer had been served with an injunction, 38 33 restraining order, or other legal process enjoining it from 38 34 registering the transfer, issued by a court of competent 38 35 jurisdiction, and the issuer had a reasonable opportunity to 39 1 act on the injunction, restraining order, or other legal 39 2 process; or 39 3 d. by an issuer acting in collusion with the wrongdoer. 39 4 2. An issuer that is liable for wrongful registration of 39 5 transfer under subsection 1 on demand shall provide the person 39 6 entitled to the security with a like certificated or 39 7 uncertificated security, and any payments or distributions 39 8 that the person did not receive as a result of the wrongful 39 9 registration. If an overissue would result, the issuer's 39 10 liability to provide the person with a like security is 39 11 governed by section 554.8210. 39 12 3. Except as otherwise provided in subsection 1 or in a 39 13 law relating to the collection of taxes, an issuer is not 39 14 liable to an owner or other person suffering loss as a result 39 15 of the registration of a transfer of a security if 39 16 registration was made pursuant to an effective indorsement or 39 17 instruction. 39 18 Sec. 45. Section 554.8405, Code 1995, is amended by 39 19 striking the section and inserting in lieu thereof the 39 20 following: 39 21 554.8405 REPLACEMENT OF LOST, DESTROYED, OR WRONGFULLY 39 22 TAKEN SECURITY CERTIFICATE. 39 23 1. If an owner of a certificated security, whether in 39 24 registered or bearer form, claims that the certificate has 39 25 been lost, destroyed, or wrongfully taken, the issuer shall 39 26 issue a new certificate if the owner: 39 27 a. so requests before the issuer has notice that the 39 28 certificate has been acquired by a protected purchaser; 39 29 b. files with the issuer a sufficient indemnity bond; and 39 30 c. satisfies other reasonable requirements imposed by the 39 31 issuer. 39 32 2. If, after the issue of a new security certificate, a 39 33 protected purchaser of the original certificate presents it 39 34 for registration of transfer, the issuer shall register the 39 35 transfer unless an overissue would result. In that case, the 40 1 issuer's liability is governed by section 554.8210. In 40 2 addition to any rights on the indemnity bond, an issuer may 40 3 recover the new certificate from a person to whom it was 40 4 issued or any person taking under that person, except a 40 5 protected purchaser. 40 6 Sec. 46. Section 554.8406, Code 1995, is amended by 40 7 striking the section and inserting in lieu thereof the 40 8 following: 40 9 554.8406 OBLIGATION TO NOTIFY ISSUER OF LOST, DESTROYED, 40 10 OR WRONGFULLY TAKEN SECURITY CERTIFICATE. 40 11 If a security certificate has been lost, apparently 40 12 destroyed, or wrongfully taken, and the owner fails to notify 40 13 the issuer of that fact within a reasonable time after the 40 14 owner has notice of it and the issuer registers a transfer of 40 15 the security before receiving notification, the owner may not 40 16 assert against the issuer a claim for registering the transfer 40 17 under section 554.8404 or a claim to a new security 40 18 certificate under section 554.8405. 40 19 Sec. 47. Section 554.8407, Code 1995, is amended by 40 20 striking the section and inserting in lieu thereof the 40 21 following: 40 22 554.8407 AUTHENTICATING TRUSTEE, TRANSFER AGENT, AND 40 23 REGISTRAR. 40 24 A person acting as authenticating trustee, transfer agent, 40 25 registrar, or other agent for an issuer in the registration of 40 26 a transfer of its securities, in the issue of new security 40 27 certificates or uncertificated securities, or in the 40 28 cancellation of surrendered security certificates has the same 40 29 obligation to the holder or owner of a certificated or 40 30 uncertificated security with regard to the particular 40 31 functions performed as the issuer has in regard to those 40 32 functions. 40 33 PART 5 40 34 SECURITY ENTITLEMENTS 40 35 Sec. 48. NEW SECTION. 554.8501 SECURITIES ACCOUNT – 41 1 ACQUISITION OF SECURITY ENTITLEMENT FROM SECURITIES 41 2 INTERMEDIARY. 41 3 1. "Securities account" means an account to which a 41 4 financial asset is or may be credited in accordance with an 41 5 agreement under which the person maintaining the account 41 6 undertakes to treat the person for whom the account is 41 7 maintained as entitled to exercise the rights that comprise 41 8 the financial asset. 41 9 2. Except as otherwise provided in subsections 4 and 5, a 41 10 person acquires a security entitlement if a securities 41 11 intermediary: 41 12 a. indicates by book entry that a financial asset has been 41 13 credited to the person's securities account; 41 14 b. receives a financial asset from the person or acquires 41 15 a financial asset for the person and, in either case, accepts 41 16 it for credit to the person's securities account; or 41 17 c. becomes obligated under other law, regulation, or rule 41 18 to credit a financial asset to the person's securities 41 19 account. 41 20 3. If a condition of subsection 2 has been met, a person 41 21 has a security entitlement even though the securities 41 22 intermediary does not itself hold the financial asset. 41 23 4. If a securities intermediary holds a financial asset 41 24 for another person, and the financial asset is registered in 41 25 the name of, payable to the order of, or specially indorsed to 41 26 the other person, and has not been indorsed to the securities 41 27 intermediary or in blank, the other person is treated as 41 28 holding the financial asset directly rather than as having a 41 29 security entitlement with respect to the financial asset. 41 30 5. Issuance of a security is not establishment of a 41 31 security entitlement. 41 32 Sec. 49. NEW SECTION. 554.8502 ASSERTION OF ADVERSE 41 33 CLAIM AGAINST ENTITLEMENT HOLDER. 41 34 An action based on an adverse claim to a financial asset, 41 35 whether framed in conversion, replevin, constructive trust, 42 1 equitable lien, or other theory, may not be asserted against a 42 2 person who acquires a security entitlement under section 42 3 554.8501 for value and without notice of the adverse claim. 42 4 Sec. 50. NEW SECTION. 554.8503 PROPERTY INTEREST OF 42 5 ENTITLEMENT HOLDER IN FINANCIAL ASSET HELD BY SECURITIES 42 6 INTERMEDIARY. 42 7 1. To the extent necessary for a securities intermediary 42 8 to satisfy all security entitlements with respect to a 42 9 particular financial asset, all interests in that financial 42 10 asset held by the securities intermediary are held by the 42 11 securities intermediary for the entitlement holders, are not 42 12 property of the securities intermediary, and are not subject 42 13 to claims of creditors of the securities intermediary, except 42 14 as otherwise provided in section 554.8511. 42 15 2. An entitlement holder's property interest with respect 42 16 to a particular financial asset under subsection 1 is a pro 42 17 rata property interest in all interests in that financial 42 18 asset held by the securities intermediary, without regard to 42 19 the time the entitlement holder acquired the security 42 20 entitlement or the time the securities intermediary acquired 42 21 the interest in that financial asset. 42 22 3. An entitlement holder's property interest with respect 42 23 to a particular financial asset under subsection 1 may be 42 24 enforced against the securities intermediary only by exercise 42 25 of the entitlement holder's rights under sections 554.8505 42 26 through 554.8508. 42 27 4. An entitlement holder's property interest with respect 42 28 to a particular financial asset under subsection 1 may be 42 29 enforced against a purchaser of the financial asset or 42 30 interest therein only if: 42 31 a. insolvency proceedings have been initiated by or 42 32 against the securities intermediary; 42 33 b. the securities intermediary does not have sufficient 42 34 interests in the financial asset to satisfy the security 42 35 entitlements of all of its entitlement holders to that 43 1 financial asset; 43 2 c. the securities intermediary violated its obligations 43 3 under section 554.8504 by transferring the financial asset or 43 4 interest therein to the purchaser; and 43 5 d. the purchaser is not protected under subsection 5. The 43 6 trustee or other liquidator, acting on behalf of all 43 7 entitlement holders having security entitlements with respect 43 8 to a particular financial asset, may recover the financial 43 9 asset, or interest therein, from the purchaser. If the 43 10 trustee or other liquidator elects not to pursue that right, 43 11 an entitlement holder whose security entitlement remains 43 12 unsatisfied has the right to recover its interest in the 43 13 financial asset from the purchaser. 43 14 5. An action based on the entitlement holder's property 43 15 interest with respect to a particular financial asset under 43 16 subsection 1, whether framed in conversion, replevin, 43 17 constructive trust, equitable lien, or other theory, may not 43 18 be asserted against any purchaser of a financial asset or 43 19 interest therein who gives value, obtains control, and does 43 20 not act in collusion with the securities intermediary in 43 21 violating the securities intermediary's obligations under 43 22 section 554.8504. 43 23 Sec. 51. NEW SECTION. 554.8504 DUTY OF SECURITIES 43 24 INTERMEDIARY TO MAINTAIN FINANCIAL ASSET. 43 25 1. A securities intermediary shall promptly obtain and 43 26 thereafter maintain a financial asset in a quantity 43 27 corresponding to the aggregate of all security entitlements it 43 28 has established in favor of its entitlement holders with 43 29 respect to that financial asset. The securities intermediary 43 30 may maintain those financial assets directly or through one or 43 31 more other securities intermediaries. 43 32 2. Except to the extent otherwise agreed by its 43 33 entitlement holder, a securities intermediary may not grant 43 34 any security interests in a financial asset it is obligated to 43 35 maintain pursuant to subsection 1. 44 1 3. A securities intermediary satisfies the duty in 44 2 subsection 1 if: 44 3 a. the securities intermediary acts with respect to the 44 4 duty as agreed upon by the entitlement holder and the 44 5 securities intermediary; or 44 6 b. in the absence of agreement, the securities 44 7 intermediary exercises due care in accordance with reasonable 44 8 commercial standards to obtain and maintain the financial 44 9 asset. 44 10 4. This section does not apply to a clearing corporation 44 11 that is itself the obligor of an option or similar obligation 44 12 to which its entitlement holders have security entitlements. 44 13 Sec. 52. NEW SECTION. 554.8505 DUTY OF SECURITIES 44 14 INTERMEDIARY WITH RESPECT TO PAYMENTS AND DISTRIBUTIONS. 44 15 1. A securities intermediary shall take action to obtain a 44 16 payment or distribution made by the issuer of a financial 44 17 asset. A securities intermediary satisfies the duty if: 44 18 a. the securities intermediary acts with respect to the 44 19 duty as agreed upon by the entitlement holder and the 44 20 securities intermediary; or 44 21 b. in the absence of agreement, the securities 44 22 intermediary exercises due care in accordance with reasonable 44 23 commercial standards to attempt to obtain the payment or 44 24 distribution. 44 25 2. A securities intermediary is obligated to its 44 26 entitlement holder for a payment or distribution made by the 44 27 issuer of a financial asset if the payment or distribution is 44 28 received by the securities intermediary. 44 29 Sec. 53. NEW SECTION. 554.8506 DUTY OF SECURITIES 44 30 INTERMEDIARY TO EXERCISE RIGHTS AS DIRECTED BY ENTITLEMENT 44 31 HOLDER. 44 32 A securities intermediary shall exercise rights with 44 33 respect to a financial asset if directed to do so by an 44 34 entitlement holder. A securities intermediary satisfies the 44 35 duty if: 45 1 1. the securities intermediary acts with respect to the 45 2 duty as agreed upon by the entitlement holder and the 45 3 securities intermediary; or 45 4 2. in the absence of agreement, the securities 45 5 intermediary either places the entitlement holder in a 45 6 position to exercise the rights directly or exercises due care 45 7 in accordance with reasonable commercial standards to follow 45 8 the direction of the entitlement holder. 45 9 Sec. 54. NEW SECTION. 554.8507 DUTY OF SECURITIES 45 10 INTERMEDIARY TO COMPLY WITH ENTITLEMENT ORDER. 45 11 1. A securities intermediary shall comply with an 45 12 entitlement order if the entitlement order is originated by 45 13 the appropriate person, the securities intermediary has had 45 14 reasonable opportunity to assure itself that the entitlement 45 15 order is genuine and authorized, and the securities 45 16 intermediary has had reasonable opportunity to comply with the 45 17 entitlement order. A securities intermediary satisfies the 45 18 duty if: 45 19 a. the securities intermediary acts with respect to the 45 20 duty as agreed upon by the entitlement holder and the 45 21 securities intermediary; or 45 22 b. in the absence of agreement, the securities 45 23 intermediary exercises due care in accordance with reasonable 45 24 commercial standards to comply with the entitlement order. 45 25 2. If a securities intermediary transfers a financial 45 26 asset pursuant to an ineffective entitlement order, the 45 27 securities intermediary shall reestablish a security 45 28 entitlement in favor of the person entitled to it, and pay or 45 29 credit any payments or distributions that the person did not 45 30 receive as a result of the wrongful transfer. If the 45 31 securities intermediary does not reestablish a security 45 32 entitlement, the securities intermediary is liable to the 45 33 entitlement holder for damages. 45 34 Sec. 55. NEW SECTION. 554.8508 DUTY OF SECURITIES 45 35 INTERMEDIARY TO CHANGE ENTITLEMENT HOLDER'S POSITION TO OTHER 46 1 FORM OF SECURITY HOLDING. 46 2 A securities intermediary shall act at the direction of an 46 3 entitlement holder to change a security entitlement into 46 4 another available form of holding for which the entitlement 46 5 holder is eligible, or to cause the financial asset to be 46 6 transferred to a securities account of the entitlement holder 46 7 with another securities intermediary. A securities 46 8 intermediary satisfies the duty if: 46 9 1. the securities intermediary acts as agreed upon by the 46 10 entitlement holder and the securities intermediary; or 46 11 2. in the absence of agreement, the securities 46 12 intermediary exercises due care in accordance with reasonable 46 13 commercial standards to follow the direction of the 46 14 entitlement holder. 46 15 Sec. 56. NEW SECTION. 554.8509 SPECIFICATION OF DUTIES 46 16 OF SECURITIES INTERMEDIARY BY OTHER STATUTE OR REGULATION – 46 17 MANNER OF PERFORMANCE OF DUTIES OF SECURITIES INTERMEDIARY AND 46 18 EXERCISE OF RIGHTS OF ENTITLEMENT HOLDER. 46 19 1. If the substance of a duty imposed upon a securities 46 20 intermediary by sections 554.8504 through 554.8508 is the 46 21 subject of other statute, regulation, or rule, compliance with 46 22 that statute, regulation, or rule satisfies the duty. 46 23 2. To the extent that specific standards for the 46 24 performance of the duties of a securities intermediary or the 46 25 exercise of the rights of an entitlement holder are not 46 26 specified by other statute, regulation, or rule or by 46 27 agreement between the securities intermediary and entitlement 46 28 holder, the securities intermediary shall perform its duties 46 29 and the entitlement holder shall exercise its rights in a 46 30 commercially reasonable manner. 46 31 3. The obligation of a securities intermediary to perform 46 32 the duties imposed by sections 554.8504 through 554.8508 is 46 33 subject to: 46 34 a. rights of the securities intermediary arising out of a 46 35 security interest under a security agreement with the 47 1 entitlement holder or otherwise; and 47 2 b. rights of the securities intermediary under other law, 47 3 regulation, rule, or agreement to withhold performance of its 47 4 duties as a result of unfulfilled obligations of the 47 5 entitlement holder to the securities intermediary. 47 6 4. Sections 554.8504 through 554.8508 do not require a 47 7 securities intermediary to take any action that is prohibited 47 8 by other statute, regulation, or rule. 47 9 Sec. 57. NEW SECTION. 554.8510 RIGHTS OF PURCHASER OF 47 10 SECURITY ENTITLEMENT FROM ENTITLEMENT HOLDER. 47 11 1. An action based on an adverse claim to a financial 47 12 asset or security entitlement, whether framed in conversion, 47 13 replevin, constructive trust, equitable lien, or other theory, 47 14 may not be asserted against a person who purchases a security 47 15 entitlement, or an interest therein, from an entitlement 47 16 holder if the purchaser gives value, does not have notice of 47 17 the adverse claim, and obtains control. 47 18 2. If an adverse claim could not have been asserted 47 19 against an entitlement holder under section 554.8502, the 47 20 adverse claim cannot be asserted against a person who 47 21 purchases a security entitlement, or an interest therein, from 47 22 the entitlement holder. 47 23 3. In a case not covered by the priority rules in Article 47 24 9, a purchaser for value of a security entitlement, or an 47 25 interest therein, who obtains control has priority over a 47 26 purchaser of a security entitlement, or an interest therein, 47 27 who does not obtain control. Purchasers who have control rank 47 28 equally, except that a securities intermediary as purchaser 47 29 has priority over a conflicting purchaser who has control 47 30 unless otherwise agreed by the securities intermediary. 47 31 Sec. 58. NEW SECTION. 554.8511 PRIORITY AMONG SECURITY 47 32 INTERESTS AND ENTITLEMENT HOLDERS. 47 33 1. Except as otherwise provided in subsections 2 and 3, if 47 34 a securities intermediary does not have sufficient interests 47 35 in a particular financial asset to satisfy both its 48 1 obligations to entitlement holders who have security 48 2 entitlements to that financial asset and its obligation to a 48 3 creditor of the securities intermediary who has a security 48 4 interest in that financial asset, the claims of entitlement 48 5 holders, other than the creditor, have priority over the claim 48 6 of the creditor. 48 7 2. A claim of a creditor of a securities intermediary who 48 8 has a security interest in a financial asset held by a 48 9 securities intermediary has priority over claims of the 48 10 securities intermediary's entitlement holders who have 48 11 security entitlements with respect to that financial asset if 48 12 the creditor has control over the financial asset. 48 13 3. If a clearing corporation does not have sufficient 48 14 financial assets to satisfy both its obligations to 48 15 entitlement holders who have security entitlements with 48 16 respect to a financial asset and its obligation to a creditor 48 17 of the clearing corporation who has a security interest in 48 18 that financial asset, the claim of the creditor has priority 48 19 over the claims of entitlement holders. 48 20 Sec. 59. Section 554.9103, subsection 6, Code 1995, is 48 21 amended by striking the subsection and inserting in lieu 48 22 thereof the following: 48 23 6. INVESTMENT PROPERTY. 48 24 a. This subsection applies to investment property. 48 25 b. Except as otherwise provided in paragraph "f", during 48 26 the time that a security certificate is located in a 48 27 jurisdiction, perfection of a security interest, the effect of 48 28 perfection or nonperfection, and the priority of a security 48 29 interest in the certificated security represented thereby are 48 30 governed by the local law of that jurisdiction. 48 31 c. Except as otherwise provided in paragraph "f", 48 32 perfection of a security interest, the effect of perfection or 48 33 non-perfection, and the priority of a security interest in an 48 34 uncertificated security are governed by the local law of the 48 35 issuer's jurisdiction as specified in section 554.8110, 49 1 subsection 4. 49 2 d. Except as otherwise provided in paragraph "f", 49 3 perfection of a security interest, the effect of perfection or 49 4 non-perfection, and the priority of a security interest in a 49 5 security entitlement or securities account are governed by the 49 6 local law of the securities intermediary's jurisdiction as 49 7 specified in section 554.8110, subsection 5. 49 8 e. Except as otherwise provided in paragraph "f", 49 9 perfection of a security interest, the effect of perfection or 49 10 non-perfection, and the priority of a security interest in a 49 11 commodity contract or commodity account are governed by the 49 12 local law of the commodity intermediary's jurisdiction. The 49 13 following rules determine a "commodity intermediary's 49 14 jurisdiction" for purposes of this paragraph: 49 15 (1) If an agreement between the commodity intermediary and 49 16 commodity customer specifies that it is governed by the law of 49 17 a particular jurisdiction, that jurisdiction is the commodity 49 18 intermediary's jurisdiction. 49 19 (2) If an agreement between the commodity intermediary and 49 20 commodity customer does not specify the governing law as 49 21 provided in subparagraph (1), but expressly specifies that the 49 22 commodity account is maintained at an office in a particular 49 23 jurisdiction, that jurisdiction is the commodity 49 24 intermediary's jurisdiction. 49 25 (3) If an agreement between the commodity intermediary and 49 26 commodity customer does not specify a jurisdiction as provided 49 27 in subparagraph (1) or (2), the commodity intermediary's 49 28 jurisdiction is the jurisdiction in which is located the 49 29 office identified in an account statement as the office 49 30 serving the commodity customer's account. 49 31 (4) If an agreement between the commodity intermediary and 49 32 commodity customer does not specify a jurisdiction as provided 49 33 in subparagraph (1) or (2) and an account statement does not 49 34 identify an office serving the commodity customer's account as 49 35 provided in subparagraph (3), the commodity intermediary's 50 1 jurisdiction is the jurisdiction in which is located the chief 50 2 executive office of the commodity intermediary. 50 3 f. Perfection of a security interest by filing, automatic 50 4 perfection of a security interest in investment property 50 5 granted by a broker or securities intermediary, and automatic 50 6 perfection of a security interest in a commodity contract or 50 7 commodity account granted by a commodity intermediary are 50 8 governed by the local law of the jurisdiction in which the 50 9 debtor is located. 50 10 Sec. 60. Section 554.9105, subsection 1, paragraphs h and 50 11 i, Code 1995, are amended to read as follows: 50 12 h. "Goods" include all things which are movable at the 50 13 time the security interest attaches or which are fixtures 50 14 (section 554.9313), but do not include money, documents, 50 15 instruments, investment property, accounts, chattel paper, 50 16 general intangibles or minerals or the like (including oil and 50 17 gas) before extraction. "Goods" also include standing timber 50 18 which is to be cut and removed under a conveyance or contract 50 19 for sale, the unborn young of animals and growing crops; 50 20 i. "Instrument" means a negotiable instrument (defined in 50 21 section 554.3104),or a certificated security (defined in50 22section 554.8102)or any other writing which evidences a right 50 23 to the payment of money and is not itself a security agreement 50 24 or lease and is of a type which is in ordinary course of 50 25 business transferred by delivery with any necessary 50 26 endorsement or assignment. The term does not include 50 27 investment property; 50 28 Sec. 61. Section 554.9105, subsection 2, Code 1995, is 50 29 amended to read as follows: 50 30 2. Other definitions applying to this Article and the 50 31 sections in which they appear are: 50 32 "Account" Section 554.9106 50 33 "Attach" Section 554.9203 50 34 "Commodity contract" Section 554.9115 50 35 "Commodity customer" Section 554.9115 51 1 "Commodity intermediary" Section 554.9115 51 2 "Construction mortgage" Section 554.9313(1) 51 3 "Consumer goods" Section 554.9109(1) 51 4 "Control" Section 554.9115 51 5 "Equipment" Section 554.9109(2) 51 6 "Farm products" Section 554.9109(3) 51 7 "Fixture" Section 554.9313 51 8 "Fixture filing" Section 554.9313 51 9 "General intangibles" Section 554.9106 51 10 "Inventory" Section 554.9109(4) 51 11 "Investment property Section 554.9115 51 12 "Lien creditor" Section 554.9301(3) 51 13 "Proceeds" Section 554.9306(1) 51 14 "Purchase money security 51 15 interest" Section 554.9107 51 16 "United States" Section 554.9103 51 17 Sec. 62. Section 554.9105, subsection 3, Code 1995, is 51 18 amended to read as follows: 51 19 3. The following definitions in other Articles apply to 51 20 this Article: 51 21 "Broker" Section 554.8102 51 22 "Certificated security" Section 554.8102 51 23 "Check" Section 554.3104 51 24 "Clearing corporation" Section 554.8102 51 25 "Contract for sale" Section 554.2106 51 26 "Control" Section 554.8106 51 27 "Delivery" Section 554.8301 51 28 "Entitlement holder" Section 554.8102 51 29 "Financial asset" Section 554.8102 51 30 "Holder in due course" Section 554.3302 51 31 "Note" Section 554.3104 51 32 "Sale" Section 554.2106 51 33 "Securities intermediary" Section 554.8102 51 34 "Security" Section 554.8102 51 35 "Security certificate" Section 554.8102 52 1 "Security entitlement" Section 554.8102 52 2 "Uncertificated security " Section 554.8102 52 3 Sec. 63. Section 554.9106, Code 1995, is amended to read 52 4 as follows: 52 5 554.9106 DEFINITIONS: "ACCOUNT" – "GENERAL INTANGIBLES." 52 6 "Account" means any right to payment for goods sold or 52 7 leased or for services rendered which is not evidenced by an 52 8 instrument or chattel paper, whether or not it has been earned 52 9 by performance. "General intangibles" means any personal 52 10 property (including things in action) other than goods, 52 11 accounts, chattel paper, documents, instruments, investment 52 12 property, and money. All rights to payment earned or unearned 52 13 under a charter or other contract involving the use or hire of 52 14 a vessel and all rights incident to the charter or contract 52 15 are accounts. 52 16 Sec. 64. NEW SECTION. 554.9115 INVESTMENT PROPERTY. 52 17 1. In this Article: 52 18 a. "Commodity account" means an account maintained by a 52 19 commodity intermediary in which a commodity contract is 52 20 carried for a commodity customer. 52 21 b. "Commodity contract" means a commodity futures 52 22 contract, an option on a commodity futures contract, a 52 23 commodity option, or other contract that, in each case, is: 52 24 (1) traded on or subject to the rules of a board of trade 52 25 that has been designated as a contract market for such a 52 26 contract pursuant to the federal commodities laws; or 52 27 (2) traded on a foreign commodity board of trade, 52 28 exchange, or market, and is carried on the books of a 52 29 commodity intermediary for a commodity customer. 52 30 c. "Commodity customer" means a person for whom a 52 31 commodity intermediary carries a commodity contract on its 52 32 books. 52 33 d. "Commodity intermediary" means: 52 34 (1) a person who is registered as a futures commission 52 35 merchant under the federal commodities laws; or 53 1 (2) a person who in the ordinary course of its business 53 2 provides clearance or settlement services for a board of trade 53 3 that has been designated as a contract market pursuant to the 53 4 federal commodities laws. 53 5 e. "Control" with respect to a certificated security, 53 6 uncertificated security, or security entitlement has the 53 7 meaning specified in section 554.8106. A secured party has 53 8 control over a commodity contract if by agreement among the 53 9 commodity customer, the commodity intermediary, and the 53 10 secured party, the commodity intermediary has agreed that it 53 11 will apply any value distributed on account of the commodity 53 12 contract as directed by the secured party without further 53 13 consent by the commodity customer. If a commodity customer 53 14 grants a security interest in a commodity contract to its own 53 15 commodity intermediary, the commodity intermediary as secured 53 16 party has control. A secured party has control over a 53 17 securities account or commodity account if the secured party 53 18 has control over all security entitlements or commodity 53 19 contracts carried in the securities account or commodity 53 20 account. 53 21 f. "Investment property" means: 53 22 (1) a security, whether certificated or uncertificated; 53 23 (2) a security entitlement; 53 24 (3) a securities account; 53 25 (4) a commodity contract; or 53 26 (5) a commodity account. 53 27 2. Attachment or perfection of a security interest in a 53 28 securities account is also attachment or perfection of a 53 29 security interest in all security entitlements carried in the 53 30 securities account. Attachment or perfection of a security 53 31 interest in a commodity account is also attachment or 53 32 perfection of a security interest in all commodity contracts 53 33 carried in the commodity account. 53 34 3. A description of collateral in a security agreement or 53 35 financing statement is sufficient to create or perfect a 54 1 security interest in a certificated security, uncertificated 54 2 security, security entitlement, securities account, commodity 54 3 contract, or commodity account whether it describes the 54 4 collateral by those terms, or as investment property, or by 54 5 description of the underlying security, financial asset, or 54 6 commodity contract. A description of investment property 54 7 collateral in a security agreement or financing statement is 54 8 sufficient if it identifies the collateral by specific 54 9 listing, by category, by quantity, by a computational or 54 10 allocational formula or procedure, or by any other method, if 54 11 the identity of the collateral is objectively determinable. 54 12 4. Perfection of a security interest in investment 54 13 property is governed by the following rules: 54 14 a. a security interest in investment property may be 54 15 perfected by control. 54 16 b. except as otherwise provided in paragraphs "c" and "d", 54 17 a security interest in investment property may be perfected by 54 18 filing. 54 19 c. if the debtor is a broker or securities intermediary, a 54 20 security interest in investment property is perfected when it 54 21 attaches. The filing of a financing statement with respect to 54 22 a security interest in investment property granted by a broker 54 23 or securities intermediary has no effect for purposes of 54 24 perfection or priority with respect to that security interest. 54 25 d. if a debtor is a commodity intermediary, a security 54 26 interest in a commodity contract or a commodity account is 54 27 perfected when it attaches. The filing of a financing 54 28 statement with respect to a security interest in a commodity 54 29 contract or a commodity account granted by a commodity 54 30 intermediary has no effect for purposes of perfection or 54 31 priority with respect to that security interest. 54 32 5. Priority between conflicting security interests in the 54 33 same investment property is governed by the following rules: 54 34 a. a security interest of a secured party who has control 54 35 over investment property has priority over a security interest 55 1 of a secured party who does not have control over the 55 2 investment property. 55 3 b. except as otherwise provided in paragraphs "c" and "d", 55 4 conflicting security interests of secured parties each of whom 55 5 has control rank equally. 55 6 c. except as otherwise agreed by the securities 55 7 intermediary, a security interest in a security entitlement or 55 8 a securities account granted to the debtor's own securities 55 9 intermediary has priority over any security interest granted 55 10 by the debtor to another secured party. 55 11 d. except as otherwise agreed by the commodity 55 12 intermediary, a security interest in a commodity contract or a 55 13 commodity account granted to the debtor's own commodity 55 14 intermediary has priority over any security interest granted 55 15 by the debtor to another secured party. 55 16 e. conflicting security interests granted by a broker, a 55 17 securities intermediary, or a commodity intermediary which are 55 18 perfected without control rank equally. 55 19 f. in all other cases, priority between conflicting 55 20 security interests in investment property is governed by 55 21 section 554.9312, subsections 5, 6, and 7. Section 554.9312, 55 22 subsection 4, does not apply to investment property. 55 23 6. If a security certificate in registered form is 55 24 delivered to a secured party pursuant to agreement, a written 55 25 security agreement is not required for attachment or 55 26 enforceability of the security interest, delivery suffices for 55 27 perfection of the security interest, and the security interest 55 28 has priority over a conflicting security interest perfected by 55 29 means other than control, even if a necessary indorsement is 55 30 lacking. 55 31 Sec. 65. NEW SECTION. 554.9116 SECURITY INTEREST ARISING 55 32 IN PURCHASE OR DELIVERY OF FINANCIAL ASSET. 55 33 1. If a person buys a financial asset through a securities 55 34 intermediary in a transaction in which the buyer is obligated 55 35 to pay the purchase price to the securities intermediary at 56 1 the time of the purchase, and the securities intermediary 56 2 credits the financial asset to the buyer's securities account 56 3 before the buyer pays the securities intermediary, the 56 4 securities intermediary has a security interest in the buyer's 56 5 security entitlement securing the buyer's obligation to pay. 56 6 A security agreement is not required for attachment or 56 7 enforceability of the security interest, and the security 56 8 interest is automatically perfected. 56 9 2. If a certificated security, or other financial asset 56 10 represented by a writing which in the ordinary course of 56 11 business is transferred by delivery with any necessary 56 12 indorsement or assignment is delivered pursuant to an 56 13 agreement between persons in the business of dealing with such 56 14 securities or financial assets and the agreement calls for 56 15 delivery versus payment, the person delivering the certificate 56 16 or other financial asset has a security interest in the 56 17 certificated security or other financial asset securing the 56 18 seller's right to receive payment. A security agreement is 56 19 not required for attachment or enforceability of the security 56 20 interest, and the security interest is automatically 56 21 perfected. 56 22 Sec. 66. Section 554.9203, subsection 1, Code 1995, is 56 23 amended to read as follows: 56 24 1. Subject to the provisions of section 554.4210 on the 56 25 security interest of a collecting bank,section 554.8321 on56 26security interests in securitiessections 554.9115 and 56 27 554.9116 on security interests in investment property, and 56 28 section 554.9113 on a security interest arising under the 56 29 Article on Sales, a security interest is not enforceable 56 30 against the debtor or third parties with respect to the 56 31 collateral and does not attach unless: 56 32 a. the collateral is in the possession of the secured 56 33 party pursuant to agreement, the collateral is investment 56 34 property and the secured party has control pursuant to 56 35 agreement, or the debtor has signed a security agreement which 57 1 contains a description of the collateral and in addition, when 57 2 the security interest covers crops growing or to be grown or 57 3 timber to be cut, a description of the land concerned; 57 4 b. value has been given; and 57 5 c. the debtor has rights in the collateral. 57 6 Sec. 67. Section 554.9301, subsection 1, paragraph d, Code 57 7 1995, is amended to read as follows: 57 8 d. in the case of accounts,andgeneral intangibles, and 57 9 investment property, a person who is not a secured party and 57 10 who is a transferee to the extent that that person gives value 57 11 without knowledge of the security interest and before it is 57 12 perfected. 57 13 Sec. 68. Section 554.9302, subsection 1, paragraphs b, f, 57 14 and g, Code 1995, are amended to read as follows: 57 15 b. a security interest temporarily perfected in 57 16 instruments, certificated securities, or documents without 57 17 delivery under section 554.9304 or in proceeds for a ten-day 57 18 period under section 554.9306; 57 19 f. a security interest of a collecting bank (section 57 20 554.4210)or in securities (section 554.8321)or arising under 57 21 the Article on Sales (see section 554.9113) or covered in 57 22 subsection 3 of this section; 57 23 g. an assignment for the benefit of all the creditors of 57 24 the transferor, and subsequent transfers by the assignee 57 25 thereunder.; 57 26 Sec. 69. Section 554.9302, subsection 1, Code 1995, is 57 27 amended by adding the following new paragraph: 57 28 NEW PARAGRAPH. h. a security interest in investment 57 29 property which is perfected without filing under section 57 30 554.9115 or section 554.9116. 57 31 Sec. 70. Section 554.9303, subsection 1, Code 1995, is 57 32 amended to read as follows: 57 33 1. A security interest is perfected when it has attached 57 34 and when all of the applicable steps required for perfection 57 35 have been taken. Such steps are specified in sections 58 1 554.9115, 554.9302, 554.9304, 554.9305 and 554.9306. If such 58 2 steps are taken before the security interest attaches, it is 58 3 perfected at the time when it attaches. 58 4 Sec. 71. Section 554.9304, subsections 1, 4, and 5, Code 58 5 1995, are amended to read as follows: 58 6 1. A security interest in chattel paper or negotiable 58 7 documents may be perfected by filing. A security interest in 58 8 money or instruments (other thancertificated securities or58 9 instruments which constitute part of chattel paper) can be 58 10 perfected only by the secured party's taking possession, 58 11 except as provided in subsections 4 and 5 of this section and 58 12 section 554.9306, subsections 2 and 3, on proceeds. 58 13 4. A security interest in instruments,(other than58 14 certificated securities), or negotiable documents is perfected 58 15 without filing or the taking of possession for a period of 58 16 twenty-one days from the time it attaches to the extent that 58 17 it arises for new value given under a written security 58 18 agreement. 58 19 5. A security interest remains perfected for a period of 58 20 twenty-one days without filing where a secured party having a 58 21 perfected security interest in an instrument,(other thana 58 22 certificatedsecurities),security, a negotiable document or 58 23 goods in possession of a bailee other than one who has issued 58 24 a negotiable document therefor 58 25 a. makes available to the debtor the goods or documents 58 26 representing the goods for the purpose of ultimate sale or 58 27 exchange or for the purpose of loading, unloading, storing, 58 28 shipping, transshipping, manufacturing, processing or 58 29 otherwise dealing with them in a manner preliminary to their 58 30 sale or exchange, but priority between conflicting security 58 31 interests in the goods is subject to section 554.9312, 58 32 subsection 3; or 58 33 b. delivers the instrument or certificated security to the 58 34 debtor for the purpose of ultimate sale or exchange or of 58 35 presentation, collection, renewal, or registration of 59 1 transfer. 59 2 Sec. 72. Section 554.9305, Code 1995, is amended to read 59 3 as follows: 59 4 554.9305 WHEN POSSESSION BY SECURED PARTY PERFECTS 59 5 SECURITY INTEREST WITHOUT FILING. 59 6 A security interest in letters of credit and advices of 59 7 credit (subsection 2 "a" of section 554.5116), goods, 59 8 instruments(other than certificated securities), money, 59 9 negotiable documents or chattel paper may be perfected by the 59 10 secured party's taking possession of the collateral. If such 59 11 collateral other than goods covered by a negotiable document 59 12 is held by a bailee, the secured party is deemed to have 59 13 possession from the time the bailee receives notification of 59 14 the secured party's interest. A security interest is 59 15 perfected by possession from the time possession is taken 59 16 without relation back and continues only so long as possession 59 17 is retained, unless otherwise specified in this Article. The 59 18 security interest may be otherwise perfected as provided in 59 19 this Article before or after the period of possession by the 59 20 secured party. 59 21 Sec. 73. Section 554.9306, subsection 1, Code 1995, is 59 22 amended to read as follows: 59 23 1. "Proceeds" include whatever is received upon the sale, 59 24 exchange, collection or other disposition of collateral or 59 25 proceeds. Insurance payable by reason of loss or damage to 59 26 the collateral is proceeds, except to the extent that it is 59 27 payable to a person other than a party to the security 59 28 agreement. Any payments or distributions made with respect to 59 29 investment property collateral are proceeds. Money, checks, 59 30 deposit accounts and the like are "cash proceeds". All other 59 31 proceeds are "noncash proceeds". 59 32 Sec. 74. Section 554.9306, subsection 3, paragraph b, Code 59 33 1995, is amended to read as follows: 59 34 b. a filed financing statement covers the original 59 35 collateral and the proceeds are identifiable cash proceeds;or60 1 Sec. 75. Section 554.9306, subsection 3, Code 1995, is 60 2 amended by adding the following new paragraph after paragraph 60 3 b and relettering subsequent paragraphs: 60 4 NEW PARAGRAPH. c. the original collateral was investment 60 5 property and the proceeds are identifiable cash proceeds; or 60 6 Sec. 76. Section 554.9309, Code 1995, is amended to read 60 7 as follows: 60 8 554.9309 PROTECTION OF PURCHASERS OF INSTRUMENTS AND 60 9 DOCUMENTS AND SECURITIES. 60 10 Nothing in this Article limits the rights of a holder in 60 11 due course of a negotiable instrument (section 554.3302) or a 60 12 holder to whom a negotiable document of title has been duly 60 13 negotiated (section 554.7501) or abona fideprotected 60 14 purchaser of a security (section554.8302554.8303) and such 60 15 holders or purchasers take priority over an earlier security 60 16 interest even though perfected. Filing under this Article 60 17 does not constitute notice of the security interest to such 60 18 holders or purchasers. 60 19 Sec. 77. Section 554.9312, subsections 1 and 7, Code 1995, 60 20 are amended to read as follows: 60 21 1. The rules of priority stated in other sections of this 60 22 Part and in the following sections shall govern when 60 23 applicable: section 554.4210 with respect to the security 60 24 interests of collecting banks in items being collected, 60 25 accompanying documents and proceeds; section 554.9103 on 60 26 security interests related to other jurisdictions; section 60 27 554.9114 on consignments; section 554.9115 on security 60 28 interest in investment property. 60 29 7. If future advances are made while a security interest 60 30 is perfected by filing, the taking of possession, or under 60 31 section554.8321 on securities554.9115 or section 554.9116 on 60 32 investment property, the security interest has the same 60 33 priority for the purposes of subsection 5 or section 554.9115, 60 34 subsection 5, with respect to the future advances as it does 60 35 with respect to the first advance. If a commitment is made 61 1 before or while the security interest is so perfected, the 61 2 security interest has the same priority with respect to 61 3 advances made pursuant thereto. In other cases a perfected 61 4 security interest has priority from the date the advance is 61 5 made. 61 6 Sec. 78. Section 554.10104, subsection 2, Code 1995, is 61 7 amended by striking the subsection. 61 8 Sec. 79. Section 633.89, unnumbered paragraph 1, Code 61 9 1995, is amended to read as follows: 61 10 A fiduciary as defined in section 633.3,subsection 17,61 11 holding securities, and a bank as defined in section 524.103, 61 12subsection 7,which is holding securities as a managing agent 61 13 or as a custodian, including a custodian for a fiduciary, may 61 14 deposit securities in a clearing corporation, as defined in 61 15 section 554.8102,subsection 3,which is located within or 61 16 without the state of Iowa, if the clearing corporation is 61 17 federally regulated. A depositing bank is subject to rules 61 18 adopted by the superintendent of banking, with respect to 61 19 state banks, and by the comptroller of the currency, with 61 20 respect to national banking associations. 61 21 Sec. 80. SAVINGS CLAUSE. 61 22 1. This Act does not affect an action or proceeding 61 23 commenced before this Act takes effect. 61 24 2. If a security interest in a security is perfected at 61 25 the date this Act takes effect, and the action by which the 61 26 security interest was perfected would suffice to perfect a 61 27 security interest under this Act, no further action is 61 28 required to continue perfection. If a security interest in a 61 29 security is perfected at the date this Act takes effect but 61 30 the action by which the security interest was perfected would 61 31 not suffice to perfect a security interest under this Act, the 61 32 security interest remains perfected for a period of four 61 33 months after the effective date and continues perfected 61 34 thereafter if appropriate action to perfect under this Act is 61 35 taken within that period. If a security interest is perfected 62 1 at the date this Act takes effect and the security interest 62 2 can be perfected by filing under this Act, a financing 62 3 statement signed by the secured party instead of the debtor 62 4 may be filed within that period to continue perfection or 62 5 thereafter to perfect. 62 6 Sec. 81. REPEALS. 62 7 1. Sections 554.8308 through 554.8321, Code 1995, are 62 8 repealed. 62 9 2. Section 554.8408, Code 1995, is repealed. 62 10 Sec. 82. Sections 633.130 through 633.138, Code 1995, are 62 11 repealed. 62 12 Sec. 83. PREVAILING STATUTE. If 1996 Iowa Acts, Senate 62 13 File 2270, or 1996 Iowa Acts, House File 2402, is enacted, 62 14 either of those Acts prevails over the amendments to section 62 15 554.5114 in this Act. 62 16 Sec. 84. EFFECTIVE DATE. This Act becomes effective on 62 17 July 1, 1997. 62 18 SF 2368 62 19 da/cc/26
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