Text: SSB02317                          Text: SSB02319
Text: SSB02300 - SSB02399               Text: SSB Index
Bills and Amendments: General Index     Bill History: General Index

Senate Study Bill 2318

Conference Committee Text

PAG LIN
  1  1    Section 1.  Section 554.1105, subsection 2, Code 1995, is
  1  2 amended to read as follows:
  1  3    2.  Where one of the following provisions of this chapter
  1  4 specifies the applicable law, that provision governs and a
  1  5 contrary agreement is effective only to the extent permitted
  1  6 by the law (including the conflict of laws rules) so
  1  7 specified:
  1  8    Rights of creditors against sold goods.  Section 554.2402.
  1  9    Applicability of the Article on Bank Deposits and
  1 10 Collections.  Section 554.4102.
  1 11    Applicability of the Article on Investment Securities.
  1 12 Section 554.8106 554.8110.
  1 13    Perfection provisions of the Article on Secured
  1 14 Transactions.  Section 554.9103.
  1 15    Governing law in the Article on Funds Transfers.  Section
  1 16 554.12507.
  1 17    Applicability of the Article on Leases.  Sections 554.13105
  1 18 and 554.13106.
  1 19    Sec. 2.  Section 554.1206, subsection 2, Code 1995, is
  1 20 amended to read as follows:
  1 21    2.  Subsection 1 of this section does not apply to
  1 22 contracts for the sale of goods (section 554.2201) nor of
  1 23 securities (section 554.8319 554.8113) nor to security
  1 24 agreements (section 554.9203).
  1 25    Sec. 3.  Section 554.4104, subsection 1, paragraph f, Code
  1 26 Supplement 1995, is amended to read as follows:
  1 27    f.  "Documentary draft" means a draft to be presented for
  1 28 acceptance or payment if specified documents, certificated
  1 29 securities (section 554.8102) or instructions for
  1 30 uncertificated securities (section 554.8308 554.8102), or
  1 31 other certificates, statements, or the like are to be received
  1 32 by the drawee or other payor before acceptance or payment of
  1 33 the draft.
  1 34    Sec. 4.  Section 554.5114, subsection 2, unnumbered
  1 35 paragraph 1, Code 1995, is amended to read as follows:
  2  1    Unless otherwise agreed when documents appear on their face
  2  2 to comply with the terms of a credit but a required document
  2  3 does not in fact conform to the warranties made on negotiation
  2  4 or transfer of a document of title (section 554.7507) or of a
  2  5 certificated security (section 554.8306 554.8108) or is forged
  2  6 or fraudulent or there is fraud in the transaction:  
  2  7                             PART 1
  2  8                 SHORT TITLE AND GENERAL MATTERS
  2  9    Sec. 5.  Section 554.8102, Code 1995, is amended by
  2 10 striking the section and inserting in lieu thereof the
  2 11 following:
  2 12    554.8102  DEFINITIONS AND INDEX OF DEFINITIONS.
  2 13    1.  In this Article:
  2 14    a.  "Adverse claim" means a claim that a claimant has a
  2 15 property interest in a financial asset and that it is a
  2 16 violation of the rights of the claimant for another person to
  2 17 hold, transfer, or deal with the financial asset.
  2 18    b.  "Bearer form", as applied to a certificated security,
  2 19 means a form in which the security is payable to the bearer of
  2 20 the security certificate according to its terms but not by
  2 21 reason of an indorsement.
  2 22    c.  "Broker" means a person defined as a broker or dealer
  2 23 under the federal securities laws, but without excluding a
  2 24 bank acting in that capacity.
  2 25    d.  "Certificated security" means a security that is
  2 26 represented by a certificate.
  2 27    e.  "Clearing corporation" means:
  2 28    (1)  a person that is registered as a "clearing agency"
  2 29 under the federal securities laws;
  2 30    (2)  a federal reserve bank; or
  2 31    (3)  any other person that provides clearance or settlement
  2 32 services with respect to financial assets that would require
  2 33 it to register as a clearing agency under the federal
  2 34 securities laws but for an exclusion or exemption from the
  2 35 registration requirement, if its activities as a clearing
  3  1 corporation, including promulgation of rules, are subject to
  3  2 regulation by a federal or state governmental authority.
  3  3    f.  "Communicate" means to:
  3  4    (1)  send a signed writing; or
  3  5    (2)  transmit information by any mechanism agreed upon by
  3  6 the persons transmitting and receiving the information.
  3  7    g.  "Entitlement holder" means a person identified in the
  3  8 records of a securities intermediary as the person having a
  3  9 security entitlement against the securities intermediary.  If
  3 10 a person acquires a security entitlement by virtue of section
  3 11 554.8501, subsection 2, paragraph "b" or "c", that person is
  3 12 the entitlement holder.
  3 13    h.  "Entitlement order" means a notification communicated
  3 14 to a securities intermediary directing transfer or redemption
  3 15 of a financial asset to which the entitlement holder has a
  3 16 security entitlement.
  3 17    i.  "Financial asset", except as otherwise provided in
  3 18 section 554.8103, means:
  3 19    (1)  a security;
  3 20    (2)  an obligation of a person or a share, participation,
  3 21 or other interest in a person or in property or an enterprise
  3 22 of a person, which is, or is of a type, dealt in or traded on
  3 23 financial markets, or which is recognized in any area in which
  3 24 it is issued or dealt in as a medium for investment; or
  3 25    (3)  any property that is held by a securities intermediary
  3 26 for another person in a securities account if the securities
  3 27 intermediary has expressly agreed with the other person that
  3 28 the property is to be treated as a financial asset under this
  3 29 Article.
  3 30    As context requires, the term means either the interest
  3 31 itself or the means by which a person's claim to it is
  3 32 evidenced, including a certificated or uncertificated
  3 33 security, a security certificate, or a security entitlement.
  3 34    j.  "Good faith", for purposes of the obligation of good
  3 35 faith in the performance or enforcement of contracts or duties
  4  1 within this Article, means honesty in fact and the observance
  4  2 of reasonable commercial standards of fair dealing.
  4  3    k.  "Indorsement" means a signature that alone or
  4  4 accompanied by other words is made on a security certificate
  4  5 in registered form or on a separate document for the purpose
  4  6 of assigning, transferring, or redeeming the security or
  4  7 granting a power to assign, transfer, or redeem it.
  4  8    l.  "Instruction" means a notification communicated to the
  4  9 issuer of an uncertificated security which directs that the
  4 10 transfer of the security be registered or that the security be
  4 11 redeemed.
  4 12    m.  "Registered form", as applied to a certificated
  4 13 security, means a form in which:
  4 14    (1)  the security certificate specifies a person entitled
  4 15 to the security; and
  4 16    (2)  a transfer of the security may be registered upon
  4 17 books maintained for that purpose by or on behalf of the
  4 18 issuer, or the security certificate so states.
  4 19    n.  "Securities intermediary" means:
  4 20    (1)  a clearing corporation; or
  4 21    (2)  a person, including a bank or broker, that in the
  4 22 ordinary course of its business maintains securities accounts
  4 23 for others and is acting in that capacity.
  4 24    o.  "Security", except as otherwise provided in section
  4 25 554.8103, means an obligation of an issuer or a share,
  4 26 participation, or other interest in an issuer or in property
  4 27 or an enterprise of an issuer:
  4 28    (1)  which is represented by a security certificate in
  4 29 bearer or registered form, or the transfer of which may be
  4 30 registered upon books maintained for that purpose by or on
  4 31 behalf of the issuer;
  4 32    (2)  which is one of a class or series or by its terms is
  4 33 divisible into a class or series of shares, participations,
  4 34 interests, or obligations; and
  4 35    (3)  which:
  5  1    (a)  is, or is of a type, dealt in or traded on securities
  5  2 exchanges or securities markets; or
  5  3    (b)  is a medium for investment and by its terms expressly
  5  4 provides that it is a security governed by this Article.
  5  5    p.  "Security certificate" means a certificate representing
  5  6 a security.
  5  7    q.  "Security entitlement" means the rights and property
  5  8 interest of an entitlement holder with respect to a financial
  5  9 asset specified in Part 5.
  5 10    r.  "Uncertificated security" means a security that is not
  5 11 represented by a certificate.
  5 12    2.  Other definitions applying to this Article and the
  5 13 sections in which they appear are:
  5 14    Appropriate person ..............  Section 554.8107
  5 15    Control .........................  Section 554.8106
  5 16    Delivery ........................  Section 554.8301
  5 17    Investment company
  5 18    security ........................  Section 554.8103
  5 19    Issuer ..........................  Section 554.8201
  5 20    Overissue .......................  Section 554.8210
  5 21    Protected purchaser .............  Section 554.8303
  5 22    Securities account ..............  Section 554.8501
  5 23    3.  In addition, Article 1 contains general definitions and
  5 24 principles of construction and interpretation applicable
  5 25 throughout this Article.
  5 26    4.  The characterization of a person, business, or
  5 27 transaction for purposes of this Article does not determine
  5 28 the characterization of the person, business, or transaction
  5 29 for purposes of any other law, regulation, or rule.
  5 30    Sec. 6.  Section 554.8103, Code 1995, is amended by
  5 31 striking the section and inserting in lieu thereof the
  5 32 following:
  5 33    554.8103  RULES FOR DETERMINING WHETHER CERTAIN OBLIGATIONS
  5 34 AND INTERESTS ARE SECURITIES OR FINANCIAL ASSETS.
  5 35    1.  A share or similar equity interest issued by a
  6  1 corporation, business trust, joint stock company, or similar
  6  2 entity is a security.
  6  3    2.  An "investment company security" is a security.
  6  4 "Investment company security" means a share or similar equity
  6  5 interest issued by an entity that is registered as an
  6  6 investment company under the federal investment company laws,
  6  7 an interest in a unit investment trust that is so registered,
  6  8 or a face-amount certificate issued by a face-amount
  6  9 certificate company that is so registered.  Investment company
  6 10 security does not include an insurance policy or endowment
  6 11 policy or annuity contract issued by an insurance company.
  6 12    3.  An interest in a partnership or limited liability
  6 13 company is not a security unless it is dealt in or traded on
  6 14 securities exchanges or in securities markets, its terms
  6 15 expressly provide that it is a security governed by this
  6 16 Article, or it is an investment company security.  However, an
  6 17 interest in a partnership or limited liability company is a
  6 18 financial asset if it is held in a securities account.
  6 19    4.  A writing that is a security certificate is governed by
  6 20 this Article and not by Article 3, even though it also meets
  6 21 the requirements of that Article.  However, a negotiable
  6 22 instrument governed by Article 3 is a financial asset if it is
  6 23 held in a securities account.
  6 24    5.  An option or similar obligation issued by a clearing
  6 25 corporation to its participants is not a security, but is a
  6 26 financial asset.
  6 27    6.  A commodity contract, as defined in section 554.9115,
  6 28 is not a security or a financial asset.
  6 29    Sec. 7.  Section 554.8104, Code 1995, is amended by
  6 30 striking the section and inserting in lieu thereof the
  6 31 following:
  6 32    554.8104  ACQUISITION OF SECURITY OR FINANCIAL ASSET OR
  6 33 INTEREST THEREIN.
  6 34    1.  A person acquires a security or an interest therein,
  6 35 under this Article, if:
  7  1    a.  the person is a purchaser to whom a security is
  7  2 delivered pursuant to section 554.8301; or
  7  3    b.  the person acquires a security entitlement to the
  7  4 security pursuant to section 554.8501.
  7  5    2.  A person acquires a financial asset, other than a
  7  6 security, or an interest therein, under this Article, if the
  7  7 person acquires a security entitlement to the financial asset.
  7  8    3.  A person who acquires a security entitlement to a
  7  9 security or other financial asset has the rights specified in
  7 10 Part 5, but is a purchaser of any security, security
  7 11 entitlement, or other financial asset held by the securities
  7 12 intermediary only to the extent provided in section 554.8503.
  7 13    4.  Unless the context shows that a different meaning is
  7 14 intended, a person who is required by other law, regulation,
  7 15 rule, or agreement to transfer, deliver, present, surrender,
  7 16 exchange, or otherwise put in the possession of another person
  7 17 a security or financial asset satisfies that requirement by
  7 18 causing the other person to acquire an interest in the
  7 19 security or financial asset pursuant to subsection 1 or 2.
  7 20    Sec. 8.  Section 554.8105, Code 1995, is amended by
  7 21 striking the section and inserting in lieu thereof the
  7 22 following:
  7 23    554.8105  NOTICE OF ADVERSE CLAIM.
  7 24    1.  A person has notice of an adverse claim if:
  7 25    a.  the person knows of the adverse claim;
  7 26    b.  the person is aware of facts sufficient to indicate
  7 27 that there is a significant probability that the adverse claim
  7 28 exists and deliberately avoids information that would
  7 29 establish the existence of the adverse claim; or
  7 30    c.  the person has a duty, imposed by statute or
  7 31 regulation, to investigate whether an adverse claim exists,
  7 32 and the investigation so required would establish the
  7 33 existence of the adverse claim.
  7 34    2.  Having knowledge that a financial asset or interest
  7 35 therein is or has been transferred by a representative imposes
  8  1 no duty of inquiry into the rightfulness of a transaction and
  8  2 is not notice of an adverse claim.  However, a person who
  8  3 knows that a representative has transferred a financial asset
  8  4 or interest therein in a transaction that is, or whose
  8  5 proceeds are being used, for the individual benefit of the
  8  6 representative or otherwise in breach of duty has notice of an
  8  7 adverse claim.
  8  8    3.  An act or event that creates a right to immediate
  8  9 performance of the principal obligation represented by a
  8 10 security certificate or sets a date on or after which the
  8 11 certificate is to be presented or surrendered for redemption
  8 12 or exchange does not itself constitute notice of an adverse
  8 13 claim except in the case of a transfer more than:
  8 14    a.  one year after a date set for presentment or surrender
  8 15 for redemption or exchange; or
  8 16    b.  six months after a date set for payment of money
  8 17 against presentation or surrender of the certificate, if money
  8 18 was available for payment on that date.
  8 19    4.  A purchaser of a certificated security has notice of an
  8 20 adverse claim if the security certificate:
  8 21    a.  whether in bearer or registered form, has been indorsed
  8 22 "for collection" or "for surrender" or for some other purpose
  8 23 not involving transfer; or
  8 24    b.  is in bearer form and has on it an unambiguous
  8 25 statement that it is the property of a person other than the
  8 26 transferor, but the mere writing of a name on the certificate
  8 27 is not such a statement.
  8 28    5.  Filing of a financing statement under Article 9 is not
  8 29 notice of an adverse claim to a financial asset.
  8 30    Sec. 9.  Section 554.8106, Code 1995, is amended by
  8 31 striking the section and inserting in lieu thereof the
  8 32 following:
  8 33    554.8106  CONTROL.
  8 34    1.  A purchaser has "control" of a certificated security in
  8 35 bearer form if the certificated security is delivered to the
  9  1 purchaser.
  9  2    2.  A purchaser has "control" of a certificated security in
  9  3 registered form if the certificated security is delivered to
  9  4 the purchaser, and:
  9  5    a.  the certificate is indorsed to the purchaser or in
  9  6 blank by an effective indorsement; or
  9  7    b.  the certificate is registered in the name of the
  9  8 purchaser, upon original issue or registration of transfer by
  9  9 the issuer.
  9 10    3.  A purchaser has "control" of an uncertificated security
  9 11 if:
  9 12    a.  the uncertificated security is delivered to the
  9 13 purchaser; or
  9 14    b.  the issuer has agreed that it will comply with
  9 15 instructions originated by the purchaser without further
  9 16 consent by the registered owner.
  9 17    4.  A purchaser has "control" of a security entitlement if:
  9 18    a.  the purchaser becomes the entitlement holder; or
  9 19    b.  the securities intermediary has agreed that it will
  9 20 comply with entitlement orders originated by the purchaser
  9 21 without further consent by the entitlement holder.
  9 22    5.  If an interest in a security entitlement is granted by
  9 23 the entitlement holder to the entitlement holder's own
  9 24 securities intermediary, the securities intermediary has
  9 25 control.
  9 26    6.  A purchaser who has satisfied the requirements of
  9 27 subsection 3, paragraph "b", or subsection 4, paragraph "b",
  9 28 has control even if the registered owner in the case of
  9 29 subsection 3, paragraph "b", or the entitlement holder in the
  9 30 case of subsection 4, paragraph "b", retains the right to make
  9 31 substitutions for the uncertificated security or security
  9 32 entitlement, to originate instructions or entitlement orders
  9 33 to the issuer or securities intermediary, or otherwise to deal
  9 34 with the uncertificated security or security entitlement.
  9 35    7.  An issuer or a securities intermediary may not enter
 10  1 into an agreement of the kind described in subsection 3,
 10  2 paragraph "b", or subsection 4, paragraph "b", without the
 10  3 consent of the registered owner or entitlement holder, but an
 10  4 issuer or a securities intermediary is not required to enter
 10  5 into such an agreement even though the registered owner or
 10  6 entitlement holder so directs.  An issuer or securities
 10  7 intermediary that has entered into such an agreement is not
 10  8 required to confirm the existence of the agreement to another
 10  9 party unless requested to do so by the registered owner or
 10 10 entitlement holder.
 10 11    Sec. 10.  Section 554.8107, Code 1995, is amended by
 10 12 striking the section and inserting in lieu thereof the
 10 13 following:
 10 14    554.8107  WHETHER INDORSEMENT, INSTRUCTION, OR ENTITLEMENT
 10 15 ORDER IS EFFECTIVE.
 10 16    1.  "Appropriate person" means:
 10 17    a.  with respect to an indorsement, the person specified by
 10 18 a security certificate or by an effective special indorsement
 10 19 to be entitled to the security;
 10 20    b.  with respect to an instruction, the registered owner of
 10 21 an uncertificated security;
 10 22    c.  with respect to an entitlement order, the entitlement
 10 23 holder;
 10 24    d.  if the person designated in paragraph "a", "b", or "c"
 10 25 is deceased, the designated person's successor taking under
 10 26 other law or the designated person's personal representative
 10 27 acting for the estate of the decedent; or
 10 28    e.  if the person designated in paragraph "a", "b", or "c"
 10 29 lacks capacity, the designated person's guardian, conservator,
 10 30 or other similar representative who has power under other law
 10 31 to transfer the security or financial asset.
 10 32    2.  An indorsement, instruction, or entitlement order is
 10 33 effective if:
 10 34    a.  it is made by the appropriate person;
 10 35    b.  it is made by a person who has power under the law of
 11  1 agency to transfer the security or financial asset on behalf
 11  2 of the appropriate person, including, in the case of an
 11  3 instruction or entitlement order, a person who has control
 11  4 under section 554.8106, subsection 3, paragraph "b", or
 11  5 subsection 4, paragraph "b"; or
 11  6    c.  the appropriate person has ratified it or is otherwise
 11  7 precluded from asserting its ineffectiveness.
 11  8    3.  An indorsement, instruction, or entitlement order made
 11  9 by a representative is effective even if:
 11 10    a.  the representative has failed to comply with a
 11 11 controlling instrument or with the law of the State having
 11 12 jurisdiction of the representative relationship, including any
 11 13 law requiring the representative to obtain court approval of
 11 14 the transaction; or
 11 15    b.  the representative's action in making the indorsement,
 11 16 instruction, or entitlement order or using the proceeds of the
 11 17 transaction is otherwise a breach of duty.
 11 18    4.  If a security is registered in the name of or specially
 11 19 indorsed to a person described as a representative, or if a
 11 20 securities account is maintained in the name of a person
 11 21 described as a representative, an indorsement, instruction, or
 11 22 entitlement order made by the person is effective even though
 11 23 the person is no longer serving in the described capacity.
 11 24    5.  Effectiveness of an indorsement, instruction, or
 11 25 entitlement order is determined as of the date the
 11 26 indorsement, instruction, or entitlement order is made, and an
 11 27 indorsement, instruction, or entitlement order does not become
 11 28 ineffective by reason of any later change of circumstances.
 11 29    Sec. 11.  Section 554.8108, Code 1995, is amended by
 11 30 striking the section and inserting in lieu thereof the
 11 31 following:
 11 32    554.8108  WARRANTIES IN DIRECT HOLDING.
 11 33    1.  A person who transfers a certificated security to a
 11 34 purchaser for value warrants to the purchaser, and an
 11 35 indorser, if the transfer is by indorsement, warrants to any
 12  1 subsequent purchaser, that:
 12  2    a.  the certificate is genuine and has not been materially
 12  3 altered;
 12  4    b.  the transferor or indorser does not know of any fact
 12  5 that might impair the validity of the security;
 12  6    c.  there is no adverse claim to the security;
 12  7    d.  the transfer does not violate any restriction on
 12  8 transfer;
 12  9    e.  if the transfer is by indorsement, the indorsement is
 12 10 made by an appropriate person, or if the indorsement is by an
 12 11 agent, the agent has actual authority to act on behalf of the
 12 12 appropriate person; and
 12 13    f.  the transfer is otherwise effective and rightful.
 12 14    2.  A person who originates an instruction for registration
 12 15 of transfer of an uncertificated security to a purchaser for
 12 16 value warrants to the purchaser that:
 12 17    a.  the instruction is made by an appropriate person, or if
 12 18 the instruction is by an agent, the agent has actual authority
 12 19 to act on behalf of the appropriate person;
 12 20    b.  the security is valid;
 12 21    c.  there is no adverse claim to the security; and
 12 22    d.  at the time the instruction is presented to the issuer:
 12 23    (1)  the purchaser will be entitled to the registration of
 12 24 transfer;
 12 25    (2)  the transfer will be registered by the issuer free
 12 26 from all liens, security interests, restrictions, and claims
 12 27 other than those specified in the instruction;
 12 28    (3)  the transfer will not violate any restriction on
 12 29 transfer; and
 12 30    (4)  the requested transfer will otherwise be effective and
 12 31 rightful.
 12 32    3.  A person who transfers an uncertificated security to a
 12 33 purchaser for value and does not originate an instruction in
 12 34 connection with the transfer warrants that:
 12 35    a.  the uncertificated security is valid;
 13  1    b.  there is no adverse claim to the security;
 13  2    c.  the transfer does not violate any restriction on
 13  3 transfer; and
 13  4    d.  the transfer is otherwise effective and rightful.
 13  5    4.  A person who indorses a security certificate warrants
 13  6 to the issuer that:
 13  7    a.  there is no adverse claim to the security; and
 13  8    b.  the indorsement is effective.
 13  9    5.  A person who originates an instruction for registration
 13 10 of transfer of an uncertificated security warrants to the
 13 11 issuer that:
 13 12    a.  the instruction is effective; and
 13 13    b.  at the time the instruction is presented to the issuer
 13 14 the purchaser will be entitled to the registration of
 13 15 transfer.
 13 16    6.  A person who presents a certificated security for
 13 17 registration of transfer or for payment or exchange warrants
 13 18 to the issuer that the person is entitled to the registration,
 13 19 payment, or exchange, but a purchaser for value and without
 13 20 notice of adverse claims to whom transfer is registered
 13 21 warrants only that the person has no knowledge of any
 13 22 unauthorized signature in a necessary indorsement.
 13 23    7.  If a person acts as agent of another in delivering a
 13 24 certificated security to a purchaser, the identity of the
 13 25 principal was known to the person to whom the certificate was
 13 26 delivered, and the certificate delivered by the agent was
 13 27 received by the agent from the principal or received by the
 13 28 agent from another person at the direction of the principal,
 13 29 the person delivering the security certificate warrants only
 13 30 that the delivering person has authority to act for the
 13 31 principal and does not know of any adverse claim to the
 13 32 certificated security.
 13 33    8.  A secured party who redelivers a security certificate
 13 34 received, or after payment and on order of the debtor delivers
 13 35 the security certificate to another person, makes only the
 14  1 warranties of an agent under subsection 7.
 14  2    9.  Except as otherwise provided in subsection 7, a broker
 14  3 acting for a customer makes to the issuer and a purchaser the
 14  4 warranties provided in subsections 1 through 6.  A broker that
 14  5 delivers a security certificate to its customer, or causes its
 14  6 customer to be registered as the owner of an uncertificated
 14  7 security, makes to the customer the warranties provided in
 14  8 subsection 1 or 2, and has the rights and privileges of a
 14  9 purchaser under this section.  The warranties of and in favor
 14 10 of the broker acting as an agent are in addition to applicable
 14 11 warranties given by and in favor of the customer.
 14 12    Sec. 12.  NEW SECTION.  554.8109  WARRANTIES IN INDIRECT
 14 13 HOLDING.
 14 14    1.  A person who originates an entitlement order to a
 14 15 securities intermediary warrants to the securities
 14 16 intermediary that:
 14 17    a.  the entitlement order is made by an appropriate person,
 14 18 or if the entitlement order is by an agent, the agent has
 14 19 actual authority to act on behalf of the appropriate person;
 14 20 and
 14 21    b.  there is no adverse claim to the security entitlement.
 14 22    2.  A person who delivers a security certificate to a
 14 23 securities intermediary for credit to a securities account or
 14 24 originates an instruction with respect to an uncertificated
 14 25 security directing that the uncertificated security be
 14 26 credited to a securities account makes to the securities
 14 27 intermediary the warranties specified in section 554.8108,
 14 28 subsection 1 or 2.
 14 29    3.  If a securities intermediary delivers a security
 14 30 certificate to its entitlement holder or causes its
 14 31 entitlement holder to be registered as the owner of an
 14 32 uncertificated security, the securities intermediary makes to
 14 33 the entitlement holder the warranties specified in section
 14 34 554.8108, subsection 1 or 2.
 14 35    Sec. 13.  NEW SECTION.  554.8110  APPLICABILITY – CHOICE
 15  1 OF LAW.
 15  2    1.  The local law of the issuer's jurisdiction, as
 15  3 specified in subsection 4, governs:
 15  4    a.  the validity of a security;
 15  5    b.  the rights and duties of the issuer with respect to
 15  6 registration of transfer;
 15  7    c.  the effectiveness of registration of transfer by the
 15  8 issuer;
 15  9    d.  whether the issuer owes any duties to an adverse
 15 10 claimant to a security; and
 15 11    e.  whether an adverse claim can be asserted against a
 15 12 person to whom transfer of a certificated or uncertificated
 15 13 security is registered or a person who obtains control of an
 15 14 uncertificated security.
 15 15    2.  The local law of the securities intermediary's
 15 16 jurisdiction, as specified in subsection 5, governs:
 15 17    a.  acquisition of a security entitlement from the
 15 18 securities intermediary;
 15 19    b.  the rights and duties of the securities intermediary
 15 20 and entitlement holder arising out of a security entitlement;
 15 21    c.  whether the securities intermediary owes any duties to
 15 22 an adverse claimant to a security entitlement; and
 15 23    d.  whether an adverse claim can be asserted against a
 15 24 person who acquires a security entitlement from the securities
 15 25 intermediary or a person who purchases a security entitlement
 15 26 or interest therein from an entitlement holder.
 15 27    3.  The local law of the jurisdiction in which a security
 15 28 certificate is located at the time of delivery governs whether
 15 29 an adverse claim can be asserted against a person to whom the
 15 30 security certificate is delivered.
 15 31    4.  "Issuer's jurisdiction" means the jurisdiction under
 15 32 which the issuer of the security is organized or, if permitted
 15 33 by the law of that jurisdiction, the law of another
 15 34 jurisdiction specified by the issuer.  An issuer organized
 15 35 under the law of this state may specify the law of another
 16  1 jurisdiction as the law governing the matters specified in
 16  2 subsection 1, paragraphs "b" through "e".
 16  3    5.  The following rules determine a "securities
 16  4 intermediary's jurisdiction" for purposes of this section:
 16  5    a.  if an agreement between the securities intermediary and
 16  6 its entitlement holder specifies that it is governed by the
 16  7 law of a particular jurisdiction, that jurisdiction is the
 16  8 securities intermediary's jurisdiction.
 16  9    b.  if an agreement between the securities intermediary and
 16 10 its entitlement holder does not specify the governing law as
 16 11 provided in paragraph "a", but expressly specifies that the
 16 12 securities account is maintained at an office in a particular
 16 13 jurisdiction, that jurisdiction is the securities
 16 14 intermediary's jurisdiction.
 16 15    c.  if an agreement between the securities intermediary and
 16 16 its entitlement holder does not specify a jurisdiction as
 16 17 provided in paragraph "a" or "b", the securities
 16 18 intermediary's jurisdiction is the jurisdiction in which is
 16 19 located the office identified in an account statement as the
 16 20 office serving the entitlement holder's account.
 16 21    d.  if an agreement between the securities intermediary and
 16 22 its entitlement holder does not specify a jurisdiction as
 16 23 provided in paragraph "a" or "b" and an account statement does
 16 24 not identify an office serving the entitlement holder's
 16 25 account as provided in paragraph "c", the securities
 16 26 intermediary's jurisdiction is the jurisdiction in which is
 16 27 located the chief executive office of the securities
 16 28 intermediary.
 16 29    6.  A securities intermediary's jurisdiction is not
 16 30 determined by the physical location of certificates
 16 31 representing financial assets, or by the jurisdiction in which
 16 32 is organized the issuer of the financial asset with respect to
 16 33 which an entitlement holder has a security entitlement, or by
 16 34 the location of facilities for data processing or other record
 16 35 keeping concerning the account.
 17  1    Sec. 14.  NEW SECTION.  554.8111  CLEARING CORPORATION
 17  2 RULES.
 17  3    A rule adopted by a clearing corporation governing rights
 17  4 and obligations among the clearing corporation and its
 17  5 participants in the clearing corporation is effective even if
 17  6 the rule conflicts with this Article and affects another party
 17  7 who does not consent to the rule.
 17  8    Sec. 15.  NEW SECTION.  554.8112  CREDITOR'S LEGAL PROCESS.
 17  9    1.  The interest of a debtor in a certificated security may
 17 10 be reached by a creditor only by actual seizure of the
 17 11 security certificate by the officer making the attachment or
 17 12 levy, except as otherwise provided in subsection 4.  However,
 17 13 a certificated security for which the certificate has been
 17 14 surrendered to the issuer may be reached by a creditor by
 17 15 legal process upon the issuer.
 17 16    2.  The interest of a debtor in an uncertificated security
 17 17 may be reached by a creditor only by legal process upon the
 17 18 issuer at its chief executive office in the United States,
 17 19 except as otherwise provided in subsection 4.
 17 20    3.  The interest of a debtor in a security entitlement may
 17 21 be reached by a creditor only by legal process upon the
 17 22 securities intermediary with whom the debtor's securities
 17 23 account is maintained, except as otherwise provided in
 17 24 subsection 4.
 17 25    4  The interest of a debtor in a certificated security for
 17 26 which the certificate is in the possession of a secured party,
 17 27 or in an uncertificated security registered in the name of a
 17 28 secured party, or a security entitlement maintained in the
 17 29 name of a secured party, may be reached by a creditor by legal
 17 30 process upon the secured party.
 17 31    5.  A creditor whose debtor is the owner of a certificated
 17 32 security, uncertificated security, or security entitlement is
 17 33 entitled to aid from a court of competent jurisdiction, by
 17 34 injunction or otherwise, in reaching the certificated
 17 35 security, uncertificated security, or security entitlement or
 18  1 in satisfying the claim by means allowed at law or in equity
 18  2 in regard to property that cannot readily be reached by other
 18  3 legal process.
 18  4    Sec. 16.  NEW SECTION.  554.8113  STATUTE OF FRAUDS
 18  5 INAPPLICABLE.
 18  6    A contract or modification of a contract for the sale or
 18  7 purchase of a security is enforceable whether or not there is
 18  8 a writing signed or record authenticated by a party against
 18  9 whom enforcement is sought, even if the contract or
 18 10 modification is not capable of performance within one year of
 18 11 its making.
 18 12    Sec. 17.  NEW SECTION.  554.8114  EVIDENTIARY RULES
 18 13 CONCERNING CERTIFICATED SECURITIES.
 18 14    The following rules apply in an action on a certificated
 18 15 security against the issuer:
 18 16    1.  Unless specifically denied in the pleadings, each
 18 17 signature on a security certificate or in a necessary
 18 18 indorsement is admitted.
 18 19    2.  If the effectiveness of a signature is put in issue,
 18 20 the burden of establishing effectiveness is on the party
 18 21 claiming under the signature, but the signature is presumed to
 18 22 be genuine or authorized.
 18 23    3.  If signatures on a security certificate are admitted or
 18 24 established, production of the certificate entitles a holder
 18 25 to recover on it unless the defendant establishes a defense or
 18 26 a defect going to the validity of the security.
 18 27    4.  If it is shown that a defense or defect exists, the
 18 28 plaintiff has the burden of establishing that the plaintiff or
 18 29 some person under whom the plaintiff claims is a person
 18 30 against whom the defense or defect cannot be asserted.
 18 31    Sec. 18.  NEW SECTION.  554.8115  SECURITIES INTERMEDIARY
 18 32 AND OTHERS NOT LIABLE TO ADVERSE CLAIMANT.
 18 33    A securities intermediary that has transferred a financial
 18 34 asset pursuant to an effective entitlement order, or a broker
 18 35 or other agent or bailee that has dealt with a financial asset
 19  1 at the direction of its customer or principal, is not liable
 19  2 to a person having an adverse claim to the financial asset,
 19  3 unless the securities intermediary, or broker or other agent
 19  4 or bailee:
 19  5    1.  took the action after it had been served with an
 19  6 injunction, restraining order, or other legal process
 19  7 enjoining it from doing so, issued by a court of competent
 19  8 jurisdiction, and had a reasonable opportunity to act on the
 19  9 injunction, restraining order, or other legal process; or
 19 10    2.  acted in collusion with the wrongdoer in violating the
 19 11 rights of the adverse claimant; or
 19 12    3.  in the case of a security certificate that has been
 19 13 stolen, acted with notice of the adverse claim.  
 19 14                             PART 2
 19 15                        ISSUE AND ISSUER
 19 16    Sec. 19.  Section 554.8201, Code 1995, is amended to read
 19 17 as follows:
 19 18    554.8201  "ISSUER".
 19 19    1.  With respect to obligations an obligation on or
 19 20 defenses a defense to a security, an "issuer" includes a
 19 21 person who that:
 19 22    a.  places or authorizes the placing of that person's its
 19 23 name on a certificated security (otherwise certificate, other
 19 24 than as authenticating trustee, registrar, transfer agent, or
 19 25 the like), to evidence that it represents a share,
 19 26 participation, or other interest in that person's its property
 19 27 or in an enterprise, or to evidence that person's its duty to
 19 28 perform an obligation represented by the certificated security
 19 29 certificate;
 19 30    b.  creates shares a share, participations participation or
 19 31 other interests interest in the person's its property or in an
 19 32 enterprise, or undertakes obligations an obligation, which
 19 33 shares, participations, interests, or obligations are that is
 19 34 an uncertificated securities security;
 19 35    c.  directly or indirectly creates a fractional interests
 20  1 interest in that person's its rights or property, which if the
 20  2 fractional interests are interest is represented by
 20  3 certificated securities security certificate; or
 20  4    d.  becomes responsible for, or in place of, any other
 20  5 another person described as an issuer in this section.
 20  6    2.  With respect to obligations an obligation on or
 20  7 defenses defense to a security, a guarantor is an issuer to
 20  8 the extent of the guarantor's guaranty its guaranty, whether
 20  9 or not the guarantor's its guaranty, whether or not its
 20 10 obligation is noted on a certificated security or on
 20 11 statements of uncertificated securities sent pursuant to
 20 12 section 554.8408 certificate.
 20 13    3.  With respect to a registration of a transfer, pledge,
 20 14 or release (Part 4 of this Article), "issuer" issuer means a
 20 15 person on whose behalf transfer books are maintained.
 20 16    Sec. 20.  Section 554.8202, Code 1995, is amended to read
 20 17 as follows:
 20 18    554.8202  ISSUER'S RESPONSIBILITY AND DEFENSES – NOTICE OF
 20 19 DEFECT OR DEFENSE.
 20 20    1.  Even against a purchaser for value and without notice,
 20 21 the terms of a certificated security include:
 20 22    a.  if the security is certificated, those stated on the
 20 23 security;
 20 24    b.  if the security is uncertificated, those contained in
 20 25 the initial transaction statement sent to such purchaser, or
 20 26 if the purchaser's interest is transferred to the purchaser
 20 27 other than by registration of transfer, pledge, or release,
 20 28 the initial transaction statement sent to the registered owner
 20 29 or registered pledgee; and
 20 30    c.  those made part of the security by reference, on the
 20 31 certificated security or in the initial transaction statement,
 20 32 terms stated on the certificate and terms made part of the
 20 33 security by reference on the certificate to another
 20 34 instrument, indenture, or document or to a constitution,
 20 35 statute, ordinance, rule, regulation, order, or the like, to
 21  1 the extent that the terms referred to do not conflict with the
 21  2 terms stated on the certificated security or contained in the
 21  3 initial statement certificate.  A reference under this
 21  4 paragraph subsection does not of itself charge a purchaser for
 21  5 value with notice of a defect going to the validity of the
 21  6 security, even though the certificated security or statement
 21  7 if the certificate expressly states that a person accepting it
 21  8 admits notice.  The terms of an uncertificated security,
 21  9 include those stated in any instrument, indenture, or document
 21 10 or in a constitution, statute, ordinance, rule, regulation,
 21 11 order, or the like pursuant to which the security is issued.
 21 12    2.  The following rules apply if an issuer asserts that a
 21 13 security is not valid:
 21 14    a.  A certificated security in the hands of a purchaser for
 21 15 value or an uncertificated security as to which an initial
 21 16 transaction statement has been sent to a purchaser for value,
 21 17 other than a security one issued by a government or
 21 18 governmental subdivision, agency, or unit instrumentality,
 21 19 even though issued with a defect going to its validity, is
 21 20 valid with respect to the in the hands of a purchaser if the
 21 21 purchaser is for value and without notice of the particular
 21 22 defect unless the defect involves a violation of a
 21 23 constitutional provisions, in which provision.  In that case,
 21 24 the security is valid with respect to a subsequent in the
 21 25 hands of a purchaser for value and without notice of the
 21 26 defect, other than one who takes by original issue.
 21 27    b.  This subsection Paragraph "a" applies to an issuer that
 21 28 is a government or governmental subdivision, agency, or unit
 21 29 instrumentality only if either there has been substantial
 21 30 compliance with the legal requirements governing the issue or
 21 31 the issuer has received a substantial consideration for the
 21 32 issue as a whole or for the particular security and a stated
 21 33 purpose of the issue is one for which the issuer has power to
 21 34 borrow money or issue the security.
 21 35    3.  Except as otherwise provided in the case of certain
 22  1 unauthorized signatures (section 554.8205), lack of
 22  2 genuineness of a certificated security or an initial
 22  3 transaction statement is a complete defense, even against a
 22  4 purchaser for value and without notice.
 22  5    4.  All other defenses of the issuer of a certificated or
 22  6 uncertificated security, including nondelivery and conditional
 22  7 delivery of a certificated security, are ineffective against a
 22  8 purchaser for value who has taken the certificated security
 22  9 without notice of the particular defense.
 22 10    5.  Nothing in this This section shall be construed to does
 22 11 not affect the right of a party to cancel a contract for a
 22 12 security "when, as and if issued" or a "when distributed"
 22 13 contract to cancel the contract in the event of a material
 22 14 change in the character of the security that is the subject of
 22 15 the contract or in the plan or arrangement pursuant to which
 22 16 the security is to be issued or distributed.
 22 17    6.  If a security is held by a securities intermediary
 22 18 against whom an entitlement holder has a security entitlement
 22 19 with respect to the security, the issuer may not assert any
 22 20 defense that the issuer could not assert if the entitlement
 22 21 holder held the security director.
 22 22    Sec. 21.  Section 554.8203, Code 1995, is amended to read
 22 23 as follows:
 22 24    554.8203  STALENESS AS NOTICE OF DEFECTS DEFECT OR DEFENSES
 22 25 DEFENSE.
 22 26    1.  After an act or event, other than a call that has been
 22 27 revoked, creating a right to immediate performance of the
 22 28 principal obligation represented by a certificated security or
 22 29 that sets setting a date on or after which the security is to
 22 30 be presented or surrendered for redemption or exchange, a
 22 31 purchaser is charged with notice of any defect in its issue or
 22 32 defense of the issuer, if the act or event:
 22 33    a. 1.  the act or event is one requiring requires the
 22 34 payment of money, the delivery of a certificated securities
 22 35 security, the registration of transfer of an uncertificated
 23  1 securities security, or any of these them on presentation or
 23  2 surrender of the certificated security certificate, the funds
 23  3 money or securities are security is available on the date set
 23  4 for payment or exchange, and the purchaser takes the security
 23  5 more than one year after that date; and or
 23  6    b. 2.  the act or event is not covered by paragraph "a"
 23  7 subsection 1 and the purchaser takes the security more than
 23  8 two years after the date set for surrender or presentation or
 23  9 the date on which performance became due.
 23 10    2.  A call that has been revoked is not within subsection
 23 11 1.
 23 12    Sec. 22.  Section 554.8204, Code 1995, is amended to read
 23 13 as follows:
 23 14    554.8204  EFFECT OF ISSUER'S RESTRICTIONS RESTRICTION ON
 23 15 TRANSFER.
 23 16    A restriction on transfer of a security imposed by the
 23 17 issuer, even though if otherwise lawful, is ineffective
 23 18 against any a person without actual knowledge of it the
 23 19 restriction unless:
 23 20    a. 1.  the security is certificated and the restriction is
 23 21 noted conspicuously thereon on the security certificate; or
 23 22    b. 2.  the security is uncertificated and a notation of the
 23 23 restriction is contained in the initial transaction statement
 23 24 sent to the person or, if the person's interest is transferred
 23 25 to the person other than by registration of transfer, pledge,
 23 26 or release, the initial transaction statement sent to the
 23 27 registered owner or the registered pledgee the registered
 23 28 owner has been notified of the restriction.
 23 29    Sec. 23.  Section 554.8205, Code 1995, is amended to read
 23 30 as follows:
 23 31    554.8205  EFFECT OF UNAUTHORIZED SIGNATURE ON CERTIFICATED
 23 32 SECURITY OR INITIAL TRANSACTION STATEMENT CERTIFICATE.
 23 33    An unauthorized signature placed on a certificated security
 23 34 prior to certificate or in the course of issue or placed on an
 23 35 initial transaction statement is ineffective, but the
 24  1 signature is effective in favor of a purchaser for value of
 24  2 the certificated security or a if the purchaser for value of
 24  3 an uncertificated security to whom such initial transaction
 24  4 statement has been sent, if the purchaser is without notice of
 24  5 the lack of authority and if the signing has been done by:
 24  6    a. 1.  an authenticating trustee, registrar, transfer agent
 24  7 or other person entrusted by the issuer with the signing of
 24  8 the security, of similar securities, or of initial transaction
 24  9 statements certificate or of similar security certificates, or
 24 10 the immediate preparation for signing of any of them; or
 24 11    b. 2.  an employee of the issuer, or of any of the
 24 12 foregoing persons listed in paragraph "a", entrusted with
 24 13 responsible handling of the security or initial transaction
 24 14 statement certificate.
 24 15    Sec. 24.  Section 554.8206, Code 1995, is amended to read
 24 16 as follows:
 24 17    554.8206  COMPLETION OR ALTERATION OF CERTIFICATED SECURITY
 24 18 OR INITIAL TRANSACTION STATEMENT CERTIFICATE.
 24 19    1.  If a certificated security certificate contains the
 24 20 signatures necessary to its issue or transfer but is
 24 21 incomplete in any other respect:
 24 22    a.  any person may complete it by filling in the blanks as
 24 23 authorized; and
 24 24    b.  even though if the blanks are incorrectly filled in,
 24 25 the security certificate as completed is enforceable by a
 24 26 purchaser who took it for value and without notice of the
 24 27 incorrectness.
 24 28    2.  A complete certificated security certificate that has
 24 29 been improperly altered, even though if fraudulently, remains
 24 30 enforceable, but only according to its original terms.
 24 31    3.  If an initial transaction statement contains the
 24 32 signatures necessary to its validity, but is incomplete in any
 24 33 other respect:
 24 34    a.  any person may complete it by filling in the blanks as
 24 35 authorized; and
 25  1    b.  even though the blanks are incorrectly filled in, the
 25  2 statement as completed is effective in favor of the person to
 25  3 whom it is sent if the person purchased the security referred
 25  4 to therein for value and without notice of the incorrectness.
 25  5    4.  A complete initial transaction statement that has been
 25  6 improperly altered, even though fraudulently, is effective in
 25  7 favor of a purchaser to whom it has been sent, but only
 25  8 according to its original terms.
 25  9    Sec. 25.  Section 554.8207, Code 1995, is amended to read
 25 10 as follows:
 25 11    554.8207  RIGHTS AND DUTIES OF ISSUER WITH RESPECT TO
 25 12 REGISTERED OWNERS.
 25 13    1.  Prior to Before due presentment for registration of
 25 14 transfer of a certificated security in registered form, or of
 25 15 an instruction requesting registration of transfer of an
 25 16 uncertificated security, the issuer or indenture trustee may
 25 17 treat the registered owner as the person exclusively entitled
 25 18 to vote, to receive notifications, and otherwise to exercise
 25 19 all the rights and powers of an owner.
 25 20    2.  Subject to the provisions of subsections 3, 4, and 6,
 25 21 the issuer or indenture trustee may treat the registered owner
 25 22 of an uncertificated security as the person exclusively
 25 23 entitled to vote, to receive notifications, and otherwise to
 25 24 exercise all the rights and powers of an owner.
 25 25    3. 2.  The This Article does not affect the liability of
 25 26 the registered owner of an uncertificated a security that is
 25 27 subject to a registered pledge is not entitled to registration
 25 28 of transfer prior to the due presentment to the issuer of a
 25 29 release instruction for a call, assessment, or the like.  The
 25 30 exercise of conversion rights with respect to a convertible
 25 31 uncertificated security is a transfer within the meaning of
 25 32 this section.
 25 33    4.  Upon due presentment of a transfer instruction from the
 25 34 registered pledgee of an uncertificated security, the issuer
 25 35 shall:
 26  1    a.  register the transfer of the security to the new owner
 26  2 free of pledge, if the instruction specifies a new owner (who
 26  3 may be the registered pledgee) and does not specify a pledgee;
 26  4    b.  register the transfer of the security to the new owner
 26  5 subject to the interest of the existing pledgee, if the
 26  6 instruction specifies a new owner and the existing pledgee; or
 26  7    c.  register the release of the security from the existing
 26  8 pledge and register the pledge of the security to the other
 26  9 pledgee, if the instruction specifies the existing owner and
 26 10 another pledgee.
 26 11    5.  Continuity of perfection of a security interest is not
 26 12 broken by registration of transfer under subsection (4)(b) or
 26 13 by registration of release and pledge under subsection (4)(c),
 26 14 if the security interest is assigned.
 26 15    6.  If an uncertificated security is subject to a
 26 16 registered pledge:
 26 17    a.  any uncertificated securities issued in exchange for or
 26 18 distributed with respect to the pledged security shall be
 26 19 registered subject to the pledge;
 26 20    b.  any certificated securities issued in exchange for or
 26 21 distributed with respect to the pledged security shall be
 26 22 delivered to the registered pledgee; and
 26 23    c.  any money paid in exchange for or in redemption of part
 26 24 or all of the security shall be paid to the registered
 26 25 pledgee.
 26 26    7.  Nothing in this Article shall be construed to affect
 26 27 the liability of the registered owner of a security for calls,
 26 28 assessments, or the like.
 26 29    Sec. 26.  Section 554.8208, Code 1995, is amended to read
 26 30 as follows:
 26 31    554.8208  EFFECT OF SIGNATURE OF AUTHENTICATING TRUSTEE,
 26 32 REGISTRAR, OR TRANSFER AGENT.
 26 33    1.  A person placing that person's signature upon signing a
 26 34 certificated security or an initial transaction statement
 26 35 certificate, as authenticating trustee, registrar, transfer
 27  1 agent, or the like, warrants to a purchaser for value of the
 27  2 certificated security, or a purchaser for value of an
 27  3 uncertificated security to whom the initial transaction
 27  4 statement has been sent, if the purchaser is without notice of
 27  5 the particular defect, that:
 27  6    a.  the certificated security or initial transaction
 27  7 statement certificate is genuine;
 27  8    b.  that the person's own participation in the issue or
 27  9 registration of transfer, pledge, or release of the security
 27 10 is within that the person's capacity and within the scope of
 27 11 the authority received by that the person from the issuer; and
 27 12    c.  that the person has reasonable grounds to believe that
 27 13 the certificated security is in the form and within the amount
 27 14 the issuer is authorized to issue.
 27 15    2.  Unless otherwise agreed, a person by so placing that
 27 16 person's signature signing under subsection 1 does not assume
 27 17 responsibility for the validity of the security in other
 27 18 respects.
 27 19    Sec. 27.  NEW SECTION.  554.8209  ISSUER'S LIEN.
 27 20    A lien in favor of an issuer upon a certificated security
 27 21 is valid against a purchaser only if the right of the issuer
 27 22 to the lien is noted conspicuously on the security
 27 23 certificate.
 27 24    Sec. 28.  NEW SECTION.  554.8210  OVERISSUE.
 27 25    1.  In this section, "overissue" means the issue of
 27 26 securities in excess of the amount the issuer has corporate
 27 27 power to issue, but an overissue does not occur if appropriate
 27 28 action has cured the overissue.
 27 29    2.  Except as otherwise provided in subsections 3 and 4,
 27 30 the provisions of this Article which validate a security or
 27 31 compel its issue or reissue do not apply to the extent that
 27 32 validation, issue, or reissue would result in overissue.
 27 33    3.  If an identical security not constituting an overissue
 27 34 is reasonably available for purchase, a person entitled to
 27 35 issue or validation may compel the issuer to purchase the
 28  1 security and deliver it if certificated or register its
 28  2 transfer if uncertificated, against surrender of any security
 28  3 certificate the person holds.
 28  4    4.  If a security is not reasonably available for purchase,
 28  5 a person entitled to issue or validation may recover from the
 28  6 issuer the price the person or the last purchaser for value
 28  7 paid for it with interest from the date of the person's
 28  8 demand.  
 28  9                             PART 3
 28 10                    TRANSFER OF CERTIFICATED
 28 11                  AND UNCERTIFICATED SECURITIES
 28 12    Sec. 29.  Section 554.8301, Code 1995, is amended by
 28 13 striking the section and inserting in lieu thereof the
 28 14 following:
 28 15    554.8301  DELIVERY.
 28 16    1.  Delivery of a certificated security to a purchaser
 28 17 occurs when:
 28 18    a.  the purchaser acquires possession of the security
 28 19 certificate;
 28 20    b.  another person, other than a securities intermediary,
 28 21 either acquires possession of the security certificate on
 28 22 behalf of the purchaser or, having previously acquired
 28 23 possession of the certificate, acknowledges that it holds for
 28 24 the purchaser; or
 28 25    c.  a securities intermediary acting on behalf of the
 28 26 purchaser acquires possession of the security certificate,
 28 27 only if the certificate is in registered form and has been
 28 28 specially indorsed to the purchaser by an effective
 28 29 indorsement.
 28 30    2.  Delivery of an uncertificated security to a purchaser
 28 31 occurs when:
 28 32    a.  the issuer registers the purchaser as the registered
 28 33 owner, upon original issue or registration of transfer; or
 28 34    b.  another person, other than a securities intermediary,
 28 35 either becomes the registered owner of the uncertificated
 29  1 security on behalf of the purchaser or, having previously
 29  2 become the registered owner, acknowledges that it holds for
 29  3 the purchaser.
 29  4    Sec. 30.  Section 554.8302, Code 1995, is amended by
 29  5 striking the section and inserting in lieu thereof the
 29  6 following:
 29  7    554.8302  RIGHTS OF PURCHASER.
 29  8    1.  Except as otherwise provided in subsections 2 and 3,
 29  9 upon delivery of a certificated or uncertificated security to
 29 10 a purchaser, the purchaser acquires all rights in the security
 29 11 that the transferor had or had power to transfer.
 29 12    2.  A purchaser of a limited interest acquires rights only
 29 13 to the extent of the interest purchased.
 29 14    3.  A purchaser of a certificated security who as a
 29 15 previous holder had notice of an adverse claim does not
 29 16 improve its position by taking from a protected purchaser.
 29 17    Sec. 31.  Section 554.8303, Code 1995, is amended by
 29 18 striking the section and inserting in lieu thereof the
 29 19 following:
 29 20    554.8303  PROTECTED PURCHASER.
 29 21    1.  "Protected purchaser" means a purchaser of a
 29 22 certificated or uncertificated security, or of an interest
 29 23 therein, who:
 29 24    a.  gives value;
 29 25    b.  does not have notice of any adverse claim to the
 29 26 security; and
 29 27    c.  obtains control of the certificated or uncertificated
 29 28 security.
 29 29    2.  In addition to acquiring the rights of a purchaser, a
 29 30 protected purchaser also acquires its interest in the security
 29 31 free of any adverse claim.
 29 32    Sec. 32.  Section 554.8304, Code 1995, is amended by
 29 33 striking the section and inserting in lieu thereof the
 29 34 following:
 29 35    554.8304  INDORSEMENT.
 30  1    1.  An indorsement may be in blank or special.  An
 30  2 indorsement in blank includes an indorsement to bearer.  A
 30  3 special indorsement specifies to whom a security is to be
 30  4 transferred or who has power to transfer it.  A holder may
 30  5 convert a blank indorsement to a special indorsement.
 30  6    2.  An indorsement purporting to be only of part of a
 30  7 security certificate representing units intended by the issuer
 30  8 to be separately transferable is effective to the extent of
 30  9 the indorsement.
 30 10    3.  An indorsement, whether special or in blank, does not
 30 11 constitute a transfer until delivery of the certificate on
 30 12 which it appears or, if the indorsement is on a separate
 30 13 document, until delivery of both the document and the
 30 14 certificate.
 30 15    4.  If a security certificate in registered form has been
 30 16 delivered to a purchaser without a necessary indorsement, the
 30 17 purchaser may become a protected purchaser only when the
 30 18 indorsement is supplied.  However, against a transferor, a
 30 19 transfer is complete upon delivery and the purchaser has a
 30 20 specifically enforceable right to have any necessary
 30 21 indorsement supplied.
 30 22    5.  An indorsement of a security certificate in bearer form
 30 23 may give notice of an adverse claim to the certificate, but it
 30 24 does not otherwise affect a right to registration that the
 30 25 holder possesses.
 30 26    6.  Unless otherwise agreed, a person making an indorsement
 30 27 assumes only the obligations provided in section 554.8108 and
 30 28 not an obligation that the security will be honored by the
 30 29 issuer.
 30 30    Sec. 33.  Section 554.8305, Code 1995, is amended by
 30 31 striking the section and inserting in lieu thereof the
 30 32 following:
 30 33    554.8305  INSTRUCTION.
 30 34    1.  If an instruction has been originated by an appropriate
 30 35 person but is incomplete in any other respect, any person may
 31  1 complete it as authorized and the issuer may rely on it as
 31  2 completed, even though it has been completed incorrectly.
 31  3    2.  Unless otherwise agreed, a person initiating an
 31  4 instruction assumes only the obligations imposed by section
 31  5 554.8108 and not an obligation that the security will be
 31  6 honored by the issuer.
 31  7    Sec. 34.  Section 554.8306, Code 1995, is amended by
 31  8 striking the section and inserting in lieu thereof the
 31  9 following:
 31 10    554.8306  EFFECT OF GUARANTEEING SIGNATURE, INDORSEMENT, OR
 31 11 INSTRUCTION.
 31 12    1.  A person who guarantees a signature of an indorser of a
 31 13 security certificate warrants that at the time of signing:
 31 14    a.  the signature was genuine;
 31 15    b.  the signer was an appropriate person to indorse, or if
 31 16 the signature is by an agent, the agent had actual authority
 31 17 to act on behalf of the appropriate person; and
 31 18    c.  the signer had legal capacity to sign.
 31 19    2.  A person who guarantees a signature of the originator
 31 20 of an instruction warrants that at the time of signing:
 31 21    a.  the signature was genuine;
 31 22    b.  the signer was an appropriate person to originate the
 31 23 instruction, or if the signature is by an agent, the agent had
 31 24 actual authority to act on behalf of the appropriate person,
 31 25 if the person specified in the instruction as the registered
 31 26 owner was, in fact, the registered owner, as to which fact the
 31 27 signature guarantor does not make a warranty; and
 31 28    c.  the signer had legal capacity to sign.
 31 29    3.  A person who specially guarantees the signature of an
 31 30 originator of an instruction makes the warranties of a
 31 31 signature guarantor under subsection 2 and also warrants that
 31 32 at the time the instruction is presented to the issuer:
 31 33    a.  the person specified in the instruction as the
 31 34 registered owner of the uncertificated security will be the
 31 35 registered owner; and
 32  1    b.  the transfer of the uncertificated security requested
 32  2 in the instruction will be registered by the issuer free from
 32  3 all liens, security interests, restrictions, and claims other
 32  4 than those specified in the instruction.
 32  5    4.  A guarantor under subsections 1 and 2 or a special
 32  6 guarantor under subsection 3 does not otherwise warrant the
 32  7 rightfulness of the transfer.
 32  8    5.  A person who guarantees an indorsement of a security
 32  9 certificate makes the warranties of a signature guarantor
 32 10 under subsection 1 and also warrants the rightfulness of the
 32 11 transfer in all respects.
 32 12    6.  A person who guarantees an instruction requesting the
 32 13 transfer of an uncertificated security makes the warranties of
 32 14 a special signature guarantor under subsection 3 and also
 32 15 warrants the rightfulness of the transfer in all respects.
 32 16    7.  An issuer may not require a special guaranty of
 32 17 signature, a guaranty of indorsement, or a guaranty of
 32 18 instruction as a condition to registration of transfer.
 32 19    8.  The warranties under this section are made to a person
 32 20 taking or dealing with the security in reliance on the
 32 21 guaranty, and the guarantor is liable to the person for loss
 32 22 resulting from their breach.  An indorser or originator of an
 32 23 instruction whose signature, indorsement, or instruction has
 32 24 been guaranteed is liable to a guarantor for any loss suffered
 32 25 by the guarantor as a result of breach of the warranties of
 32 26 the guarantor.
 32 27    Sec. 35.  Section 554.8307, Code 1995, is amended by
 32 28 striking the section and inserting in lieu thereof the
 32 29 following:
 32 30    554.8307  PURCHASER'S RIGHT TO REQUISITES FOR REGISTRATION
 32 31 OF TRANSFER.
 32 32    Unless otherwise agreed, the transferor of a security on
 32 33 due demand shall supply the purchaser with proof of authority
 32 34 to transfer or with any other requisite necessary to obtain
 32 35 registration of the transfer of the security, but if the
 33  1 transfer is not for value, a transferor need not comply unless
 33  2 the purchaser pays the necessary expenses.  If the transferor
 33  3 fails within a reasonable time to comply with the demand, the
 33  4 purchaser may reject or rescind the transfer.  
 33  5                             PART 4
 33  6                          REGISTRATION
 33  7    Sec. 36.  Section 554.8401, Code 1995, is amended to read
 33  8 as follows:
 33  9    554.8401  DUTY OF ISSUER TO REGISTER TRANSFER, PLEDGE, OR
 33 10 RELEASE.
 33 11    1.  If a certificated security in registered form is
 33 12 presented to the an issuer with a request to register transfer
 33 13 or an instruction is presented to the an issuer with a request
 33 14 to register transfer, pledge, or release the issuer shall
 33 15 register the transfer, pledge, or release as requested if:
 33 16    a.  the security is endorsed or the instruction was
 33 17 originated by the appropriate person or persons (section
 33 18 554.8308) under the terms of the security by the person
 33 19 seeking registration of transfer is eligible to have the
 33 20 security registered in its name;
 33 21    b.  the indorsement or instruction is made by the
 33 22 appropriate person or by an agent who has actual authority to
 33 23 act on behalf of the appropriate person;
 33 24    b. c.  reasonable assurance is given that those
 33 25 endorsements the indorsement or instructions are instruction
 33 26 is genuine and effective authorized (section 554.8402
 33 27 554.8403);
 33 28    c.  the issuer has no duty as to adverse claims or has
 33 29 discharged the duty (section 554.8403);
 33 30    d.  any applicable law relating to the collection of taxes
 33 31 has been complied with; and
 33 32    e.  the transfer, pledge, or release is in fact rightful or
 33 33 is to a bona fide purchaser does not violate any restriction
 33 34 on transfer imposed by the issuer in accordance with section
 33 35 554.8204.
 34  1    f.  a demand that the issuer not register transfer has not
 34  2 become effective under section 554.8403, or the issuer has
 34  3 complied with section 554.8403, subsection 2, but no legal
 34  4 process or indemnity bond is obtained as provided in section
 34  5 554.8403, subsection 4; and
 34  6    g.  the transfer is in fact rightful or is to a protected
 34  7 purchaser.
 34  8    2.  If an issuer is under a duty to register a transfer,
 34  9 pledge, or release of a security, the issuer is also liable to
 34 10 the a person presenting a certificated security or an
 34 11 instruction for registration or that to the person's principal
 34 12 for loss resulting from any unreasonable delay in registration
 34 13 or from failure or refusal to register the transfer, pledge,
 34 14 or release.
 34 15    Sec. 37.  Section 554.8402, Code 1995, is amended to read
 34 16 as follows:
 34 17    554.8402  ASSURANCE THAT ENDORSEMENTS AND INSTRUCTIONS ARE
 34 18 INDORSEMENT OR INSTRUCTION IS EFFECTIVE.
 34 19    1.  The An issuer may require the following assurance that
 34 20 each necessary endorsement of a certificated security
 34 21 indorsement or each instruction (section 554.8308) is genuine
 34 22 and effective authorized:
 34 23    a.  in all cases, a guarantee of the signature (section
 34 24 554.8312, subsection 1 or 2) of the person endorsing a
 34 25 certificated security making an indorsement or originating an
 34 26 instruction including, in the case of an instruction, a
 34 27 warranty of the taxpayer identification number or, in the
 34 28 absence thereof, other reasonable assurance of identity;
 34 29    b.  if the endorsement is made or the instruction is
 34 30 originated by an agent, appropriate assurance of actual
 34 31 authority to sign;
 34 32    c.  if the endorsement is made or the instruction is
 34 33 originated by a fiduciary, pursuant to section 554.8107,
 34 34 subsection 1, paragraph "d" or subsection 1, paragraph "e",
 34 35 appropriate evidence of appointment or incumbency;
 35  1    d.  if there is more than one fiduciary, reasonable
 35  2 assurance that all who are required to sign have done so; and
 35  3    e.  if the endorsement indorsement is made or the
 35  4 instruction is originated by a person not covered by any of
 35  5 the foregoing another provision of this subsection, assurance
 35  6 appropriate to the case corresponding as nearly as may be to
 35  7 the foregoing provisions of this subsection.
 35  8    2.  An issuer may elect to require reasonable assurance
 35  9 beyond that specified in this section.
 35 10    3.  In this section:
 35 11    2. a.  A "guarantee "Guarantee of the signature" in
 35 12 subsection 1 means a guarantee signed by or on behalf of a
 35 13 person reasonably believed by the issuer to be responsible.
 35 14 The An issuer may adopt standards with respect to
 35 15 responsibility if they are not manifestly unreasonable.
 35 16    3. b.  "Appropriate evidence of appointment or incumbency"
 35 17 in subsection 1 means
 35 18    a. (1)  in the case of a fiduciary appointed or qualified
 35 19 by a court, a certificate issued by or under the direction or
 35 20 supervision of that the court or an officer of that court
 35 21 thereof and dated within one hundred eighty sixty days before
 35 22 the date of presentation for transfer, pledge, or release; or
 35 23    b. (2)  in any other case, a copy of a document showing the
 35 24 appointment or a certificate issued by or on behalf of a
 35 25 person reasonably believed by the an issuer to be responsible
 35 26 or, in the absence of that document or certificate, other
 35 27 evidence the issuer reasonably deemed by the issuer to be
 35 28 considers appropriate.  The issuer may adopt standards with
 35 29 respect to the evidence if they are not manifestly
 35 30 unreasonable.  The issuer is not charged with notice of the
 35 31 contents of any document obtained pursuant to this paragraph
 35 32 "b" except to the extent that the contents relate directly to
 35 33 the appointment or incumbency.
 35 34    4.  The issuer may elect to require reasonable assurance
 35 35 beyond that specified in this section, but if it does so and,
 36  1 for a purpose other than that specified in subsection 3 "b",
 36  2 both requires and obtains a copy of a will, trust, indenture,
 36  3 articles of copartnership, bylaws, or other controlling
 36  4 instrument, it is charged with notice of all matters contained
 36  5 therein affecting the transfer, pledge, or release.
 36  6    Sec. 38.  Section 554.8403, Code 1995, is amended by
 36  7 striking the section and inserting in lieu thereof the
 36  8 following:
 36  9    554.8403  DEMAND THAT ISSUER NOT REGISTER TRANSFER.
 36 10    1.  A person who is an appropriate person to make an
 36 11 indorsement or originate an instruction may demand that the
 36 12 issuer not register transfer of a security by communicating to
 36 13 the issuer a notification that identifies the registered owner
 36 14 and the issue of which the security is a part and provides an
 36 15 address for communications directed to the person making the
 36 16 demand.  The demand is effective only if it is received by the
 36 17 issuer at a time and in a manner affording the issuer
 36 18 reasonable opportunity to act on it.
 36 19    2.  If a certificated security in registered form is
 36 20 presented to an issuer with a request to register transfer or
 36 21 an instruction is presented to an issuer with a request to
 36 22 register transfer of an uncertificated security after a demand
 36 23 that the issuer not register transfer has become effective,
 36 24 the issuer shall promptly communicate to (1) the person who
 36 25 initiated the demand at the address provided in the demand,
 36 26 and (2) the person who presented the security for registration
 36 27 of transfer or initiated the instruction requesting
 36 28 registration of transfer a notification stating that:
 36 29    a.  the certificated security has been presented for
 36 30 registration of transfer or the instruction for registration
 36 31 of transfer of the uncertificated security has been received;
 36 32    b.  a demand that the issuer not register transfer had
 36 33 previously been received; and
 36 34    c.  the issuer will withhold registration of transfer for a
 36 35 period of time stated in the notification in order to provide
 37  1 the person who initiated the demand an opportunity to obtain
 37  2 legal process or an indemnity bond.
 37  3    3.  The period described in subsection 2, paragraph "c",
 37  4 not exceed thirty days after the date of communication of the
 37  5 notification.  A shorter period may be specified by the issuer
 37  6 if it is not manifestly unreasonable.
 37  7    4.  An issuer is not liable to a person who initiated a
 37  8 demand that the issuer not register transfer for any loss the
 37  9 person suffers as a result of registration of a transfer
 37 10 pursuant to an effective indorsement or instruction if the
 37 11 person who initiated the demand does not, within the time
 37 12 stated in the issuer's communication, either:
 37 13    a.  obtain an appropriate restraining order, injunction, or
 37 14 other process from a court of competent jurisdiction enjoining
 37 15 the issuer from registering the transfer; or
 37 16    b.  file with the issuer an indemnity bond, sufficient in
 37 17 the issuer's judgment to protect the issuer and any transfer
 37 18 agent, registrar, or other agent of the issuer involved from
 37 19 any loss it or they may suffer by refusing to register the
 37 20 transfer.
 37 21    5.  This section does not relieve an issuer from liability
 37 22 for registering transfer pursuant to an indorsement or
 37 23 instruction that was not effective.
 37 24    Sec. 39.  Section 554.8404, Code 1995, is amended by
 37 25 striking the section and inserting in lieu thereof the
 37 26 following:
 37 27    554.8404  WRONGFUL REGISTRATION.
 37 28    1.  Except as otherwise provided in section 554.8406, an
 37 29 issuer is liable for wrongful registration of transfer if the
 37 30 issuer has registered a transfer of a security to a person not
 37 31 entitled to it, and the transfer was registered:
 37 32    a.  pursuant to an ineffective indorsement or instruction;
 37 33    b.  after a demand that the issuer not register transfer
 37 34 became effective under section 554.8403, subsection 1, and the
 37 35 issuer did not comply with section 554.8403, subsection 2;
 38  1    c.  after the issuer had been served with an injunction,
 38  2 restraining order, or other legal process enjoining it from
 38  3 registering the transfer, issued by a court of competent
 38  4 jurisdiction, and the issuer had a reasonable opportunity to
 38  5 act on the injunction, restraining order, or other legal
 38  6 process; or
 38  7    d.  by an issuer acting in collusion with the wrongdoer.
 38  8    2.  An issuer that is liable for wrongful registration of
 38  9 transfer under subsection 1 on demand shall provide the person
 38 10 entitled to the security with a like certificated or
 38 11 uncertificated security, and any payments or distributions
 38 12 that the person did not receive as a result of the wrongful
 38 13 registration.  If an overissue would result, the issuer's
 38 14 liability to provide the person with a like security is
 38 15 governed by section 554.8210.
 38 16    3.  Except as otherwise provided in subsection 1 or in a
 38 17 law relating to the collection of taxes, an issuer is not
 38 18 liable to an owner or other person suffering loss as a result
 38 19 of the registration of a transfer of a security if
 38 20 registration was made pursuant to an effective indorsement or
 38 21 instruction.
 38 22    Sec. 40.  Section 554.8405, Code 1995, is amended by
 38 23 striking the section and inserting in lieu thereof the
 38 24 following:
 38 25    554.8405  REPLACEMENT OF LOST, DESTROYED, OR WRONGFULLY
 38 26 TAKEN SECURITY CERTIFICATE.
 38 27    1.  If an owner of a certificated security, whether in
 38 28 registered or bearer form, claims that the certificate has
 38 29 been lost, destroyed, or wrongfully taken, the issuer shall
 38 30 issue a new certificate if the owner:
 38 31    a.  so requests before the issuer has notice that the
 38 32 certificate has been acquired by a protected purchaser;
 38 33    b.  files with the issuer a sufficient indemnity bond; and
 38 34    c.  satisfies other reasonable requirements imposed by the
 38 35 issuer.
 39  1    2.  If, after the issue of a new security certificate, a
 39  2 protected purchaser of the original certificate presents it
 39  3 for registration of transfer, the issuer shall register the
 39  4 transfer unless an overissue would result.  In that case, the
 39  5 issuer's liability is governed by section 554.8210.  In
 39  6 addition to any rights on the indemnity bond, an issuer may
 39  7 recover the new certificate from a person to whom it was
 39  8 issued or any person taking under that person, except a
 39  9 protected purchaser.
 39 10    Sec. 41.  Section 554.8406, Code 1995, is amended by
 39 11 striking the section and inserting in lieu thereof the
 39 12 following:
 39 13    554.8406  OBLIGATION TO NOTIFY ISSUER OF LOST, DESTROYED,
 39 14 OR WRONGFULLY TAKEN SECURITY CERTIFICATE.
 39 15    If a security certificate has been lost, apparently
 39 16 destroyed, or wrongfully taken, and the owner fails to notify
 39 17 the issuer of that fact within a reasonable time after the
 39 18 owner has notice of it and the issuer registers a transfer of
 39 19 the security before receiving notification, the owner may not
 39 20 assert against the issuer a claim for registering the transfer
 39 21 under section 554.8404 or a claim to a new security
 39 22 certificate under section 554.8405.
 39 23    Sec. 42.  Section 554.8407, Code 1995, is amended by
 39 24 striking the section and inserting in lieu thereof the
 39 25 following:
 39 26    554.8407  AUTHENTICATING TRUSTEE, TRANSFER AGENT, AND
 39 27 REGISTRAR.
 39 28    A person acting as authenticating trustee, transfer agent,
 39 29 registrar, or other agent for an issuer in the registration of
 39 30 a transfer of its securities, in the issue of new security
 39 31 certificates or uncertificated securities, or in the
 39 32 cancellation of surrendered security certificates has the same
 39 33 obligation to the holder or owner of a certificated or
 39 34 uncertificated security with regard to the particular
 39 35 functions performed as the issuer has in regard to those
 40  1 functions.  
 40  2                             PART 5
 40  3                      SECURITY ENTITLEMENTS
 40  4    Sec. 43.  NEW SECTION.  554.8501  SECURITIES ACCOUNT –
 40  5 ACQUISITION OF SECURITY ENTITLEMENT FROM SECURITIES
 40  6 INTERMEDIARY.
 40  7    1.  "Securities account" means an account to which a
 40  8 financial asset is or may be credited in accordance with an
 40  9 agreement under which the person maintaining the account
 40 10 undertakes to treat the person for whom the account is
 40 11 maintained as entitled to exercise the rights that comprise
 40 12 the financial asset.
 40 13    2.  Except as otherwise provided in subsections 4 and 5, a
 40 14 person acquires a security entitlement if a securities
 40 15 intermediary:
 40 16    a.  indicates by book entry that a financial asset has been
 40 17 credited to the person's securities account;
 40 18    b.  receives a financial asset from the person or acquires
 40 19 a financial asset for the person and, in either case, accepts
 40 20 it for credit to the person's securities account; or
 40 21    c.  becomes obligated under other law, regulation, or rule
 40 22 to credit a financial asset to the person's securities
 40 23 account.
 40 24    3.  If a condition of subsection 2 has been met, a person
 40 25 has a security entitlement even though the securities
 40 26 intermediary does not itself hold the financial asset.
 40 27    4.  If a securities intermediary holds a financial asset
 40 28 for another person, and the financial asset is registered in
 40 29 the name of, payable to the order of, or specially indorsed to
 40 30 the other person, and has not been indorsed to the securities
 40 31 intermediary or in blank, the other person is treated as
 40 32 holding the financial asset directly rather than as having a
 40 33 security entitlement with respect to the financial asset.
 40 34    5.  Issuance of a security is not establishment of a
 40 35 security entitlement.
 41  1    Sec. 44.  NEW SECTION.  554.8502  ASSERTION OF ADVERSE
 41  2 CLAIM AGAINST ENTITLEMENT HOLDER.
 41  3    An action based on an adverse claim to a financial asset,
 41  4 whether framed in conversion, replevin, constructive trust,
 41  5 equitable lien, or other theory, may not be asserted against a
 41  6 person who acquires a security entitlement under section
 41  7 554.8501 for value and without notice of the adverse claim.
 41  8    Sec. 45.  NEW SECTION.  554.8503  PROPERTY INTEREST OF
 41  9 ENTITLEMENT HOLDER IN FINANCIAL ASSET HELD BY SECURITIES
 41 10 INTERMEDIARY.
 41 11    1.  To the extent necessary for a securities intermediary
 41 12 to satisfy all security entitlements with respect to a
 41 13 particular financial asset, all interests in that financial
 41 14 asset held by the securities intermediary are held by the
 41 15 securities intermediary for the entitlement holders, are not
 41 16 property of the securities intermediary, and are not subject
 41 17 to claims of creditors of the securities intermediary, except
 41 18 as otherwise provided in section 554.8511.
 41 19    2.  An entitlement holder's property interest with respect
 41 20 to a particular financial asset under subsection 1 is a pro
 41 21 rata property interest in all interests in that financial
 41 22 asset held by the securities intermediary, without regard to
 41 23 the time the entitlement holder acquired the security
 41 24 entitlement or the time the securities intermediary acquired
 41 25 the interest in that financial asset.
 41 26    3.  An entitlement holder's property interest with respect
 41 27 to a particular financial asset under subsection 1 may be
 41 28 enforced against the securities intermediary only by exercise
 41 29 of the entitlement holder's rights under sections 554.8505
 41 30 through 554.8508.
 41 31    4.  An entitlement holder's property interest with respect
 41 32 to a particular financial asset under subsection 1 may be
 41 33 enforced against a purchaser of the financial asset or
 41 34 interest therein only if:
 41 35    a.  insolvency proceedings have been initiated by or
 42  1 against the securities intermediary;
 42  2    b.  the securities intermediary does not have sufficient
 42  3 interests in the financial asset to satisfy the security
 42  4 entitlements of all of its entitlement holders to that
 42  5 financial asset;
 42  6    c.  the securities intermediary violated its obligations
 42  7 under section 554.8504 by transferring the financial asset or
 42  8 interest therein to the purchaser; and
 42  9    d.  the purchaser is not protected under subsection 5.  The
 42 10 trustee or other liquidator, acting on behalf of all
 42 11 entitlement holders having security entitlements with respect
 42 12 to a particular financial asset, may recover the financial
 42 13 asset, or interest therein, from the purchaser.  If the
 42 14 trustee or other liquidator elects not to pursue that right,
 42 15 an entitlement holder whose security entitlement remains
 42 16 unsatisfied has the right to recover its interest in the
 42 17 financial asset from the purchaser.
 42 18    5.  An action based on the entitlement holder's property
 42 19 interest with respect to a particular financial asset under
 42 20 subsection 1, whether framed in conversion, replevin,
 42 21 constructive trust, equitable lien, or other theory, may not
 42 22 be asserted against any purchaser of a financial asset or
 42 23 interest therein who gives value, obtains control, and does
 42 24 not act in collusion with the securities intermediary in
 42 25 violating the securities intermediary's obligations under
 42 26 section 554.8504.
 42 27    Sec. 46.  NEW SECTION.  554.8504  DUTY OF SECURITIES
 42 28 INTERMEDIARY TO MAINTAIN FINANCIAL ASSET.
 42 29    1.  A securities intermediary shall promptly obtain and
 42 30 thereafter maintain a financial asset in a quantity
 42 31 corresponding to the aggregate of all security entitlements it
 42 32 has established in favor of its entitlement holders with
 42 33 respect to that financial asset.  The securities intermediary
 42 34 may maintain those financial assets directly or through one or
 42 35 more other securities intermediaries.
 43  1    2.  Except to the extent otherwise agreed by its
 43  2 entitlement holder, a securities intermediary may not grant
 43  3 any security interests in a financial asset it is obligated to
 43  4 maintain pursuant to subsection 1.
 43  5    3.  A securities intermediary satisfies the duty in
 43  6 subsection 1 if:
 43  7    a.  the securities intermediary acts with respect to the
 43  8 duty as agreed upon by the entitlement holder and the
 43  9 securities intermediary; or
 43 10    b.  in the absence of agreement, the securities
 43 11 intermediary exercises due care in accordance with reasonable
 43 12 commercial standards to obtain and maintain the financial
 43 13 asset.
 43 14    4.  This section does not apply to a clearing corporation
 43 15 that is itself the obligor of an option or similar obligation
 43 16 to which its entitlement holders have security entitlements.
 43 17    Sec. 47.  NEW SECTION.  554.8505  DUTY OF SECURITIES
 43 18 INTERMEDIARY WITH RESPECT TO PAYMENTS AND DISTRIBUTIONS.
 43 19    1.  A securities intermediary shall take action to obtain a
 43 20 payment or distribution made by the issuer of a financial
 43 21 asset.  A securities intermediary satisfies the duty if:
 43 22    a.  the securities intermediary acts with respect to the
 43 23 duty as agreed upon by the entitlement holder and the
 43 24 securities intermediary; or
 43 25    b.  in the absence of agreement, the securities
 43 26 intermediary exercises due care in accordance with reasonable
 43 27 commercial standards to attempt to obtain the payment or
 43 28 distribution.
 43 29    2.  A securities intermediary is obligated to its
 43 30 entitlement holder for a payment or distribution made by the
 43 31 issuer of a financial asset if the payment or distribution is
 43 32 received by the securities intermediary.
 43 33    Sec. 48.  NEW SECTION.  554.8506  DUTY OF SECURITIES
 43 34 INTERMEDIARY TO EXERCISE RIGHTS AS DIRECTED BY ENTITLEMENT
 43 35 HOLDER.
 44  1    A securities intermediary shall exercise rights with
 44  2 respect to a financial asset if directed to do so by an
 44  3 entitlement holder.  A securities intermediary satisfies the
 44  4 duty if:
 44  5    1.  the securities intermediary acts with respect to the
 44  6 duty as agreed upon by the entitlement holder and the
 44  7 securities intermediary; or
 44  8    2.  in the absence of agreement, the securities
 44  9 intermediary either places the entitlement holder in a
 44 10 position to exercise the rights directly or exercises due care
 44 11 in accordance with reasonable commercial standards to follow
 44 12 the direction of the entitlement holder.
 44 13    Sec. 49.  NEW SECTION.  554.8507  DUTY OF SECURITIES
 44 14 INTERMEDIARY TO COMPLY WITH ENTITLEMENT ORDER.
 44 15    1.  A securities intermediary shall comply with an
 44 16 entitlement order if the entitlement order is originated by
 44 17 the appropriate person, the securities intermediary has had
 44 18 reasonable opportunity to assure itself that the entitlement
 44 19 order is genuine and authorized, and the securities
 44 20 intermediary has had reasonable opportunity to comply with the
 44 21 entitlement order.  A securities intermediary satisfies the
 44 22 duty if:
 44 23    a.  the securities intermediary acts with respect to the
 44 24 duty as agreed upon by the entitlement holder and the
 44 25 securities intermediary; or
 44 26    b.  in the absence of agreement, the securities
 44 27 intermediary exercises due care in accordance with reasonable
 44 28 commercial standards to comply with the entitlement order.
 44 29    2.  If a securities intermediary transfers a financial
 44 30 asset pursuant to an ineffective entitlement order, the
 44 31 securities intermediary shall reestablish a security
 44 32 entitlement in favor of the person entitled to it, and pay or
 44 33 credit any payments or distributions that the person did not
 44 34 receive as a result of the wrongful transfer.  If the
 44 35 securities intermediary does not reestablish a security
 45  1 entitlement, the securities intermediary is liable to the
 45  2  
 45  3    Sec. 50.  NEW SECTION.  554.8508  DUTY OF SECURITIES
 45  4 INTERMEDIARY TO CHANGE ENTITLEMENT HOLDER'S POSITION TO OTHER
 45  5 FORM OF SECURITY HOLDING.
 45  6    A securities intermediary shall act at the direction of an
 45  7 entitlement holder to change a security entitlement into
 45  8 another available form of holding for which the entitlement
 45  9 holder is eligible, or to cause the financial asset to be
 45 10 transferred to a securities account of the entitlement holder
 45 11 with another securities intermediary.  A securities
 45 12 intermediary satisfies the duty if:
 45 13    1.  the securities intermediary acts as agreed upon by the
 45 14 entitlement holder and the securities intermediary; or
 45 15    2.  in the absence of agreement, the securities
 45 16 intermediary exercises due care in accordance with reasonable
 45 17 commercial standards to follow the direction of the
 45 18 entitlement holder.
 45 19    Sec. 51.  NEW SECTION.  554.8509  SPECIFICATION OF DUTIES
 45 20 OF SECURITIES INTERMEDIARY BY OTHER STATUTE OR REGULATION –
 45 21 MANNER OF PERFORMANCE OF DUTIES OF SECURITIES INTERMEDIARY AND
 45 22 EXERCISE OF RIGHTS OF ENTITLEMENT HOLDER.
 45 23    1.  If the substance of a duty imposed upon a securities
 45 24 intermediary by sections 554.8504 through 554.8508 is the
 45 25 subject of other statute, regulation, or rule, compliance with
 45 26 that statute, regulation, or rule satisfies the duty.
 45 27    2.  To the extent that specific standards for the
 45 28 performance of the duties of a securities intermediary or the
 45 29 exercise of the rights of an entitlement holder are not
 45 30 specified by other statute, regulation, or rule or by
 45 31 agreement between the securities intermediary and entitlement
 45 32 holder, the securities intermediary shall perform its duties
 45 33 and the entitlement holder shall exercise its rights in a
 45 34 commercially reasonable manner.
 45 35    3.  The obligation of a securities intermediary to perform
 46  1 the duties imposed by sections 554.8504 through 554.8508 is
 46  2 subject to:
 46  3    a.  rights of the securities intermediary arising out of a
 46  4 security interest under a security agreement with the
 46  5 entitlement holder or otherwise; and
 46  6    b.  rights of the securities intermediary under other law,
 46  7 regulation, rule, or agreement to withhold performance of its
 46  8 duties as a result of unfulfilled obligations of the
 46  9 entitlement holder to the securities intermediary.
 46 10    4.  Sections 554.8504 through 554.8508 do not require a
 46 11 securities intermediary to take any action that is prohibited
 46 12 by other statute, regulation, or rule.
 46 13    Sec. 52.  NEW SECTION.  554.8510  RIGHTS OF PURCHASER OF
 46 14 SECURITY ENTITLEMENT FROM ENTITLEMENT HOLDER.
 46 15    1.  An action based on an adverse claim to a financial
 46 16 asset or security entitlement, whether framed in conversion,
 46 17 replevin, constructive trust, equitable lien, or other theory,
 46 18 may not be asserted against a person who purchases a security
 46 19 entitlement, or an interest therein, from an entitlement
 46 20 holder if the purchaser gives value, does not have notice of
 46 21 the adverse claim, and obtains control.
 46 22    2.  If an adverse claim could not have been asserted
 46 23 against an entitlement holder under section 554.8502, the
 46 24 adverse claim cannot be asserted against a person who
 46 25 purchases a security entitlement, or an interest therein, from
 46 26 the entitlement holder.
 46 27    3.  In a case not covered by the priority rules in Article
 46 28 9, a purchaser for value of a security entitlement, or an
 46 29 interest therein, who obtains control has priority over a
 46 30 purchaser of a security entitlement, or an interest therein,
 46 31 who does not obtain control.  Purchasers who have control rank
 46 32 equally, except that a securities intermediary as purchaser
 46 33 has priority over a conflicting purchaser who has control
 46 34 unless otherwise agreed by the securities intermediary.
 46 35    Sec. 53.  NEW SECTION.  554.8511  PRIORITY AMONG SECURITY
 47  1 INTERESTS AND ENTITLEMENT HOLDERS.
 47  2    1.  Except as otherwise provided in subsections 2 and 3, if
 47  3 a securities intermediary does not have sufficient interests
 47  4 in a particular financial asset to satisfy both its
 47  5 obligations to entitlement holders who have security
 47  6 entitlements to that financial asset and its obligation to a
 47  7 creditor of the securities intermediary who has a security
 47  8 interest in that financial asset, the claims of entitlement
 47  9 holders, other than the creditor, have priority over the claim
 47 10 of the creditor.
 47 11    2.  A claim of a creditor of a securities intermediary who
 47 12 has a security interest in a financial asset held by a
 47 13 securities intermediary has priority over claims of the
 47 14 securities intermediary's entitlement holders who have
 47 15 security entitlements with respect to that financial asset if
 47 16 the creditor has control over the financial asset.
 47 17    3.  If a clearing corporation does not have sufficient
 47 18 financial assets to satisfy both its obligations to
 47 19 entitlement holders who have security entitlements with
 47 20 respect to a financial asset and its obligation to a creditor
 47 21 of the clearing corporation who has a security interest in
 47 22 that financial asset, the claim of the creditor has priority
 47 23 over the claims of entitlement holders.
 47 24    Sec. 54.  Section 554.9103, subsection 6, Code 1995, is
 47 25 amended by striking the subsection and inserting in lieu
 47 26 thereof the following:
 47 27    6.  INVESTMENT PROPERTY.
 47 28    a.  This subsection applies to investment property.
 47 29    b.  Except as otherwise provided in paragraph "f", during
 47 30 the time that a security certificate is located in a
 47 31 jurisdiction, perfection of a security interest, the effect of
 47 32 perfection or nonperfection, and the priority of a security
 47 33 interest in the certificated security represented thereby are
 47 34 governed by the local law of that jurisdiction.
 47 35    c.  Except as otherwise provided in paragraph "f",
 48  1 perfection of a security interest, the effect of perfection or
 48  2 non-perfection, and the priority of a security interest in an
 48  3 uncertificated security are governed by the local law of the
 48  4 issuer's jurisdiction as specified in section 554.8110,
 48  5 subsection 4.
 48  6    d.  Except as otherwise provided in paragraph "f",
 48  7 perfection of a security interest, the effect of perfection or
 48  8 non-perfection, and the priority of a security interest in a
 48  9 security entitlement or securities account are governed by the
 48 10 local law of the securities intermediary's jurisdiction as
 48 11 specified in section 554.8110, subsection 5.
 48 12    e.  Except as otherwise provided in paragraph "f",
 48 13 perfection of a security interest, the effect of perfection or
 48 14 non-perfection, and the priority of a security interest in a
 48 15 commodity contract or commodity account are governed by the
 48 16 local law of the commodity intermediary's jurisdiction.  The
 48 17 following rules determine a "commodity intermediary's
 48 18 jurisdiction" for purposes of this paragraph:
 48 19    (1)  If an agreement between the commodity intermediary and
 48 20 commodity customer specifies that it is governed by the law of
 48 21 a particular jurisdiction, that jurisdiction is the commodity
 48 22 intermediary's jurisdiction.
 48 23    (2)  If an agreement between the commodity intermediary and
 48 24 commodity customer does not specify the governing law as
 48 25 provided in subparagraph (1), but expressly specifies that the
 48 26 commodity account is maintained at an office in a particular
 48 27 jurisdiction, that jurisdiction is the commodity
 48 28 intermediary's jurisdiction.
 48 29    (3)  If an agreement between the commodity intermediary and
 48 30 commodity customer does not specify a jurisdiction as provided
 48 31 in subparagraph (1) or (2), the commodity intermediary's
 48 32 jurisdiction is the jurisdiction in which is located the
 48 33 office identified in an account statement as the office
 48 34 serving the commodity customer's account.
 48 35    (4)  If an agreement between the commodity intermediary and
 49  1 commodity customer does not specify a jurisdiction as provided
 49  2 in subparagraph (1) or (2) and an account statement does not
 49  3 identify an office serving the commodity customer's account as
 49  4 provided in subparagraph (3), the commodity intermediary's
 49  5 jurisdiction is the jurisdiction in which is located the chief
 49  6 executive office of the commodity intermediary.
 49  7    f.  Perfection of a security interest by filing, automatic
 49  8 perfection of a security interest in investment property
 49  9 granted by a broker or securities intermediary, and automatic
 49 10 perfection of a security interest in a commodity contract or
 49 11 commodity account granted by a commodity intermediary are
 49 12 governed by the local law of the jurisdiction in which the
 49 13 debtor is located.
 49 14    Sec. 55.  Section 554.9105, subsection 1, paragraphs h and
 49 15 i, Code 1995, are amended to read as follows:
 49 16    h.  "Goods" include all things which are movable at the
 49 17 time the security interest attaches or which are fixtures
 49 18 (section 554.9313), but do not include money, documents,
 49 19 instruments, investment property, accounts, chattel paper,
 49 20 general intangibles or minerals or the like (including oil and
 49 21 gas) before extraction.  "Goods" also include standing timber
 49 22 which is to be cut and removed under a conveyance or contract
 49 23 for sale, the unborn young of animals and growing crops;
 49 24    i.  "Instrument" means a negotiable instrument (defined in
 49 25 section 554.3104), or a certificated security (defined in
 49 26 section 554.8102) or any other writing which evidences a right
 49 27 to the payment of money and is not itself a security agreement
 49 28 or lease and is of a type which is in ordinary course of
 49 29 business transferred by delivery with any necessary
 49 30 endorsement or assignment.  The term does not include
 49 31 investment property;
 49 32    Sec. 56.  Section 554.9105, subsection 2, Code 1995, is
 49 33 amended to read as follows:
 49 34    2.  Other definitions applying to this Article and the
 49 35 sections in which they appear are:  
 50  1   "Account"                   Section 554.9106
 50  2   "Attach"                    Section 554.9203
 50  3   "Commodity contract"        Section 554.9115
 50  4   "Commodity customer"        Section 554.9115
 50  5   "Commodity intermediary"    Section 554.9115
 50  6   "Construction mortgage"     Section 554.9313(1)
 50  7   "Consumer goods"            Section 554.9109(1)
 50  8   "Equipment"                 Section 554.9109(2)
 50  9   "Farm products"             Section 554.9109(3)
 50 10   "Fixture"                   Section 554.9313
 50 11   "Fixture filing"            Section 554.9313
 50 12   "General intangibles"       Section 554.9106
 50 13   "Inventory"                 Section 554.9109(4)
 50 14   "Investment property        Section 554.9115
 50 15   "Lien creditor"             Section 554.9301(3)
 50 16   "Proceeds"                  Section 554.9306(1)
 50 17   "Purchase money security
 50 18 interest"                     Section 554.9107
 50 19   "United States"             Section 554.9103
 50 20    Sec. 57.  Section 554.9105, subsection 3, Code 1995, is
 50 21 amended to read as follows:
 50 22    3.  The following definitions in other Articles apply to
 50 23 this Article:  
 50 24   "Broker"                    Section 554.8102
 50 25   "Certificated security"     Section 554.8102
 50 26   "Check"                     Section 554.3104
 50 27   "Clearing corporation"      Section 554.8102
 50 28   "Contract for sale"         Section 554.2106
 50 29   "Control"                   Section 554.8106
 50 30   "Delivery"                  Section 554.8301
 50 31   "Entitlement holder"        Section 554.8102
 50 32   "Financial asset"           Section 554.8102
 50 33   "Holder in due course"      Section 554.3302
 50 34   "Note"                      Section 554.3104
 50 35   "Sale"                      Section 554.2106
 51  1 "Securities intermediary"     Section 554.8102
 51  2 "Security"                    Section 554.8102
 51  3 "Security certificate"        Section 554.8102
 51  4 "Security entitlement"        Section 554.8102
 51  5 "Uncertificated security   "  Section 554.8102
 51  6    Sec. 58.  Section 554.9106, Code 1995, is amended to read
 51  7 as follows:
 51  8    554.9106  DEFINITIONS:  "ACCOUNT" – "GENERAL INTANGIBLES."
 51  9    "Account" means any right to payment for goods sold or
 51 10 leased or for services rendered which is not evidenced by an
 51 11 instrument or chattel paper, whether or not it has been earned
 51 12 by performance.  "General intangibles" means any personal
 51 13 property (including things in action) other than goods,
 51 14 accounts, chattel paper, documents, instruments, investment
 51 15 property, and money.  All rights to payment earned or unearned
 51 16 under a charter or other contract involving the use or hire of
 51 17 a vessel and all rights incident to the charter or contract
 51 18 are accounts.
 51 19    Sec. 59.  NEW SECTION.  554.9115  INVESTMENT PROPERTY.
 51 20    1.  In this Article:
 51 21    a.  "Commodity account" means an account maintained by a
 51 22 commodity intermediary in which a commodity contract is
 51 23 carried for a commodity customer.
 51 24    b.  "Commodity contract" means a commodity futures
 51 25 contract, an option on a commodity futures contract, a
 51 26 commodity option, or other contract that, in each case, is:
 51 27    (1)  traded on or subject to the rules of a board of trade
 51 28 that has been designated as a contract market for such a
 51 29 contract pursuant to the federal commodities laws; or
 51 30    (2)  traded on a foreign commodity board of trade,
 51 31 exchange, or market, and is carried on the books of a
 51 32 commodity intermediary for a commodity customer.
 51 33    c.  "Commodity customer" means a person for whom a
 51 34 commodity intermediary carries a commodity contract on its
 51 35 books.
 52  1    d.  "Commodity intermediary" means:
 52  2    (1)  a person who is registered as a futures commission
 52  3 merchant under the federal commodities laws; or
 52  4    (2)  a person who in the ordinary course of its business
 52  5 provides clearance or settlement services for a board of trade
 52  6 that has been designated as a contract market pursuant to the
 52  7 federal commodities laws.
 52  8    e.  "Control" with respect to a certificated security,
 52  9 uncertificated security, or security entitlement has the
 52 10 meaning specified in section 554.8106.  A secured party has
 52 11 control over a commodity contract if by agreement among the
 52 12 commodity customer, the commodity intermediary, and the
 52 13 secured party, the commodity intermediary has agreed that it
 52 14 will apply any value distributed on account of the commodity
 52 15 contract as directed by the secured party without further
 52 16 consent by the commodity customer.  If a commodity customer
 52 17 grants a security interest in a commodity contract to its own
 52 18 commodity intermediary, the commodity intermediary as secured
 52 19 party has control.  A secured party has control over a
 52 20 securities account or commodity account if the secured party
 52 21 has control over all security entitlements or commodity
 52 22 contracts carried in the securities account or commodity
 52 23 account.
 52 24    f.  "Investment property" means:
 52 25    (1)  a security, whether certificated or uncertificated;
 52 26    (2)  a security entitlement;
 52 27    (3)  a securities account;
 52 28    (4)  a commodity contract; or
 52 29    (5)  a commodity account.
 52 30    2.  Attachment or perfection of a security interest in a
 52 31 securities account is also attachment or perfection of a
 52 32 security interest in all security entitlements carried in the
 52 33 securities account.  Attachment or perfection of a security
 52 34 interest in a commodity account is also attachment or
 52 35 perfection of a security interest in all commodity contracts
 53  1 carried in the commodity account.
 53  2    3.  A description of collateral in a security agreement or
 53  3 financing statement is sufficient to create or perfect a
 53  4 security interest in a certificated security, uncertificated
 53  5 security, security entitlement, securities account, commodity
 53  6 contract, or commodity account whether it describes the
 53  7 collateral by those terms, or as investment property, or by
 53  8 description of the underlying security, financial asset, or
 53  9 commodity contract.  A description of investment property
 53 10 collateral in a security agreement or financing statement is
 53 11 sufficient if it identifies the collateral by specific
 53 12 listing, by category, by quantity, by a computational or
 53 13 allocational formula or procedure, or by any other method, if
 53 14 the identity of the collateral is objectively determinable.
 53 15    4.  Perfection of a security interest in investment
 53 16 property is governed by the following rules:
 53 17    a.  a security interest in investment property may be
 53 18 perfected by control.
 53 19    b.  except as otherwise provided in paragraphs "c" and "d",
 53 20 a security interest in investment property may be perfected by
 53 21 filing.
 53 22    c.  if the debtor is a broker or securities intermediary, a
 53 23 security interest in investment property is perfected when it
 53 24 attaches.  The filing of a financing statement with respect to
 53 25 a security interest in investment property granted by a broker
 53 26 or securities intermediary has no effect for purposes of
 53 27 perfection or priority with respect to that security interest.
 53 28    d.  if a debtor is a commodity intermediary, a security
 53 29 interest in a commodity contract or a commodity account is
 53 30 perfected when it attaches.  The filing of a financing
 53 31 statement with respect to a security interest in a commodity
 53 32 contract or a commodity account granted by a commodity
 53 33 intermediary has no effect for purposes of perfection or
 53 34 priority with respect to that security interest.
 53 35    e.  priority between conflicting security interests in the
 54  1 same investment property is governed by the following rules:
 54  2    (1)  a security interest of a secured party who has control
 54  3 over investment property has priority over a security interest
 54  4 of a secured party who does not have control over the
 54  5 investment property.
 54  6    (2)  except as otherwise provided in paragraphs "c" and
 54  7 "d", conflicting security interests of secured parties each of
 54  8 whom has control rank equally.
 54  9    (3)  except as otherwise agreed by the securities
 54 10 intermediary, a security interest in a security entitlement or
 54 11 a securities account granted to the debtor's own securities
 54 12 intermediary has priority over any security interest granted
 54 13 by the debtor to another secured party.
 54 14    (4)  except as otherwise agreed by the commodity
 54 15 intermediary, a security interest in a commodity contract or a
 54 16 commodity account granted to the debtor's own commodity
 54 17 intermediary has priority over any security interest granted
 54 18 by the debtor to another secured party.
 54 19    (5)  conflicting security interests granted by a broker, a
 54 20 securities intermediary, or a commodity intermediary which are
 54 21 perfected without control rank equally.
 54 22    (6)  in all other cases, priority between conflicting
 54 23 security interests in investment property is governed by
 54 24 section 554.9312, subsections 5, 6, and 7.  Section 554.9312,
 54 25 subsection 4, does not apply to investment property.
 54 26    f.  if a security certificate in registered form is
 54 27 delivered to a secured party pursuant to agreement, a written
 54 28 security agreement is not required for attachment or
 54 29 enforceability of the security interest, delivery suffices for
 54 30 perfection of the security interest, and the security interest
 54 31 has priority over a conflicting security interest perfected by
 54 32 means other than control, even if a necessary indorsement is
 54 33 lacking.
 54 34    Sec. 60.  NEW SECTION.  554.9116  SECURITY INTEREST ARISING
 54 35 IN PURCHASE OR DELIVERY OF FINANCIAL ASSET.
 55  1    1.  If a person buys a financial asset through a securities
 55  2 intermediary in a transaction in which the buyer is obligated
 55  3 to pay the purchase price to the securities intermediary at
 55  4 the time of the purchase, and the securities intermediary
 55  5 credits the financial asset to the buyer's securities account
 55  6 before the buyer pays the securities intermediary, the
 55  7 securities intermediary has a security interest in the buyer's
 55  8 security entitlement securing the buyer's obligation to pay.
 55  9 A security agreement is not required for attachment or
 55 10 enforceability of the security interest, and the security
 55 11 interest is automatically perfected.
 55 12    2.  If a certificated security, or other financial asset
 55 13 represented by a writing which in the ordinary course of
 55 14 business is transferred by delivery with any necessary
 55 15 indorsement or assignment is delivered pursuant to an
 55 16 agreement between persons in the business of dealing with such
 55 17 securities or financial assets and the agreement calls for
 55 18 delivery versus payment, the person delivering the certificate
 55 19 or other financial asset has a security interest in the
 55 20 certificated security or other financial asset securing the
 55 21 seller's right to receive payment.  A security agreement is
 55 22 not required for attachment or enforceability of the security
 55 23 interest, and the security interest is automatically
 55 24 perfected.
 55 25    Sec. 61.  Section 554.9203, subsection 1, Code 1995, is
 55 26 amended to read as follows:
 55 27    1.  Subject to the provisions of section 554.4210 on the
 55 28 security interest of a collecting bank, section 554.8321 on
 55 29 security interests in securities sections 554.9115 and
 55 30 554.9116 on security interest in investment property, and
 55 31 section 554.9113 on a security interest arising under the
 55 32 Article on Sales, a security interest is not enforceable
 55 33 against the debtor or third parties with respect to the
 55 34 collateral and does not attach unless:
 55 35    a.  the collateral is in the possession of the secured
 56  1 party pursuant to agreement, the collateral is investment
 56  2 property and the secured party has control pursuant to
 56  3 agreement, or the debtor has signed a security agreement which
 56  4 contains a description of the collateral and in addition, when
 56  5 the security interest covers crops growing or to be grown or
 56  6 timber to be cut, a description of the land concerned;
 56  7    b.  value has been given; and
 56  8    c.  the debtor has rights in the collateral.
 56  9    Sec. 62.  Section 554.9301, subsection 1, paragraph d, Code
 56 10 1995, is amended to read as follows:
 56 11    d.  in the case of accounts, and general intangibles, and
 56 12 investment property, a person who is not a secured party and
 56 13 who is a transferee to the extent that that person gives value
 56 14 without knowledge of the security interest and before it is
 56 15 perfected.
 56 16    Sec. 63.  Section 554.9302, subsection 1, paragraphs b, f,
 56 17 and g, Code 1995, are amended to read as follows:
 56 18    b.  a security interest temporarily perfected in
 56 19 instruments, certificated securities, or documents without
 56 20 delivery under section 554.9304 or in proceeds for a ten-day
 56 21 period under section 554.9306;
 56 22    f.  a security interest of a collecting bank (section
 56 23 554.4210) or in securities (section 554.8321) or arising under
 56 24 the Article on Sales (see section 554.9113) or covered in
 56 25 subsection 3 of this section;
 56 26    g.  an assignment for the benefit of all the creditors of
 56 27 the transferor, and subsequent transfers by the assignee
 56 28 thereunder.;
 56 29    Sec. 64.  Section 554.9302, subsection 1, Code 1995, is
 56 30 amended by adding the following new paragraph:
 56 31    NEW PARAGRAPH.  h.  a security interest in investment
 56 32 property which is perfected without filing under section
 56 33 554.9115 or section 554.9116.
 56 34    Sec. 65.  Section 554.9303, subsection 1, Code 1995, is
 56 35 amended to read as follows:
 57  1    1.  A security interest is perfected when it has attached
 57  2 and when all of the applicable steps required for perfection
 57  3 have been taken.  Such steps are specified in sections
 57  4 554.9115, 554.9302, 554.9304, 554.9305 and 554.9306.  If such
 57  5 steps are taken before the security interest attaches, it is
 57  6 perfected at the time when it attaches.
 57  7    Sec. 66.  Section 554.9304, subsections 1, 4, and 5, Code
 57  8 1995, are amended to read as follows:
 57  9    1.  A security interest in chattel paper or negotiable
 57 10 documents may be perfected by filing.  A security interest in
 57 11 money or instruments (other than certificated securities or
 57 12 instruments which constitute part of chattel paper) can be
 57 13 perfected only by the secured party's taking possession,
 57 14 except as provided in subsections 4 and 5 of this section and
 57 15 section 554.9306, subsections 2 and 3, on proceeds.
 57 16    4.  A security interest in instruments, (other than a
 57 17 certificated securities), or negotiable documents is perfected
 57 18 without filing or the taking of possession for a period of
 57 19 twenty-one days from the time it attaches to the extent that
 57 20 it arises for new value given under a written security
 57 21 agreement.
 57 22    5.  A security interest remains perfected for a period of
 57 23 twenty-one days without filing where a secured party having a
 57 24 perfected security interest in an instrument, (other than a
 57 25 certificated securities), security, a negotiable document or
 57 26 goods in possession of a bailee other than one who has issued
 57 27 a negotiable document therefor
 57 28    a.  makes available to the debtor the goods or documents
 57 29 representing the goods for the purpose of ultimate sale or
 57 30 exchange or for the purpose of loading, unloading, storing,
 57 31 shipping, transshipping, manufacturing, processing or
 57 32 otherwise dealing with them in a manner preliminary to their
 57 33 sale or exchange, but priority between conflicting security
 57 34 interests in the goods is subject to section 554.9312,
 57 35 subsection 3; or
 58  1    b.  delivers the instrument or certificated security to the
 58  2 debtor for the purpose of ultimate sale or exchange or of
 58  3 presentation, collection, renewal, or registration of
 58  4 transfer.
 58  5    Sec. 67.  Section 554.9305, Code 1995, is amended to read
 58  6 as follows:
 58  7    554.9305  WHEN POSSESSION BY SECURED PARTY PERFECTS
 58  8 SECURITY INTEREST WITHOUT FILING.
 58  9    A security interest in letters of credit and advices of
 58 10 credit (subsection 2 "a" of section 554.5116), goods,
 58 11 instruments (other than certificated securities), money,
 58 12 negotiable documents or chattel paper may be perfected by the
 58 13 secured party's taking possession of the collateral.  If such
 58 14 collateral other than goods covered by a negotiable document
 58 15 is held by a bailee, the secured party is deemed to have
 58 16 possession from the time the bailee receives notification of
 58 17 the secured party's interest.  A security interest is
 58 18 perfected by possession from the time possession is taken
 58 19 without relation back and continues only so long as possession
 58 20 is retained, unless otherwise specified in this Article.  The
 58 21 security interest may be otherwise perfected as provided in
 58 22 this Article before or after the period of possession by the
 58 23 secured party.
 58 24    Sec. 68.  Section 554.9306, subsection 1, Code 1995, is
 58 25 amended to read as follows:
 58 26    1.  "Proceeds" include whatever is received upon the sale,
 58 27 exchange, collection or other disposition of collateral or
 58 28 proceeds.  Insurance payable by reason of loss or damage to
 58 29 the collateral is proceeds, except to the extent that it is
 58 30 payable to a person other than a party to the security
 58 31 agreement.  Any payments or distributions made with respect to
 58 32 investment property collateral are proceeds.  Money, checks,
 58 33 deposit accounts and the like are "cash proceeds".  All other
 58 34 proceeds are "noncash proceeds".
 58 35    Sec. 69.  Section 554.9306, subsection 3, paragraph b, Code
 59  1 1995, is amended to read as follows:
 59  2    b.  a filed financing statement covers the original
 59  3 collateral and the proceeds are identifiable cash proceeds; or
 59  4    Sec. 70.  Section 554.9306, subsection 3, Code 1995, is
 59  5 amended by adding the following new paragraph after paragraph
 59  6 b and relettering subsequent paragraphs:
 59  7    NEW PARAGRAPH.  c.  the original collateral was investment
 59  8 property and the proceeds are identifiable cash proceeds; or
 59  9    Sec. 71.  Section 554.9309, Code 1995, is amended to read
 59 10 as follows:
 59 11    554.9309  PROTECTION OF PURCHASERS OF INSTRUMENTS AND
 59 12 DOCUMENTS AND SECURITIES.
 59 13    Nothing in this Article limits the rights of a holder in
 59 14 due course of a negotiable instrument (section 554.3302) or a
 59 15 holder to whom a negotiable document of title has been duly
 59 16 negotiated (section 554.7501) or a bona fide protected
 59 17 purchaser of a security (section 554.8302 554.8303) and such
 59 18 holders or purchasers take priority over an earlier security
 59 19 interest even though perfected.  Filing under this Article
 59 20 does not constitute notice of the security interest to such
 59 21 holders or purchasers.
 59 22    Sec. 72.  Section 554.9312, subsections 1 and 7, Code 1995,
 59 23 are amended to read as follows:
 59 24    1.  The rules of priority stated in other sections of this
 59 25 Part and in the following sections shall govern when
 59 26 applicable:  section 554.4210 with respect to the security
 59 27 interests of collecting banks in items being collected,
 59 28 accompanying documents and proceeds; section 554.9103 on
 59 29 security interests related to other jurisdictions; section
 59 30 554.9114 on consignments; section 554.9115 on security
 59 31 interest in investment property.
 59 32    7.  If future advances are made while a security interest
 59 33 is perfected by filing, the taking of possession, or under
 59 34 section 554.8321 on securities 554.9115 or section 554.9116 on
 59 35 investment property, the security interest has the same
 60  1 priority for the purposes of subsection 5 or section 554.9115,
 60  2 subsection 5, with respect to the future advances as it does
 60  3 with respect to the first advance.  If a commitment is made
 60  4 before or while the security interest is so perfected, the
 60  5 security interest has the same priority with respect to
 60  6 advances made pursuant thereto.  In other cases a perfected
 60  7 security interest has priority from the date the advance is
 60  8 made.
 60  9    Sec. 73.  Section 554.10104, subsection 2, Code 1995, is
 60 10 amended by striking the subsection.
 60 11    Sec. 74.  SAVINGS CLAUSE.
 60 12    1.  This Act does not affect an action or proceeding
 60 13 commenced before this Act takes effect.
 60 14    2.  If a security interest in a security is perfected at
 60 15 the date this Act takes effect, and the action by which the
 60 16 security interest was perfected would suffice to perfect a
 60 17 security interest under this Act, no further action is
 60 18 required to continue perfection.  If a security interest in a
 60 19 security is perfected at the date this Act takes effect but
 60 20 the action by which the security interest was perfected would
 60 21 not suffice to perfect a security interest under this Act, the
 60 22 security interest remains perfected for a period of four
 60 23 months after the effective date and continues perfected
 60 24 thereafter if appropriate action to perfect under this Act is
 60 25 taken within that period.  If a security interest is perfected
 60 26 at the date this Act takes effect and the security interest
 60 27 can be perfected by filing under this Act, a financing
 60 28 statement signed by the secured party instead of the debtor
 60 29 may be filed within that period to continue perfection or
 60 30 thereafter to perfect.
 60 31    Sec. 75.  REPEALS.
 60 32    1.  Sections 554.8308 through 554.8321, Code 1995, are
 60 33 repealed.
 60 34    2.  Section 554.8408, Code 1995, is repealed.
 60 35    Sec. 76.  EFFECTIVE DATE.  This Act becomes effective on
 61  1 July 1, 1997.  
 61  2                           EXPLANATION
 61  3    This bill provides for investment securities, by rewriting
 61  4 Article 8 of the uniform commercial code, as recommended by
 61  5 the American Law Institute and the National Conference of
 61  6 Commissioners on Uniform State Laws.  The bill provides
 61  7 commercial law rules applicable to investment securities,
 61  8 including the holding of investment securities directly by
 61  9 investors or by persons on behalf of investor clients.  The
 61 10 Article is divided into multiple parts.
 61 11    Part 1 deals with definitions and general matters affecting
 61 12 the Article.  Section 554.8012 provides definitions; section
 61 13 554.8013 includes provisions for determining whether certain
 61 14 obligations and interests are securities; section 554.8104
 61 15 provides for the acquisition of security or financial assets;
 61 16 section 554.8105 provides procedures for notice of an adverse
 61 17 claim; section 554.8106 provides for control; section 554.8107
 61 18 provides for indorsements, instructions, and entitlement
 61 19 orders; section 554.8108 provides for warranties involving
 61 20 direct holding; section 554.8109 provides for warranties in
 61 21 indirect holding; section 554.8110 provides for applicability
 61 22 and choice of law; section 554.8111 provides for clearing
 61 23 corporations; section 554.8112 provides for a creditor's legal
 61 24 processes; section 554.8113 provides for statutes of frauds;
 61 25 section 554.8114 provides for evidentiary rules concerning
 61 26 certificated securities; section 554.8115 provides for
 61 27 security intermediaries; and section 554.8116 provides for
 61 28 securities intermediaries as purchasers for values.
 61 29    Parts 2, 3, and 4 deal with the rights of persons who hold
 61 30 securities directly.  Under the bill, a person who holds a
 61 31 security through a broker or securities custodian has a
 61 32 security entitlement governed by the Part 5, and is not
 61 33 considered the direct holder of the security.
 61 34    Part 2 is largely unchanged from current Iowa law.  It
 61 35 deals with certain obligations of issuers.  According to the
 62  1 Prefactory Note to the model Act, the primary purpose of the
 62  2 provisions of Part 2 is to apply to investment securities the
 62  3 principles of negotiable instruments law that preclude the
 62  4 issuers of negotiable instruments from asserting defenses
 62  5 against subsequent purchasers.  Section 554.8201 provides for
 62  6 issuers; section 554.8202 provides for an issuer's
 62  7 responsibility and defenses; section 554.8203 provides notice
 62  8 of defect or defense based on staleness; section 554.8204
 62  9 provides for the effect of an issuer's restriction on a
 62 10 transfer; section 554.8205 provides for the effect of an
 62 11 unauthorized signature on a security certificate; section
 62 12 554.8206 provides for completion or alternation of a security
 62 13 certificate; section 554.8207 provides for the rights and
 62 14 duties of an issuer; section 554.8208 provides for the effect
 62 15 of a signature of an authenticating trustee, registrar, or
 62 16 transfer agent; section 554.8209 provides for an issuer's
 62 17 lien; and section 554.8210 provides for overissue.
 62 18    Part 3 deals with a transfer for securities held directly.
 62 19 This part applies to investment securities provisions
 62 20 regulating negotiable instruments that have protected
 62 21 purchasers of negotiable instruments against adverse claims.
 62 22 Section 554.8301 provides for delivery; section 554.8302
 62 23 provides for the rights of purchasers; section 554.8303
 62 24 provides for protected purchasers; section 554.8304 provides
 62 25 for indorsement; section 554.8305 provides for instructions;
 62 26 section 554.8306 provides for the effect of guaranteeing a
 62 27 signature, indorsement, or instruction; and section 554.8307
 62 28 provides for a purchaser's rights.
 62 29    Part 4 deals with the process of registration of transfer
 62 30 by the issuer or transfer agent.  Section 554.8401 provides
 62 31 for the duty of an issuer to register a transfer; section
 62 32 554.8402 provides for an assurance that an indorsement or
 62 33 instruction is effective; section 554.8403 provides for a
 62 34 demand that an issuer is not registering a transfer; section
 62 35 554.8404 provides for wrongful registration; section 554.8405
 63  1 provides for the replacement of a lost, destroyed, or
 63  2 wrongfully taken security certificate; section 554.8406
 63  3 provides for an obligation to notify an issuer of a lost,
 63  4 destroyed, or wrongfully taken security certificate; and
 63  5 section 554.8407 provides for an authenticating trustee,
 63  6 transfer agency, or registrar.
 63  7    Part 5 applies specifically to the indirect holding of
 63  8 securities, when one person holds securities on behalf of
 63  9 another.  Part 5 provides for the rights and property interest
 63 10 associated with a security entitlement.  The bill provides
 63 11 that a person acquires a security entitlement when a
 63 12 securities intermediary credits the financial asset to the
 63 13 person's account.  A securities intermediary is a clearing
 63 14 corporation or a person, including a bank or broker, that in
 63 15 the ordinary course of its business maintains securities
 63 16 accounts for others.  A "clearing agency" includes a federal
 63 17 reserve bank or any other person that provides clearance or
 63 18 settlement services with respect to financial assets and is
 63 19 required to register as such under the federal securities
 63 20 laws.  Section 554.8501 provides for securities accounts and
 63 21 the acquisition of a security entitlement from a securities
 63 22 intermediary; section 554.8502 provides for the assertion of
 63 23 an adverse claim against an entitlement holder; section
 63 24 554.8503 provides for the property interest of an entitlement
 63 25 holder in a financial asset held by a securities intermediary;
 63 26 section 554.8504 provides for the duty of a securities
 63 27 intermediary to maintain financial assets; section 554.8505
 63 28 provides for the duty of a securities intermediary regarding
 63 29 payments and distributions; section 554.8506 provides for the
 63 30 duty of a securities intermediary to exercise rights as
 63 31 directed by an entitlement holder; section 554.8507 provides
 63 32 for the duty of a securities intermediary to comply with an
 63 33 entitlement order; section 554.8508 provides for a duty of a
 63 34 securities intermediary to change an entitlement holder's
 63 35 position to another form of security holder; section 554.8509
 64  1 specifies duties of securities intermediaries and others;
 64  2 section 554.8510 provides for the rights of purchaser of
 64  3 securities entitlements from entitlement holders; and section
 64  4 554.8511 provides for priority among security interests and
 64  5 entitlement holders
 64  6    Along with the revision of Article 8, the bill provides
 64  7 related changes in Articles 1, 4, 5, 9, and 10, including a
 64  8 number of changes concerning security interests in Article 9.
 64  9    Conforming amendments to Articles other than Article 9
 64 10 include amendments to Article 1 providing general provisions
 64 11 applicable to the entire chapter, and specifically to section
 64 12 554.105, relating to the territorial application of the
 64 13 chapter, and section 554.1206, relating to statute of frauds
 64 14 for kinds of personal property; Article 4 providing for bank
 64 15 deposits and collections, and specifically section 554.4104,
 64 16 relating to definitions; Article 5 providing for letters of
 64 17 credit, and specifically section 554.5114, relating to an
 64 18 issuer's duties and rights; and Article 10 providing for the
 64 19 chapter's effective date and repealer, and specifically for
 64 20 the application of Article 8.
 64 21    Article 9 provides for secured transactions, and
 64 22 specifically amends section 554.9103, relating to the
 64 23 perfection of security interests in multiple state
 64 24 transactions; section 554.9105, relating to definitions;
 64 25 section 554.9106, relating to specific definitions for
 64 26 accounts and general intangibles; section 554.9115, relating
 64 27 to investment property; section 554.9116, relating to security
 64 28 interests arising in purchase or delivery of financial assets;
 64 29 section 554.9203, relating to attachments and enforceability
 64 30 of security interests; section 554.9301, relating to persons
 64 31 who take priority over unperfected security interests; section
 64 32 554.9302, relating to requirements when filing is required to
 64 33 perfect a security interest; section 554.9303, relating to the
 64 34 perfection of security interests; section 554.9304, relating
 64 35 to the perfection of security interests in documents and goods
 65  1 covered by documents; section 554.9305, relating to possession
 65  2 by a secured party perfecting a security interest without
 65  3 filing; section 554.9306, relating to a secured party's right
 65  4 of disposition of collateral; section 554.9309, relating to
 65  5 the protection of purchasers of instruments, documents, and
 65  6 securities; and section 554.9312, relating to priorities among
 65  7 conflicting security interests in the same collateral.  
 65  8 LSB 3274XL 76
 65  9 da/cf/24
     

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