House File 2445 - Reprinted HOUSE FILE 2445 BY COMMITTEE ON JUDICIARY (SUCCESSOR TO HSB 678) (As Amended and Passed by the House March 2, 2022 ) A BILL FOR An Act relating to the uniform commercial code by providing for 1 controllable electronic records. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 HF 2445 (2) 89 da/jh/md

H.F. 2445 DIVISION I 1 CONTROLLABLE ELECTRONIC RECORDS 2 Section 1. NEW SECTION . 554.14101 Short title. 3 This Article may be cited as the Uniform Commercial Code —— 4 Controllable Electronic Records. 5 Sec. 2. NEW SECTION . 554.14102 Definitions. 6 1. Article 14 definitions. In this Article: 7 a. “Controllable electronic record” means a record stored 8 in an electronic medium that can be subjected to control 9 under section 554.14105. The term does not include a deposit 10 account, electronic chattel paper, electronic copy of a 11 record evidencing chattel paper, electronic document of title, 12 electronic money, investment property, or a transferable 13 record. 14 b. “Qualifying purchaser” means a purchaser of a 15 controllable electronic record or an interest in the 16 controllable electronic record that obtains control of the 17 controllable electronic record for value, in good faith, 18 and without notice of a claim of a property right in the 19 controllable electronic record. 20 c. “Transferable record” means: 21 (1) “Transferable record” , as defined in the federal 22 Electronic Signatures in Global and National Commerce Act, 15 23 U.S.C. §7021(a)(1), as amended. 24 (2) “Transferable record” as defined in the uniform 25 electronic transactions Act, section 554D.118, subsection 1. 26 d. “Value” has the meaning provided in section 554.3303, 27 subsection 1. 28 2. Definitions in Article 9. The definitions in Article 29 9 of “account debtor” , “authenticate” , “controllable account” , 30 “controllable payment intangible” , “chattel paper” , “deposit 31 account” , “electronic chattel paper” , “electronic money” , and 32 “investment property” apply to this Article. 33 Sec. 3. NEW SECTION . 554.14103 Scope. 34 1. Article 9 governs in case of conflict. If there is 35 -1- HF 2445 (2) 89 da/jh/md 1/ 22

H.F. 2445 conflict between this Article and Article 9, Article 9 governs. 1 2. Applicable consumer law and other laws. A transaction 2 subject to this Article is subject to: 3 a. any applicable rule of law that establishes a different 4 rule for consumers, including as provided in chapter 537 and 5 any other consumer protection statute or regulation of this 6 state; and 7 b. any other statute or regulation of this state that 8 regulates the rates, charges, agreements, and practices for 9 loans, credit sales, or other extensions of credit or credit 10 transactions, including as provided in chapter 535. 11 Sec. 4. NEW SECTION . 554.14104 Rights in controllable 12 account, controllable electronic record, and controllable payment 13 intangible. 14 1. Applicability of section to controllable account and 15 controllable payment intangible. This section applies to the 16 acquisition and purchase of rights in a controllable account 17 or controllable payment intangible, including the rights of 18 a purchaser and a qualifying purchaser and under subsections 19 3, 4, and 6, and in the same manner this section applies to a 20 controllable electronic record. 21 2. Applicability of other law to acquisition of 22 rights. Except as provided in this section, law other than 23 this Article determines whether a person acquires a right in 24 a controllable electronic record and the right the person 25 acquires. 26 3. Shelter principle and purchase of limited interest. A 27 purchaser of a controllable electronic record acquires 28 all rights in the controllable electronic record that the 29 transferor had or had power to transfer, except that a 30 purchaser of a limited interest in a controllable electronic 31 record acquires rights only to the extent of the interest 32 purchased. 33 4. Rights of qualifying purchaser. A qualifying purchaser 34 acquires its rights in the controllable electronic record free 35 -2- HF 2445 (2) 89 da/jh/md 2/ 22

H.F. 2445 of a claim of a property right in the controllable electronic 1 record. 2 5. Limitation of rights of qualifying purchaser in other 3 property. Except as provided in subsections 1 and 4 for 4 controllable accounts and controllable payment intangibles or 5 law other than this Article, a qualifying purchaser takes a 6 right to payment, right to performance, or interest in property 7 evidenced by the controllable electronic record subject to a 8 claim of a property right in the right to payment, right to 9 performance, or other interest in property. 10 6. No-action protection for qualifying purchaser. An action 11 shall not be asserted against a qualifying purchaser based on 12 both a purchase by the qualifying purchaser of a controllable 13 electronic record and a claim of a property right in another 14 controllable electronic record, whether framed in conversion, 15 replevin, constructive trust, equitable lien, or other theory. 16 7. Filing notice. Filing of a financing statement under 17 Article 9 is not notice of a claim of a property right in a 18 controllable electronic record. 19 Sec. 5. NEW SECTION . 554.14105 Control of controllable 20 electronic record. 21 1. General rule —— control of controllable electronic 22 record. A person has control of a controllable electronic 23 record if: 24 a. the electronic record, a record attached to or logically 25 associated with the electronic record, or a system in which the 26 electronic record is recorded gives the person: 27 (1) the power to avail itself of substantially all the 28 benefit from the electronic record; and 29 (2) exclusive power, subject to subsection 2, to: 30 (a) prevent others from availing themselves of 31 substantially all the benefit from the electronic record; and 32 (b) transfer control of the electronic record to another 33 person or cause another person to obtain control of another 34 controllable electronic record as a result of the transfer of 35 -3- HF 2445 (2) 89 da/jh/md 3/ 22

H.F. 2445 the electronic record; and 1 b. the electronic record, a record attached to or logically 2 associated with the electronic record, or a system in which 3 the electronic record is recorded enables the person readily 4 to identify itself in any way, including by name, identifying 5 number, cryptographic key, office, or account number, as having 6 the powers specified in paragraph “a” . 7 2. Control through another person. A person has control of 8 a controllable electronic record if another person, other than 9 the transferor of an interest in the electronic record: 10 a. has control of the electronic record and acknowledges 11 that it has control on behalf of the person, or 12 b. obtains control of the electronic record after having 13 acknowledged that it will obtain control of the electronic 14 record on behalf of the person. 15 3. Meaning of exclusive. A power specified in subsection 1, 16 paragraph “a” , subparagraph (2), is exclusive, even if: 17 a. the controllable electronic record or a system in 18 which the electronic record is recorded limits the use of 19 the electronic record or has a protocol programmed to cause 20 a change, including a transfer or loss of control or a 21 modification of benefits afforded by the electronic record; or 22 b. the person has agreed to share the power with another 23 person. 24 Sec. 6. NEW SECTION . 554.14106 Discharge of account debtor 25 on controllable account or controllable payment intangible. 26 1. Discharge of account debtor. An account debtor on a 27 controllable account or controllable payment intangible may 28 discharge its obligation by paying: 29 a. the person having control of the controllable electronic 30 record that evidences the controllable account or controllable 31 payment intangible; or 32 b. except as provided in subsection 2, a person that 33 formerly had control of the controllable electronic record. 34 2. Effect of notification. Subject to subsection 4, an 35 -4- HF 2445 (2) 89 da/jh/md 4/ 22

H.F. 2445 account debtor shall not discharge its obligation by paying a 1 person that formerly had control of the controllable electronic 2 record if the account debtor receives a notification that: 3 a. is authenticated by a person that formerly had control or 4 the person to which control was transferred; 5 b. reasonably identifies the controllable account or 6 controllable payment intangible; 7 c. notifies the account debtor that control of the 8 controllable electronic record that evidences the controllable 9 account or controllable payment intangible was transferred; 10 d. identifies the transferee, in any reasonable way, 11 including by name, identifying number, cryptographic key, 12 office, or account number; and 13 e. provides a commercially reasonable method by which the 14 account debtor is to pay the transferee. 15 3. Discharge following effective notification. After 16 receipt of a notification that complies with subsection 2, the 17 account debtor may discharge its obligation only by paying in 18 accordance with the notification and shall not discharge the 19 obligation by paying a person that formerly had control. 20 4. When notification ineffective. Notification is 21 ineffective under subsection 2: 22 a. unless, before the notification is sent, an account 23 debtor and the person that, at that time, had control of the 24 controllable electronic record that evidences the controllable 25 account or controllable payment intangible agree in an 26 authenticated record to a commercially reasonable method by 27 which a person must furnish reasonable proof that control has 28 been transferred; 29 b. to the extent an agreement between an account debtor and 30 seller of a payment intangible limits the account debtor’s duty 31 to pay a person other than the seller and the limitation is 32 effective under law other than this Article; or 33 c. at the option of an account debtor, if the notification 34 notifies the account debtor to: 35 -5- HF 2445 (2) 89 da/jh/md 5/ 22

H.F. 2445 (1) divide a payment; 1 (2) make less than the full amount of any installment or 2 other periodic payment; or 3 (3) pay any part of a payment by more than one method or to 4 more than one person. 5 5. Proof of transfer of control. If requested by the 6 account debtor, the person giving the notification seasonably 7 shall furnish reasonable proof, using the agreed method, 8 that control of the controllable electronic record has been 9 transferred. Unless the person complies with the request, the 10 account debtor may discharge its obligation by paying a person 11 that formerly had control, even if the account debtor has 12 received a notification under subsection 2. 13 6. What constitutes reasonable proof. A person furnishes 14 reasonable proof that control has been transferred if the 15 person demonstrates, using the agreed method, that the 16 transferee has the power to: 17 a. avail itself of substantially all the benefit from the 18 controllable electronic record; 19 b. prevent others from availing themselves of substantially 20 all the benefit from the controllable electronic record; and 21 c. transfer the powers mentioned in paragraphs “a” and “b” 22 to another person. 23 7. Rights not waivable. An account debtor shall not waive 24 or vary its rights under subsection 4, paragraph “a” , and 25 subsection 5 or its option under subsection 4, paragraph “c” . 26 Sec. 7. NEW SECTION . 554.14107 Governing law. 27 Unless otherwise agreed to by the parties, the laws of this 28 state shall govern any actions taken pursuant to this Article. 29 This Article and the local law of this state shall apply to 30 any transaction involving a controllable account, controllable 31 electronic record, or controllable payment intangible if 32 under section 554.9306A, the local law of this state governs 33 perfection, the effect of perfection or nonperfection, and the 34 priority of a security interest in such controllable account, 35 -6- HF 2445 (2) 89 da/jh/md 6/ 22

H.F. 2445 controllable electronic record, or controllable payment 1 intangible. 2 Sec. 8. NEW SECTION . 554.14108 Applicability. 3 This Article applies to any transaction involving a 4 controllable electronic record that arises on or after the 5 effective date of this Article. This Article does not apply to 6 any transaction involving a controllable electronic record that 7 arises before the effective date of this Article even if the 8 transaction would be subject to this Article if the transaction 9 had arisen on or after the effective date of this Article. 10 This Article does not apply to a right of action with regard to 11 any transaction involving a controllable electronic record that 12 has accrued before the effective date of this Article. 13 Sec. 9. NEW SECTION . 554.14109 Savings clause. 14 Any transaction involving a controllable electronic record 15 that arose before the effective date of this Article and 16 the rights, obligations, and interests flowing from that 17 transaction are governed by any statute or other rule amended 18 or repealed by this Article as if such amendment or repeal had 19 not occurred and may be terminated, completed, consummated, or 20 enforced under that statute or other rule. 21 DIVISION II 22 CORRESPONDING CHANGES 23 PART A 24 GENERAL PROVISIONS 25 Sec. 10. Section 554.1201, subsection 2, Code 2022, is 26 amended by adding the following new paragraph: 27 NEW PARAGRAPH . 0q. “Electronic” means relating to 28 technology having electrical, digital, magnetic, wireless, 29 optical, electromagnetic, or similar capabilities. 30 Sec. 11. Section 554.1201, subsection 2, paragraph x, Code 31 2022, is amended to read as follows: 32 x. “Money” means a medium of exchange that: 33 (1) is currently authorized or adopted by a domestic or 34 foreign government , by an intergovernmental organization, or 35 -7- HF 2445 (2) 89 da/jh/md 7/ 22

H.F. 2445 pursuant to an agreement between two or more governments; and 1 (2) was initially issued, created, or distributed by 2 a domestic or foreign government, by an intergovernmental 3 organization, or pursuant to an agreement between two or 4 more governments . The term includes a monetary unit of 5 account established by an intergovernmental organization or by 6 agreement between two or more countries. 7 Sec. 12. Section 554.1204, unnumbered paragraph 1, Code 8 2022, is amended to read as follows: 9 Except as otherwise provided in Articles 3 , 4 , and 5 , and 14 , 10 a person gives value for rights if the person acquires them: 11 PART B 12 SECURED TRANSACTIONS 13 Sec. 13. Section 554.9102, subsection 1, paragraphs b and 14 bi, Code 2022, are amended to read as follows: 15 b. “Account” , except as used in “account for” , “on account 16 of” , and paragraph “ac” , means a right to payment of a monetary 17 obligation, whether or not earned by performance, (i) for 18 property that has been or is to be sold, leased, licensed, 19 assigned, or otherwise disposed of; (ii) for services rendered 20 or to be rendered; (iii) for a policy of insurance issued or to 21 be issued; (iv) for a secondary obligation incurred or to be 22 incurred; (v) for energy provided or to be provided; (vi) for 23 the use or hire of a vessel under a charter or other contract; 24 (vii) arising out of the use of a credit or charge card or 25 information contained on or for use with the card; or (viii) 26 as winnings in a lottery or other game of chance operated or 27 sponsored by a state, governmental unit of a state, or person 28 licensed or authorized to operate the game by a state or 29 governmental unit of a state. The term includes controllable 30 accounts and health care insurance receivables. The term 31 does not include rights to payment evidenced by chattel paper 32 or an instrument, (i) chattel paper, (ii) commercial tort 33 claims, (iii) deposit accounts, (iv) investment property, (v) 34 letter-of-credit rights or letters of credit, or (vi) rights 35 -8- HF 2445 (2) 89 da/jh/md 8/ 22

H.F. 2445 to payment for money or funds advanced or sold, other than 1 rights arising out of the use of a credit or charge card or 2 information contained on or for use with the card , or (vii) 3 rights to payment evidenced by an instrument . 4 bi. “Payment intangible” means a general intangible 5 under which the account debtor’s principal obligation is a 6 monetary obligation. The term includes a controllable payment 7 intangible. 8 Sec. 14. Section 554.9102, subsection 1, Code 2022, is 9 amended by adding the following new paragraphs: 10 NEW PARAGRAPH . 0ab. “Controllable account” means an account 11 evidenced by a controllable electronic record that provides 12 that the account debtor undertakes to pay the person that under 13 section 554.14105 has control of the controllable electronic 14 record. 15 NEW PARAGRAPH . 00ab. “Controllable payment intangible” means 16 a payment intangible evidenced by a controllable electronic 17 record that provides that the account debtor undertakes to pay 18 the person that under section 554.14105 has control of the 19 controllable electronic record. 20 NEW PARAGRAPH . 0af. “Electronic money” means money that is 21 in an electronic form. 22 NEW PARAGRAPH . 0bc. “Money” has the meaning provided in 23 section 554.1201, subsection 2, paragraph “x” , but does not 24 include a deposit account. 25 NEW PARAGRAPH . 0cb. “Tangible money” means money in a 26 tangible form. 27 Sec. 15. Section 554.9102, subsection 2, Code 2022, is 28 amended by adding the following new paragraphs: 29 NEW PARAGRAPH . 0i. “Controllable electronic 30 record” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 554.14102. 31 NEW PARAGRAPH . 0ae. “Qualifying 32 purchaser” . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 554.14102. 33 Sec. 16. NEW SECTION . 554.9105A Control of electronic 34 money. 35 -9- HF 2445 (2) 89 da/jh/md 9/ 22

H.F. 2445 1. General rule —— control of electronic money. A person has 1 control of electronic money if: 2 a. the electronic money or a system in which the electronic 3 money is recorded gives the person: 4 (1) the power to avail itself of substantially all the 5 benefit from the electronic money; and 6 (2) exclusive power, subject to subsection 2, to: 7 (a) prevent others from availing themselves of 8 substantially all the benefit from the electronic money; and 9 (b) transfer control of the electronic money to another 10 person or cause another person to obtain control of other 11 electronic money as a result of the transfer of the electronic 12 money; and 13 b. the electronic money, a record attached to or logically 14 associated with the electronic money, or a system in which 15 the electronic money is recorded enables the person readily 16 to identify itself in any way, including by name, identifying 17 number, cryptographic key, office, or account number, as having 18 the powers under paragraph “a” . 19 2. Control through another person. A person has control of 20 electronic money if another person, other than the transferor 21 of an interest in the electronic money: 22 a. has control of the electronic money and acknowledges that 23 it has control on behalf of the person, or 24 b. obtains control of the electronic money after having 25 acknowledged that it will obtain control of the electronic 26 money on behalf of the person. 27 3. Meaning of exclusive. A power is exclusive under 28 subsection 1, paragraph “a” , subparagraph (2), even if: 29 a. the electronic money or a system in which the electronic 30 money is recorded limits the use of the electronic money or has 31 a protocol programmed to transfer control; or 32 b. the person has agreed to share the power with another 33 person. 34 Sec. 17. NEW SECTION . 554.9107A Control of controllable 35 -10- HF 2445 (2) 89 da/jh/md 10/ 22

H.F. 2445 account, controllable electronic record, or controllable payment 1 intangible. 2 1. Control under section 554.14105. A secured party has 3 control of a controllable electronic record as provided in 4 section 554.14105. 5 2. Control of controllable account and controllable payment 6 intangible. A secured party has control of a controllable 7 account or controllable payment intangible if the secured 8 party has control of the controllable electronic record that 9 evidences the controllable account or controllable payment 10 intangible. 11 Sec. 18. Section 554.9203, subsection 2, Code 2022, is 12 amended to read as follows: 13 2. Enforceability. Except as otherwise provided in 14 subsections 3 through 9 10 , a security interest is enforceable 15 against the debtor and third parties with respect to the 16 collateral only if: 17 a. value has been given; 18 b. the debtor has rights in the collateral or the power to 19 transfer rights in the collateral to a secured party; and 20 c. one of the following conditions is met: 21 (1) the debtor has authenticated a security agreement that 22 provides a description of the collateral and, if the security 23 interest covers timber to be cut, a description of the land 24 concerned; 25 (2) the collateral is not a certificated security and is 26 in the possession of the secured party under section 554.9313 27 pursuant to the debtor’s security agreement; 28 (3) the collateral is a certificated security in registered 29 form and the security certificate has been delivered to the 30 secured party under section 554.8301 pursuant to the debtor’s 31 security agreement; or 32 (4) the collateral is controllable accounts, controllable 33 electronic records, controllable payment intangibles, deposit 34 accounts, electronic chattel paper, electronic documents, 35 -11- HF 2445 (2) 89 da/jh/md 11/ 22

H.F. 2445 electronic money, investment property, or letter-of-credit 1 rights, or electronic documents, and the secured party has 2 control under section 554.7106 , 554.9104 , 554.9105 , 554.9105A, 3 554.9106 , or 554.9107 , or 554.9107A pursuant to the debtor’s 4 security agreement. 5 Sec. 19. Section 554.9203, Code 2022, is amended by adding 6 the following new subsection: 7 NEW SUBSECTION . 10. Controllable account or controllable 8 payment intangible. The attachment of a security interest in a 9 controllable electronic record that evidences a controllable 10 account or controllable payment intangible is also attachment 11 of a security interest in the controllable account or 12 controllable payment intangible. 13 Sec. 20. Section 554.9207, subsection 3, Code 2022, is 14 amended to read as follows: 15 3. Duties and rights when secured party in possession or 16 control. Except as otherwise provided in subsection 4 , a 17 secured party having possession of collateral or control 18 of collateral under section 554.7106 , 554.9104 , 554.9105 , 19 554.9105A, 554.9106 , or 554.9107 , or 554.9107A : 20 a. may hold as additional security any proceeds, except 21 money or funds, received from the collateral; 22 b. shall apply money or funds received from the collateral 23 to reduce the secured obligation, unless remitted to the 24 debtor; and 25 c. may create a security interest in the collateral. 26 Sec. 21. Section 554.9208, subsection 2, paragraphs e and f, 27 Code 2022, are amended to read as follows: 28 e. a secured party having control of a letter-of-credit 29 right under section 554.9107 shall send to each person having 30 an unfulfilled obligation to pay or deliver proceeds of the 31 letter of credit to the secured party an authenticated release 32 from any further obligation to pay or deliver proceeds of the 33 letter of credit to the secured party; and 34 f. a secured party having control of an electronic document 35 -12- HF 2445 (2) 89 da/jh/md 12/ 22

H.F. 2445 shall: 1 (1) give control of the electronic document to the debtor or 2 its designated custodian; 3 (2) if the debtor designates a custodian that is the 4 designated custodian with which the authoritative copy of 5 the electronic document is maintained for the secured party, 6 communicate to the custodian an authenticated record releasing 7 the designated custodian from any further obligation to 8 comply with instructions originated by the secured party 9 and instructing the custodian to comply with instructions 10 originated by the debtor; and 11 (3) take appropriate action to enable the debtor or its 12 designated custodian to make copies of or revisions to the 13 authoritative copy which add or change an identified assignee 14 of the authoritative copy without the consent of the secured 15 party . ; and 16 Sec. 22. Section 554.9208, subsection 2, Code 2022, is 17 amended by adding the following new paragraphs: 18 NEW PARAGRAPH . g. a secured party having control under 19 section 554.9105A of electronic money shall transfer control 20 of the electronic money to the debtor or a person designated 21 by the debtor; and 22 NEW PARAGRAPH . h. a secured party having control under 23 section 554.14105 of a controllable electronic record shall 24 transfer control of the controllable electronic record to the 25 debtor or a person designated by the debtor. 26 Sec. 23. Section 554.9301, subsection 3, Code 2022, is 27 amended to read as follows: 28 3. Except as otherwise provided in subsection 4 , while 29 tangible negotiable documents, goods, instruments, tangible 30 money, or tangible chattel paper is located in a jurisdiction, 31 the local law of that jurisdiction governs: 32 a. perfection of a security interest in the goods by filing 33 a fixture filing; 34 b. perfection of a security interest in timber to be cut; 35 -13- HF 2445 (2) 89 da/jh/md 13/ 22

H.F. 2445 and 1 c. the effect of perfection or nonperfection and the 2 priority of a nonpossessory security interest in the 3 collateral. 4 Sec. 24. NEW SECTION . 554.9306A Law governing perfection 5 and priority of security interests in controllable accounts, 6 controllable electronic records, and controllable payment 7 intangibles. 8 The local law of this state governs perfection, the effect 9 of perfection or nonperfection, and the priority of a security 10 interest in a controllable account, controllable electronic 11 record, or controllable payment intangible granted by a debtor 12 located in this state at the time the security interest becomes 13 enforceable against the debtor with respect to the collateral 14 under section 554.9203. 15 Sec. 25. Section 554.9308, Code 2022, is amended by adding 16 the following new subsection: 17 NEW SUBSECTION . 8. Controllable account or payment 18 intangible. Perfection of a security interest in a controllable 19 electronic record that evidences a controllable account or 20 controllable payment intangible also perfects a security 21 interest in the controllable account or controllable payment 22 intangible. 23 Sec. 26. Section 554.9310, subsection 2, paragraph h, Code 24 2022, is amended to read as follows: 25 h. in controllable accounts, controllable electronic 26 records, controllable payment intangibles, deposit accounts, 27 electronic chattel paper, electronic documents, investment 28 property, or letter-of-credit rights which is perfected by 29 control under section 554.9314 ; 30 Sec. 27. Section 554.9312, Code 2022, is amended to read as 31 follows: 32 554.9312 Perfection of security interests in controllable 33 accounts, controllable electronic records, controllable payment 34 intangibles, chattel paper, deposit accounts, documents, 35 -14- HF 2445 (2) 89 da/jh/md 14/ 22

H.F. 2445 goods covered by documents, instruments, investment property, 1 letter-of-credit rights, and money —— perfection by permissive 2 filing —— temporary perfection without filing or transfer of 3 possession. 4 1. Perfection by filing permitted. A security interest 5 in controllable accounts, controllable electronic records, 6 controllable payment intangibles, chattel paper, negotiable 7 documents, instruments, or investment property may be perfected 8 by filing. 9 2. Control or possession of certain collateral. Except as 10 otherwise provided in section 554.9315, subsections 3 and 4 , 11 for proceeds: 12 a. a security interest in a deposit account may be perfected 13 only by control under section 554.9314 ; 14 b. and except as otherwise provided in section 554.9308, 15 subsection 4 , a security interest in a letter-of-credit right 16 may be perfected only by control under section 554.9314 ; and 17 c. a security interest in tangible money may be perfected 18 only by the secured party’s taking possession under section 19 554.9313 ; and 20 d. a security interest in electronic money may be perfected 21 only by control under section 554.9314 . 22 3. Goods covered by negotiable document. While goods are 23 in the possession of a bailee that has issued a negotiable 24 document covering the goods: 25 a. a security interest in the goods may be perfected by 26 perfecting a security interest in the document; and 27 b. a security interest perfected in the document has 28 priority over any security interest that becomes perfected in 29 the goods by another method during that time. 30 4. Goods covered by nonnegotiable document. While goods are 31 in the possession of a bailee that has issued a nonnegotiable 32 document covering the goods, a security interest in the goods 33 may be perfected by: 34 a. issuance of a document in the name of the secured party; 35 -15- HF 2445 (2) 89 da/jh/md 15/ 22

H.F. 2445 b. the bailee’s receipt of notification of the secured 1 party’s interest; or 2 c. filing as to the goods. 3 5. Temporary perfection —— new value. A security 4 interest in certificated securities, negotiable documents, 5 or instruments is perfected without filing or the taking of 6 possession or control for a period of twenty days from the time 7 it attaches to the extent that it arises for new value given 8 under an authenticated security agreement. 9 6. Temporary perfection —— goods or documents made available 10 to debtor. A perfected security interest in a negotiable 11 document or goods in possession of a bailee, other than one 12 that has issued a negotiable document for the goods, remains 13 perfected for twenty days without filing if the secured 14 party makes available to the debtor the goods or documents 15 representing the goods for the purpose of: 16 a. ultimate sale or exchange; or 17 b. loading, unloading, storing, shipping, transshipping, 18 manufacturing, processing, or otherwise dealing with them in a 19 manner preliminary to their sale or exchange. 20 7. Temporary perfection —— delivery of security certificate 21 or instrument to debtor. A perfected security interest in 22 a certificated security or instrument remains perfected for 23 twenty days without filing if the secured party delivers the 24 security certificate or instrument to the debtor for the 25 purpose of: 26 a. ultimate sale or exchange; or 27 b. presentation, collection, enforcement, renewal, or 28 registration of transfer. 29 8. Expiration of temporary perfection. After the twenty-day 30 period specified in subsection 5, 6, or 7 expires, perfection 31 depends upon compliance with this Article . 32 Sec. 28. Section 554.9313, subsection 1, Code 2022, is 33 amended to read as follows: 34 1. Perfection by possession or delivery. Except as otherwise 35 -16- HF 2445 (2) 89 da/jh/md 16/ 22

H.F. 2445 provided in subsection 2 , a secured party may perfect a 1 security interest in tangible negotiable documents, goods, 2 instruments, tangible money, or tangible chattel paper by 3 taking possession of the collateral. A secured party may 4 perfect a security interest in certificated securities by 5 taking delivery of the certificated securities under section 6 554.8301 . 7 Sec. 29. Section 554.9314, subsections 1 and 2, Code 2022, 8 are amended to read as follows: 9 1. Perfection by control. A security interest in investment 10 property, deposit accounts, letter-of-credit rights, electronic 11 chattel paper, or electronic documents controllable accounts, 12 controllable electronic records, controllable payment 13 intangibles, deposit accounts, electronic chattel paper, 14 electronic documents, electronic money, investment property, 15 or letter-of-credit rights, may be perfected by control of 16 the collateral under section 554.7106 , 554.9104 , 554.9105 , 17 554.9105A, 554.9106 , or 554.9107 , or 554.9107A . 18 2. Specified collateral —— time of perfection by control —— 19 continuation of perfection. A security interest in deposit 20 accounts, electronic chattel paper, letter-of-credit rights, 21 or electronic documents controllable accounts, controllable 22 electronic records, controllable payment intangibles, deposit 23 accounts, electronic chattel paper, electronic documents, 24 electronic money, or letter-of-credit rights, is perfected by 25 control under section 554.7106 , 554.9104 , 554.9105 , 554.9105A 26 or 554.9107 , or 554.9107A when the secured party obtains 27 control and remains perfected by control only while the secured 28 party retains control. 29 Sec. 30. NEW SECTION . 554.9326A Priority of security 30 interests in controllable account, controllable electronic 31 record, and controllable payment intangible. 32 A security interest in a controllable account, controllable 33 electronic record, or controllable payment intangible held by a 34 secured party having control of the account, electronic record, 35 -17- HF 2445 (2) 89 da/jh/md 17/ 22

H.F. 2445 or payment intangible has priority over a conflicting security 1 interest held by a secured party that does not have control. 2 Sec. 31. Section 554.9331, Code 2022, is amended to read as 3 follows: 4 554.9331 Priority of rights of purchasers of instruments, 5 controllable accounts, controllable records, controllable payment 6 intangibles, documents, instruments, and securities under other 7 articles Articles —— priority of interests in financial assets 8 and security entitlements and protections against assertions of 9 claims under Article Articles 8 and 14 . 10 1. Rights under Articles 3 , 7 , and 8 , and 14 not 11 limited. This Article does not limit the rights of a holder 12 in due course of a negotiable instrument, a holder to which a 13 negotiable document of title has been duly negotiated, or a 14 protected purchaser of a security , or a qualifying purchaser 15 of a controllable account, controllable electronic record, or 16 controllable payment intangible . These holders or purchasers 17 take priority over an earlier security interest, even if 18 perfected, to the extent provided in Articles 3 , 7 , and 8 , and 19 14 . 20 2. Protection under Article Articles 8 and 14 . This Article 21 does not limit the rights of or impose liability on a person to 22 the extent that the person is protected against the assertion 23 of a claim under Article 8 or 14 . 24 3. Filing not notice. Filing under this Article does not 25 constitute notice of a claim or defense to the holders, or 26 purchasers, or persons described in subsections 1 and 2 . 27 Sec. 32. Section 554.9332, Code 2022, is amended to read as 28 follows: 29 554.9332 Transfer of money —— transfer of funds from deposit 30 account. 31 1. Transferee of tangible money. A transferee of tangible 32 money takes the money free of a security interest unless the 33 transferee acts in the money if the transferee when receiving 34 delivery of the money does not act in collusion with the debtor 35 -18- HF 2445 (2) 89 da/jh/md 18/ 22

H.F. 2445 in violating the rights of the secured party. 1 2. Transferee of electronic money. A transferee of 2 electronic money takes the money free of a security interest 3 in the money if the transferee when obtaining control of the 4 money does not act in collusion with the debtor in violating 5 the rights of the secured party. 6 2. 3. Transferee of funds from deposit account. A 7 transferee of funds from a deposit account takes the funds 8 free of a security interest in the deposit account unless the 9 transferee acts if the transferee when receiving the funds does 10 not act in collusion with the debtor in violating the rights of 11 the secured party. 12 Sec. 33. Section 554.9406, subsections 1, 2, and 3, Code 13 2022, are amended to read as follows: 14 1. Discharge of account debtor —— effect of 15 notification. Subject to subsections 2 through 9 and 16 11 , an account debtor on an account, chattel paper, or a 17 payment intangible may discharge its obligation by paying the 18 assignor until, but not after, the account debtor receives a 19 notification, authenticated by the assignor or the assignee, 20 that the amount due or to become due has been assigned and that 21 payment is to be made to the assignee. After receipt of the 22 notification, the account debtor may discharge its obligation 23 by paying the assignee and may not discharge the obligation by 24 paying the assignor. 25 2. When notification ineffective. Subject to subsection 26 subsections 8 and 11 , notification is ineffective under 27 subsection 1 : 28 a. if it does not reasonably identify the rights assigned; 29 b. to the extent that an agreement between an account 30 debtor and a seller of a payment intangible limits the account 31 debtor’s duty to pay a person other than the seller and the 32 limitation is effective under law other than this Article ; or 33 c. at the option of an account debtor, if the notification 34 notifies the account debtor to make less than the full amount 35 -19- HF 2445 (2) 89 da/jh/md 19/ 22