CHAPTER 8.1. INVESTMENT SECURITIES
IC 26-1-8.1
Chapter 8.1. Investment Securities
IC 26-1-8.1-101
Short title
Sec. 101. IC 26-1-8.1 may be cited as Uniform CommercialCode.Investment Securities.
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-102
Definitions; rules of construction
Sec. 102. (a) In IC 26-1-8.1:
(1) "Adverse claim" means a claim that a claimant has aproperty interest in a financial asset and that it is a violation ofthe rights of the claimant for another person to hold, transfer, ordeal with the financial asset.
(2) "Bearer form", as applied to a certificated security, meansa form in which the security is payable to the bearer of thesecurity certificate according to its terms but not by reason ofan endorsement.
(3) "Broker" means a person defined as a broker or dealer underthe federal securities laws, but without excluding a bank actingin that capacity.
(4) "Certificated security" means a security that is representedby a certificate.
(5) "Clearing corporation" means:
(i) a person that is registered as a "clearing agency" underthe federal securities laws;
(ii) a federal reserve bank; or
(iii) any other person that provides clearance or settlementservices with respect to financial assets that would require itto register as a clearing agency under the federal securitieslaws but for an exclusion or exemption from the registrationrequirement, if its activities as a clearing corporation,including promulgation of rules, are subject to regulation bya federal or state governmental authority.
(6) "Communicate" means to:
(i) send a signed writing; or
(ii) transmit information by any mechanism agreed upon bythe persons transmitting and receiving the information.
(7) "Entitlement holder" means a person identified in therecords of a securities intermediary as the person having asecurity entitlement against the securities intermediary. If aperson acquires a security entitlement by virtue ofIC 26-1-8.1-501(b)(2) or IC 26-1-8.1-501(b)(3), that person isthe entitlement holder.
(8) "Entitlement order" means a notification communicated toa securities intermediary directing transfer or redemption of afinancial asset to which the entitlement holder has a securityentitlement. (9) "Financial asset", except as otherwise provided inIC 26-1-8.1-103, means:
(i) a security;
(ii) an obligation of a person or a share, participation, orother interest in a person or in property or an enterprise of aperson, that is, or is of a type, dealt in or traded on financialmarkets, or that is recognized in any area in which it isissued or dealt in as a medium for investment; or
(iii) any property that is held by a securities intermediary foranother person in a securities account if the securitiesintermediary has expressly agreed with the other person thatthe property is to be treated as a financial asset underIC 26-1-8.1.
As context requires, the term means either the interest itself orthe means by which a person's claim to it is evidenced,including a certificated or an uncertificated security, a securitycertificate, or a security entitlement.
(10) "Good faith", for purposes of the obligation of good faithin the performance or enforcement of contracts or duties withinIC 26-1-8.1, means honesty in fact and the observance ofreasonable commercial standards of fair dealing.
(11) "Endorsement" means a signature that alone oraccompanied by other words is made on a security certificate inregistered form or on a separate document for the purpose ofassigning, transferring, or redeeming the security or granting apower to assign, transfer, or redeem it.
(12) "Instruction" means a notification communicated to theissuer of an uncertificated security which directs that thetransfer of the security be registered or that the security beredeemed.
(13) "Registered form", as applied to a certificated security,means a form in which:
(i) the security certificate specifies a person entitled to thesecurity; and
(ii) a transfer of the security may be registered upon booksmaintained for that purpose by or on behalf of the issuer, orthe security certificate so states.
(14) "Securities intermediary" means:
(i) a clearing corporation; or
(ii) a person, including a bank or broker, that in the ordinarycourse of its business maintains securities accounts forothers and is acting in that capacity.
(15) "Security", except as otherwise provided inIC 26-1-8.1-103, means an obligation of an issuer or a share,participation, or other interest in an issuer or in property or anenterprise of an issuer:
(i) which is represented by a security certificate in bearer orregistered form, or the transfer of which may be registeredupon books maintained for that purpose by or on behalf ofthe issuer; (ii) which is one (1) of a class or series or by its terms isdivisible into a class or series of shares, participations,interests, or obligations; and
(iii) which:
(A) is, or is of a type, dealt in or traded on securitiesexchanges or securities markets; or
(B) is a medium for investment and by its terms expresslyprovides that it is a security governed by IC 26-1-8.1.
(16) "Security certificate" means a certificate representing asecurity.
(17) "Security entitlement" means the rights and propertyinterest of an entitlement holder with respect to a financial assetspecified in IC 26-1-8.1-501 through IC 26-1-8.1-511.
(18) "Uncertificated security" means a security that is notrepresented by a certificate.
(b) Other definitions applying to IC 26-1-8.1 and the sections inwhich they appear are:
"Appropriate person". IC 26-1-8.1-107.
"Control". IC 26-1-8.1-106.
"Delivery". IC 26-1-8.1-301.
"Investment company security". IC 26-1-8.1-103.
"Issuer". IC 26-1-8.1-201.
"Overissue". IC 26-1-8.1-210.
"Protected purchaser". IC 26-1-8.1-303.
"Securities account". IC 26-1-8.1-501.
(c) In addition, IC 26-1-1 contains general definitions andprinciples of construction and interpretation applicable throughoutIC 26-1-8.1.
(d) The characterization of a person, business, or transaction forpurposes of IC 26-1-8.1 does not determine the characterization ofthe person, business, or transaction for purposes of any other law,regulation, or rule.
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-103
Classification as security or financial asset
Sec. 103. (a) A share or similar equity interest issued by acorporation, business trust, joint stock company, or similar entity isa security.
(b) An "investment company security" is a security. "Investmentcompany security" means a share or similar equity interest issued byan entity that is registered as an investment company under thefederal investment company laws, an interest in a unit investmenttrust that is so registered, or a face amount certificate issued by aface amount certificate company that is so registered. Investmentcompany security does not include an insurance policy orendowment policy or annuity contract issued by an insurancecompany.
(c) An interest in a partnership or limited liability company is nota security unless it is dealt in or traded on securities exchanges or in
securities markets, its terms expressly provide that it is a securitygoverned by IC 26-1-8.1, or it is an investment company security.However, an interest in a partnership or limited liability company isa financial asset if it is held in a securities account.
(d) A writing that is a security certificate is governed byIC 26-1-8.1 and not by IC 26-1-3.1, even though it also meets therequirements of that article. However, a negotiable instrumentgoverned by IC 26-1-3.1 is a financial asset if it is held in a securitiesaccount.
(e) An option or a similar obligation issued by a clearingcorporation to its participants is not a security, but it is a financialasset.
(f) A commodity contract (as defined in IC 26-1-9.1-102(a)(15))is not a security or a financial asset.
(g) A document of title is not a financial asset unless section102(a)(9)(iii) of this chapter applies.
As added by P.L.247-1995, SEC.10. Amended by P.L.57-2000,SEC.38; P.L.143-2007, SEC.64.
IC 26-1-8.1-104
Acquisition of a security or financial asset
Sec. 104. (a) A person acquires a security or an interest therein,under IC 26-1-8.1, if:
(1) the person is a purchaser to whom a security is deliveredunder IC 26-1-8.1-301; or
(2) the person acquires a security entitlement to the securityunder IC 26-1-8.1-501.
(b) A person acquires a financial asset, other than a security, or aninterest therein, under IC 26-1-8.1, if the person acquires a securityentitlement to the financial asset.
(c) A person who acquires a security entitlement to a security orother financial asset has the rights specified in IC 26-1-8.1-501through IC 26-1-8.1-511, but is a purchaser of any security, securityentitlement, or other financial asset held by the securitiesintermediary only to the extent provided in IC 26-1-8.1-503.
(d) Unless the context shows that a different meaning is intended,a person who is required by other law, regulation, rule, or agreementto transfer, deliver, present, surrender, exchange, or otherwise put inthe possession of another person a security or financial asset satisfiesthat requirement by causing the other person to acquire an interest inthe security or financial asset under subsection (a) or (b).
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-105
Notice of adverse claim
Sec. 105. (a) A person has notice of an adverse claim if:
(1) the person knows of the adverse claim;
(2) the person is aware of facts sufficient to indicate that thereis a significant probability that the adverse claim exists anddeliberately avoids information that would establish the
existence of the adverse claim; or
(3) the person has a duty, imposed by statute or regulation, toinvestigate whether an adverse claim exists, and theinvestigation so required would establish the existence of theadverse claim.
(b) Having knowledge that a financial asset or interest therein isor has been transferred by a representative imposes no duty ofinquiry into the rightfulness of a transaction and is not notice of anadverse claim. However, a person who knows that a representativehas transferred a financial asset or interest therein in a transactionthat is, or whose proceeds are being used, for the individual benefitof the representative or otherwise in breach of duty has notice of anadverse claim.
(c) An act or event that creates a right to immediate performanceof the principal obligation represented by a security certificate or setsa date on or after which the certificate is to be presented orsurrendered for redemption or exchange does not itself constitutenotice of an adverse claim except in the case of a transfer more than:
(1) one (1) year after a date set for presentment or surrender forredemption or exchange; or
(2) six (6) months after a date set for payment of money againstpresentation or surrender of the certificate, if money wasavailable for payment on that date.
(d) A purchaser of a certificated security has notice of an adverseclaim if the security certificate:
(1) whether in bearer or registered form, has been endorsed "forcollection" or "for surrender" or for some other purpose notinvolving transfer; or
(2) is in bearer form and has on it an unambiguous statementthat it is the property of a person other than the transferor, butthe mere writing of a name on the certificate is not such astatement.
(e) Filing of a financing statement under IC 26-1-9.1 is not noticeof an adverse claim to a financial asset.
As added by P.L.247-1995, SEC.10. Amended by P.L.57-2000,SEC.39.
IC 26-1-8.1-106
Control of securities
Sec. 106. (a) A purchaser has "control" of a certificated securityin bearer form if the certificated security is delivered to thepurchaser.
(b) A purchaser has "control" of a certificated security inregistered form if the certificated security is delivered to thepurchaser, and:
(1) the certificate is endorsed to the purchaser or in blank by aneffective endorsement; or
(2) the certificate is registered in the name of the purchaser,upon original issue or registration of transfer by the issuer.
(c) A purchaser has "control" of an uncertificated security if: (1) the uncertificated security is delivered to the purchaser; or
(2) the issuer has agreed that it will comply with instructionsoriginated by the purchaser without further consent by theregistered owner.
(d) A purchaser has "control" of a security entitlement if:
(1) the purchaser becomes the entitlement holder;
(2) the securities intermediary has agreed that it will complywith entitlement orders originated by the purchaser withoutfurther consent by the entitlement holder; or
(3) another person has control of the security entitlement onbehalf of the purchaser or, having previously acquired controlof the security entitlement, acknowledges that it has control onbehalf of the purchaser.
(e) If an interest in a security entitlement is granted by theentitlement holder to the entitlement holder's own securitiesintermediary, the securities intermediary has control.
(f) A purchaser who has satisfied the requirements of subsection(c) or (d) has control even if the registered owner in the case ofsubsection (c) or the entitlement holder in the case of subsection (d)retains the right to make substitutions for the uncertificated securityor security entitlement, to originate instructions or entitlement ordersto the issuer or a securities intermediary, or otherwise to deal withthe uncertificated security or security entitlement.
(g) An issuer or a securities intermediary may not enter into anagreement of the kind described in subsection (c)(2) or (d)(2) withoutthe consent of the registered owner or entitlement holder, but anissuer or a securities intermediary is not required to enter into suchan agreement even though the registered owner or entitlement holderso directs. An issuer or securities intermediary that has entered intosuch an agreement is not required to confirm the existence of theagreement to another party unless requested to do so by theregistered owner or entitlement holder.
As added by P.L.247-1995, SEC.10. Amended by P.L.57-2000,SEC.40.
IC 26-1-8.1-107
Effectiveness of endorsement, instruction, or entitlement order
Sec. 107. (a) "Appropriate person" means:
(1) with respect to an endorsement, the person specified by asecurity certificate or by an effective special endorsement to beentitled to the security;
(2) with respect to an instruction, the registered owner of anuncertificated security;
(3) with respect to an entitlement order, the entitlement holder;
(4) if the person designated in subdivision (1), (2), or (3) isdeceased, the designated person's successor taking under otherlaw or the designated person's personal representative acting forthe estate of the decedent; or
(5) if the person designated in subdivision (1), (2), or (3) lackscapacity, the designated person's guardian, conservator, or other
similar representative who has power under other law totransfer the security or financial asset.
(b) An endorsement, instruction, or entitlement order is effectiveif:
(1) it is made by the appropriate person;
(2) it is made by a person who has power under the law ofagency to transfer the security or financial asset on behalf of theappropriate person, including, in the case of an instruction orentitlement order, a person who has control underIC 26-1-8.1-106(c)(2) or IC 26-1-8.1-106(d)(2); or
(3) the appropriate person has ratified it or is otherwiseprecluded from asserting its ineffectiveness.
(c) An endorsement, instruction, or entitlement order made by arepresentative is effective even if:
(1) the representative has failed to comply with a controllinginstrument or with the law of the state having jurisdiction of therepresentative relationship, including any law requiring therepresentative to obtain court approval of the transaction; or
(2) the representative's action in making the endorsement,instruction, or entitlement order or using the proceeds of thetransaction is otherwise a breach of duty.
(d) If a security is registered in the name of or specially endorsedto a person described as a representative, or if a securities account ismaintained in the name of a person described as a representative, anendorsement, instruction, or entitlement order made by the person iseffective even though the person is no longer serving in the describedcapacity.
(e) Effectiveness of an endorsement, instruction, or entitlementorder is determined as of the date the endorsement, instruction, orentitlement order is made, and an endorsement, instruction, orentitlement order does not become ineffective by reason of any laterchange of circumstances.
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-108
Warranties upon purchase or transfer of security
Sec. 108. (a) A person who transfers a certificated security to apurchaser for value warrants to the purchaser, and an endorser, if thetransfer is by endorsement, warrants to any subsequent purchaser,that:
(1) the certificate is genuine and has not been materially altered;
(2) the transferor or endorser does not know of any fact thatmight impair the validity of the security;
(3) there is no adverse claim to the security;
(4) the transfer does not violate any restriction on transfer;
(5) if the transfer is by endorsement, the endorsement is madeby an appropriate person, or if the endorsement is by an agent,the agent has actual authority to act on behalf of the appropriateperson; and
(6) the transfer is otherwise effective and rightful. (b) A person who originates an instruction for registration oftransfer of an uncertificated security to a purchaser for valuewarrants to the purchaser that:
(1) the instruction is made by an appropriate person, or if theinstruction is by an agent, the agent has actual authority to acton behalf of the appropriate person;
(2) the security is valid;
(3) there is no adverse claim to the security; and
(4) at the time the instruction is presented to the issuer:
(i) the purchaser will be entitled to the registration oftransfer;
(ii) the transfer will be registered by the issuer free from allliens, security interests, restrictions, and claims other thanthose specified in the instruction;
(iii) the transfer will not violate any restriction on transfer;and
(iv) the requested transfer will otherwise be effective andrightful.
(c) A person who transfers an uncertificated security to apurchaser for value and does not originate an instruction inconnection with the transfer warrants that:
(1) the uncertificated security is valid;
(2) there is no adverse claim to the security;
(3) the transfer does not violate any restriction on transfer; and
(4) the transfer is otherwise effective and rightful.
(d) A person who endorses a security certificate warrants to theissuer that:
(1) there is no adverse claim to the security; and
(2) the endorsement is effective.
(e) A person who originates an instruction for registration oftransfer of an uncertificated security warrants to the issuer that:
(1) the instruction is effective; and
(2) at the time the instruction is presented to the issuer thepurchaser will be entitled to the registration of transfer.
(f) A person who presents a certificated security for registrationof transfer or for payment or exchange warrants to the issuer that theperson is entitled to the registration, payment, or exchange, but apurchaser for value and without notice of adverse claims to whomtransfer is registered warrants only that the person has no knowledgeof any unauthorized signature in a necessary endorsement.
(g) If a person acts as agent of another in delivering a certificatedsecurity to a purchaser, the identity of the principal was known to theperson to whom the certificate was delivered, and the certificatedelivered by the agent was received by the agent from the principalor received by the agent from another person at the direction of theprincipal, the person delivering the security certificate warrants onlythat the delivering person has authority to act for the principal anddoes not know of any adverse claim to the certificated security.
(h) A secured party who redelivers a security certificate received,or after payment and on order of the debtor delivers the security
certificate to another person, makes only the warranties of an agentunder subsection (g).
(i) Except as otherwise provided in subsection (g), a broker actingfor a customer makes to the issuer and a purchaser the warrantiesprovided in subsections (a) through (f). A broker that delivers asecurity certificate to its customer, or causes its customer to beregistered as the owner of an uncertificated security, makes to thecustomer the warranties provided in subsection (a) or (b), and has therights and privileges of a purchaser under this section. Thewarranties of and in favor of the broker acting as an agent are inaddition to applicable warranties given by and in favor of thecustomer.
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-109
Warranties made by and to a securities intermediary
Sec. 109. (a) A person who originates an entitlement order to asecurities intermediary warrants to the securities intermediary that:
(1) the entitlement order is made by an appropriate person, orif the entitlement order is by an agent, the agent has actualauthority to act on behalf of the appropriate person; and
(2) there is no adverse claim to the security entitlement.
(b) A person who delivers a security certificate to a securitiesintermediary for credit to a securities account or originates aninstruction with respect to an uncertificated security directing thatthe uncertificated security be credited to a securities account makesto the securities intermediary the warranties specified inIC 26-1-8.1-108(a) or IC 26-1-8.1-108(b).
(c) If a securities intermediary delivers a security certificate to itsentitlement holder or causes its entitlement holder to be registered asthe owner of an uncertificated security, the securities intermediarymakes to the entitlement holder the warranties specified inIC 26-1-8.1-108(a) or IC 26-1-8.1-108(b).
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-110
Applicability of local law; determination of jurisdiction
Sec. 110. (a) The local law of the issuer's jurisdiction, as specifiedin subsection (d), governs:
(1) the validity of a security;
(2) the rights and duties of the issuer with respect to registrationof transfer;
(3) the effectiveness of registration of transfer by the issuer;
(4) whether the issuer owes any duties to an adverse claimant toa security; and
(5) whether an adverse claim can be asserted against a personto whom transfer of a certificated or uncertificated security isregistered or a person who obtains control of an uncertificatedsecurity.
(b) The local law of the securities intermediary's jurisdiction, as
specified in subsection (e), governs:
(1) acquisition of a security entitlement from the securitiesintermediary;
(2) the rights and duties of the securities intermediary andentitlement holder arising out of a security entitlement;
(3) whether the securities intermediary owes any duties to anadverse claimant to a security entitlement; and
(4) whether an adverse claim can be asserted against a personwho acquires a security entitlement from the securitiesintermediary or a person who purchases a security entitlementor interest therein from an entitlement holder.
(c) The local law of the jurisdiction in which a security certificateis located at the time of delivery governs whether an adverse claimcan be asserted against a person to whom the security certificate isdelivered.
(d) "Issuer's jurisdiction" means the jurisdiction under which theissuer of the security is organized or, if permitted by the law of thatjurisdiction, the law of another jurisdiction specified by the issuer.An issuer organized under the law of this state may specify the lawof another jurisdiction as the law governing the matters specified insubsection (a)(2) through (a)(5).
(e) The following rules determine a "securities intermediary'sjurisdiction" for purposes of this section:
(1) If an agreement between the securities intermediary and itsentitlement holder governing the securities account expresslyprovides that a particular jurisdiction is the securitiesintermediary's jurisdiction for purposes of IC 26-1-8.1-101through IC 26-1-8.1-116, that jurisdiction is the securitiesintermediary's jurisdiction.
(2) If subdivision (1) does not apply, and an agreement betweenthe securities intermediary and its entitlement holder expresslyprovides that the agreement is governed by the law of aparticular jurisdiction, that jurisdiction is the securitiesintermediary's jurisdiction.
(3) If neither subdivision (1) nor subdivision (2) applies, and anagreement between the securities intermediary and itsentitlement holder governing the securities account expresslyprovides that the securities account is maintained at an office ina particular jurisdiction, that jurisdiction is the securitiesintermediary's jurisdiction.
(4) If none of the preceding subdivisions apply, the securitiesintermediary's jurisdiction is the jurisdiction in which the officeidentified in an account statement as the office serving theentitlement holder's account is located.
(5) If none of the preceding subdivisions apply, the securitiesintermediary's jurisdiction is the jurisdiction in which the chiefexecutive office of the securities intermediary is located.
(f) A securities intermediary's jurisdiction is not determined bythe physical location of certificates representing financial assets, orby the jurisdiction in which is organized the issuer of the financial
asset with respect to which an entitlement holder has a securityentitlement, or by the location of facilities for data processing orother record keeping concerning the account.
As added by P.L.247-1995, SEC.10. Amended by P.L.57-2000,SEC.41.
IC 26-1-8.1-111
Applicability of rules adopted by clearing corporations
Sec. 111. A rule adopted by a clearing corporation governingrights and obligations among the clearing corporation and itsparticipants in the clearing corporation is effective even if the ruleconflicts with IC 26-1-8.1 and affects another party who does notconsent to the rule.
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-112
Creditor access to debtor's interest in a security
Sec. 112. (a) The interest of a debtor in a certificated security maybe reached by a creditor only by actual seizure of the securitycertificate by the officer making the attachment or levy, except asotherwise provided in subsection (d). However, a certificatedsecurity for which the certificate has been surrendered to the issuermay be reached by a creditor by legal process upon the issuer.
(b) The interest of a debtor in an uncertificated security may bereached by a creditor only by legal process upon the issuer at itschief executive office in the United States, except as otherwiseprovided in subsection (d).
(c) The interest of a debtor in a security entitlement may bereached by a creditor only by legal process upon the securitiesintermediary with whom the debtor's securities account ismaintained, except as otherwise provided in subsection (d).
(d) The interest of a debtor in a certificated security for which thecertificate is in the possession of a secured party, or in anuncertificated security registered in the name of a secured party, ora security entitlement maintained in the name of a secured party, maybe reached by a creditor by legal process upon the secured party.
(e) A creditor whose debtor is the owner of a certificated security,uncertificated security, or security entitlement is entitled to aid froma court of competent jurisdiction, by injunction or otherwise, inreaching the certificated security, uncertificated security, or securityentitlement or in satisfying the claim by means allowed at law or inequity in regard to property that cannot readily be reached by otherlegal process.
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-113
Enforceability of contracts for sale or purchase of a security
Sec. 113. A contract or modification of a contract for the sale orpurchase of a security is enforceable whether or not there is a writingsigned or record authenticated by a party against whom enforcement
is sought, even if the contract or modification is not capable ofperformance within one (1) year of its making.
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-114
Special rules in actions against issuers of a certificated security
Sec. 114. The following rules apply in an action on a certificatedsecurity against the issuer:
(1) Unless specifically denied in the pleadings, each signatureon a security certificate or in a necessary endorsement isadmitted.
(2) If the effectiveness of a signature is put in issue, the burdenof establishing effectiveness is on the party claiming under thesignature, but the signature is presumed to be genuine orauthorized.
(3) If signatures on a security certificate are admitted orestablished, production of the certificate entitles a holder torecover on it unless the defendant establishes a defense or adefect going to the validity of the security.
(4) If it is shown that a defense or defect exists, the plaintiff hasthe burden of establishing that the plaintiff or some personunder whom the plaintiff claims is a person against whom thedefense or defect cannot be asserted.
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-115
Liability of securities intermediary, broker, or other agent orbailee
Sec. 115. A securities intermediary that has transferred a financialasset under an effective entitlement order, or a broker or other agentor bailee that has dealt with a financial asset at the direction of itscustomer or principal, is not liable to a person having an adverseclaim to the financial asset, unless the securities intermediary, orbroker or other agent or bailee:
(1) took the action after it had been served with an injunction,restraining order, or other legal process enjoining it from doingso, issued by a court of competent jurisdiction, and had areasonable opportunity to act on the injunction, restrainingorder, or other legal process;
(2) acted in collusion with the wrongdoer in violating the rightsof the adverse claimant; or
(3) in the case of a security certificate that has been stolen,acted with notice of the adverse claim.
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-116
Determination of securities intermediary as purchaser for value
Sec. 116. A securities intermediary that receives a financial assetand establishes a security entitlement to the financial asset in favorof an entitlement holder is a purchaser for value of the financial
asset. A securities intermediary that acquires a security entitlementto a financial asset from another securities intermediary acquires thesecurity entitlement for value if the securities intermediary acquiringthe security entitlement establishes a security entitlement to thefinancial asset in favor of an entitlement holder.
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-201
"Issuer" defined
Sec. 201. (a) With respect to an obligation on or a defense to asecurity, an "issuer" includes a person that:
(1) places or authorizes the placing of its name on a securitycertificate, other than as authenticating trustee, registrar,transfer agent, or the like, to evidence a share, participation, orother interest in its property or in an enterprise, or to evidenceits duty to perform an obligation represented by the certificate;
(2) creates a share, participation, or other interest in its propertyor in an enterprise, or undertakes an obligation, that is anuncertificated security;
(3) directly or indirectly creates a fractional interest in its rightsor property, if the fractional interest is represented by a securitycertificate; or
(4) becomes responsible for, or is in place of, another persondescribed as an issuer in this section.
(b) With respect to an obligation on or defense to a security, aguarantor is an issuer to the extent of its guaranty, whether or not itsobligation is noted on a security certificate.
(c) With respect to a registration of a transfer, issuer means aperson on whose behalf transfer books are maintained.
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-202
Terms of security; rules on validity; issuer's defenses; cancellationof contracts
Sec. 202. (a) Even against a purchaser for value and withoutnotice, the terms of a certificated security include terms stated on thecertificate and terms made part of the security by reference on thecertificate to another instrument, indenture, or document or to aconstitution, a statute, an ordinance, a rule, a regulation, an order, orthe like, to the extent the terms referred to do not conflict with termsstated on the certificate. A reference under this subsection does notof itself charge a purchaser for value with notice of a defect going tothe validity of the security, even if the certificate expressly states thata person accepting it admits notice. The terms of an uncertificatedsecurity include those stated in any instrument, indenture, ordocument or in a constitution, a statute, an ordinance, a rule, aregulation, an order, or the like, under which the security is issued.
(b) The following rules apply if an issuer asserts that a security isnot valid:
(1) A security other than a security issued by a government or
governmental subdivision, agency, or instrumentality, eventhough issued with a defect going to its validity, is valid in thehands of a purchaser for value and without notice of theparticular defect unless the defect involves a violation of aconstitutional provision. In that case, the security is valid in thehands of a purchaser for value and without notice of the defect,other than one who takes by original issue.
(2) Subdivision (1) applies to an issuer that is a government orgovernmental subdivision, agency, or instrumentality only ifthere has been substantial compliance with the legalrequirements governing the issue or the issuer has received asubstantial consideration for the issue as a whole or for theparticular security and a stated purpose of the issue is one forwhich the issuer has power to borrow money or issue thesecurity.
(c) Except as otherwise provided in IC 26-1-8.1-205, lack ofgenuineness of a certificated security is a complete defense, evenagainst a purchaser for value and without notice.
(d) All other defenses of the issuer of a security, includingnondelivery and conditional delivery of a certificated security, areineffective against a purchaser for value who has taken thecertificated security without notice of the particular defense.
(e) This section does not affect the right of a party to cancel acontract for a security "when, as, and if issued" or "when distributed"in the event of a material change in the character of the security thatis the subject of the contract or in the plan or arrangement underwhich the security is to be issued or distributed.
(f) If a security is held by a securities intermediary against whoman entitlement holder has a security entitlement with respect to thesecurity, the issuer may not assert any defense that the issuer couldnot assert if the entitlement holder held the security directly.
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-203
Notice of defects
Sec. 203. After an act or event, other than a call that has beenrevoked, creating a right to immediate performance of the principalobligation represented by a certificated security or setting a date onor after which the security is to be presented or surrendered forredemption or exchange, a purchaser is charged with notice of anydefect in its issue or defense of the issuer, if the act or event:
(1) requires the payment of money, the delivery of a certificatedsecurity, the registration of transfer of an uncertificatedsecurity, or any of them on presentation or surrender of thesecurity certificate, the money or security is available on thedate set for payment or exchange, and the purchaser takes thesecurity more than one (1) year after that date; or
(2) is not covered by subdivision (1) and the purchaser takes thesecurity more than two (2) years after the date set for surrenderor presentation or the date on which performance became due.As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-204
Restrictions on transfer
Sec. 204. A restriction on transfer of a security imposed by theissuer, even if otherwise lawful, is ineffective against a personwithout knowledge of the restriction unless:
(1) the security is certificated and the restriction is notedconspicuously on the security certificate; or
(2) the security is uncertificated and the registered owner hasbeen notified of the restriction.
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-205
Effect of unauthorized signature or certificate
Sec. 205. An unauthorized signature placed on a securitycertificate before or in the course of issue is ineffective, but thesignature is effective in favor of a purchaser for value of thecertificated security if the purchaser is without notice of the lack ofauthority and the signing has been done by:
(1) an authenticating trustee, a registrar, a transfer agent, orother person entrusted by the issuer with the signing of thesecurity certificate or of similar security certificates, or theimmediate preparation for signing of any of them; or
(2) an employee of the issuer, or of any of the persons listed insubdivision (1), entrusted with responsible handling of thesecurity certificate.
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-206
Enforceability of incomplete or incorrect certificate
Sec. 206. (a) If a security certificate contains the signaturesnecessary to its issue or transfer but is incomplete in any otherrespect:
(1) any person may complete it by filling in the blanks asauthorized; and
(2) even if the blanks are incorrectly filled in, the securitycertificate as completed is enforceable by a purchaser who tookit for value and without notice of the incorrectness.
(b) A complete security certificate that has been improperlyaltered, even if fraudulently, remains enforceable, but only accordingto its original terms.
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-207
Registered owner to exercise all rights and powers of owner absentappropriate notice of transfer
Sec. 207. (a) Before due presentment for registration of transferof a certificated security in registered form or of an instructionrequesting registration of transfer of an uncertificated security, the
issuer or indenture trustee may treat the registered owner as theperson exclusively entitled to vote, receive notifications, andotherwise exercise all the rights and powers of an owner.
(b) IC 26-1-8.1 does not affect the liability of the registered ownerof a security for a call, an assessment, or the like.
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-208
Warranties by security certificate authenticating signatory
Sec. 208. (a) A person signing a security certificate asauthenticating trustee, registrar, transfer agent, or the like, warrantsto a purchaser for value of the certificated security, if the purchaseris without notice of a particular defect, that:
(1) the certificate is genuine;
(2) the person's own participation in the issue of the security iswithin the person's capacity and within the scope of theauthority received by the person from the issuer; and
(3) the person has reasonable grounds to believe that thecertificated security is in the form and within the amount theissuer is authorized to issue.
(b) Unless otherwise agreed, a person signing under subsection (a)does not assume responsibility for the validity of the security in otherrespects.
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-209
Issuer's lien
Sec. 209. A lien in favor of an issuer upon a certificated securityis valid against a purchaser only if the right of the issuer to the lienis noted conspicuously on the security certificate.
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-210
Overissue of security; refund in the event of unavailability ofsecurity
Sec. 210. (a) In this section, "overissue" means the issue ofsecurities in excess of the amount the issuer has corporate power toissue, but an overissue does not occur if appropriate action has curedthe overissue.
(b) Except as otherwise provided in subsections (c) and (d), theprovisions of IC 26-1-8.1 which validate a security or compel itsissue or reissue do not apply to the extent that validation, issue, orreissue would result in overissue.
(c) If an identical security not constituting an overissue isreasonably available for purchase, a person entitled to issue orvalidation may compel the issuer to purchase the security and deliverit if certificated or register its transfer if uncertificated, againstsurrender of any security certificate the person holds.
(d) If a security is not reasonably available for purchase, a personentitled to issue or validation may recover from the issuer the price
the person or the last purchaser for value paid for it with interestfrom the date of the person's demand.
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-301
Delivery of security
Sec. 301. (a) Delivery of a certificated security to a purchaseroccurs when:
(1) the purchaser acquires possession of the security certificate;
(2) another person, other than a securities intermediary, eitheracquires possession of the security certificate on behalf of thepurchaser or, having previously acquired possession of thecertificate, acknowledges that it holds for the purchaser; or
(3) a securities intermediary acting on behalf of the purchaseracquires possession of the security certificate, only if thecertificate is in registered form and is (i) registered in the nameof the purchaser, (ii) payable to the order of the purchaser, or(iii) specially endorsed to the purchaser by an effectiveendorsement and has not been endorsed to the securitiesintermediary or in blank.
(b) Delivery of an uncertificated security to a purchaser occurswhen:
(1) the issuer registers the purchaser as the registered owner,upon original issue or registration of transfer; or
(2) another person, other than a securities intermediary, eitherbecomes the registered owner of the uncertificated security onbehalf of the purchaser or, having previously become theregistered owner, acknowledges that it holds for the purchaser.
As added by P.L.247-1995, SEC.10. Amended by P.L.57-2000,SEC.42.
IC 26-1-8.1-302
Rights acquired by purchaser
Sec. 302. (a) Except as otherwise provided in subsections (b) and(c), a purchaser of a certificated or uncertificated security acquiresall rights in the security that the transferor had or had power totransfer.
(b) A purchaser of a limited interest acquires rights only to theextent of the interest purchased.
(c) A purchaser of a certificated security who as a previous holderhad notice of an adverse claim does not improve its position bytaking from a protected purchaser.
As added by P.L.247-1995, SEC.10. Amended by P.L.57-2000,SEC.43.
IC 26-1-8.1-303
"Protected purchaser" defined; acquisition of interest free ofadverse claims
Sec. 303. (a) "Protected purchaser" means a purchaser of acertificated or uncertificated security, or of an interest therein, who: (1) gives value;
(2) does not have notice of any adverse claim to the security;and
(3) obtains control of the certificated or uncertificated security.
(b) In addition to acquiring the rights of a purchaser, a protectedpurchaser also acquires its interest in the security free of any adverseclaim.
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-304
Endorsement of securities
Sec. 304. (a) An endorsement may be in blank or special. Anendorsement in blank includes an endorsement to bearer. A specialendorsement specifies to whom a security is to be transferred or whohas power to transfer it. A holder may convert a blank endorsementto a special endorsement.
(b) An endorsement purporting to be only of part of a securitycertificate representing units intended by the issuer to be separatelytransferable is effective to the extent of the endorsement.
(c) An endorsement, whether special or in blank, does notconstitute a transfer until delivery of the certificate on which itappears or, if the endorsement is on a separate document, untildelivery of both the document and the certificate.
(d) If a security certificate in registered form has been deliveredto a purchaser without a necessary endorsement, the purchaser maybecome a protected purchaser only when the endorsement issupplied. However, against a transferor, a transfer is complete upondelivery and the purchaser has a specifically enforceable right tohave any necessary endorsement supplied.
(e) An endorsement of a security certificate in bearer form maygive notice of an adverse claim to the certificate, but it does nototherwise affect a right to registration that the holder possesses.
(f) Unless otherwise agreed, a person making an endorsementassumes only the obligations provided in IC 26-1-8.1-108 and not anobligation that the security will be honored by the issuer.
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-305
Incomplete instructions; obligations imposed on person initiatinginstructions
Sec. 305. (a) If an instruction has been originated by anappropriate person but is incomplete in any other respect, any personmay complete it as authorized and the issuer may rely on it ascompleted, even though it has been completed incorrectly.
(b) Unless otherwise agreed, a person initiating an instructionassumes only the obligations imposed by IC 26-1-8.1-108 and not anobligation that the security will be honored by the issuer.
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-306 Warranties by guarantor
Sec. 306. (a) A person who guarantees a signature of an endorserof a security certificate warrants that at the time of signing:
(1) the signature was genuine;
(2) the signer was an appropriate person to endorse, or if thesignature is by an agent, the agent had actual authority to act onbehalf of the appropriate person; and
(3) the signer had legal capacity to sign.
(b) A person who guarantees a signature of the originator of aninstruction warrants that at the time of signing:
(1) the signature was genuine;
(2) the signer was an appropriate person to originate theinstruction, or if the signature is by an agent, the agent hadactual authority to act on behalf of the appropriate person, if theperson specified in the instruction as the registered owner was,in fact, the registered owner, as to which fact the signatureguarantor does not make a warranty; and
(3) the signer had legal capacity to sign.
(c) A person who specially guarantees the signature of anoriginator of an instruction makes the warranties of a signatureguarantor under subsection (b) and also warrants that at the time theinstruction is presented to the issuer:
(1) the person specified in the instruction as the registeredowner of the uncertificated security will be the registeredowner; and
(2) the transfer of the uncertificated security requested in theinstruction will be registered by the issuer free from all liens,security interests, restrictions, and claims other than thosespecified in the instruction.
(d) A guarantor under subsections (a) and (b) or a specialguarantor under subsection (c) does not otherwise warrant therightfulness of the transfer.
(e) A person who guarantees an endorsement of a securitycertificate makes the warranties of a signature guarantor undersubsection (a) and also warrants the rightfulness of the transfer in allrespects.
(f) A person who guarantees an instruction requesting the transferof an uncertificated security makes the warranties of a specialsignature guarantor under subsection (c) and also warrants therightfulness of the transfer in all respects.
(g) An issuer may not require a special guaranty of signature, aguaranty of endorsement, or a guaranty of instruction as a conditionto registration of transfer.
(h) The warranties under this section are made to a person takingor dealing with the security in reliance on the guaranty, and theguarantor is liable to the person for loss resulting from their breach.An endorser or originator of an instruction whose signature,endorsement, or instruction has been guaranteed is liable to aguarantor for any loss suffered by the guarantor as a result of breachof the warranties of the guarantor.As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-307
Duties of transferor of security
Sec. 307. Unless otherwise agreed, the transferor of a security ondue demand shall supply the purchaser with proof of authority totransfer or with any other requisite necessary to obtain registrationof the transfer of the security, but if the transfer is not for value, atransferor need not comply unless the purchaser pays the necessaryexpenses. If the transferor fails within a reasonable time to complywith the demand, the purchaser may reject or rescind the transfer.
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-401
Issuer's duty to register transfer
Sec. 401. (a) If a certificated security in registered form ispresented to an issuer with a request to register transfer or aninstruction is presented to an issuer with a request to register transferof an uncertificated security, the issuer shall register the transfer asrequested if:
(1) under the terms of the security the person seekingregistration of transfer is eligible to have the security registeredin its name;
(2) the endorsement or instruction is made by the appropriateperson or by an agent who has actual authority to act on behalfof the appropriate person;
(3) reasonable assurance is given that the endorsement orinstruction is genuine and authorized (IC 26-1-8.1-402);
(4) any applicable law relating to the collection of taxes hasbeen complied with;
(5) the transfer does not violate any restriction on transferimposed by the issuer in accordance with IC 26-1-8.1-204;
(6) a demand that the issuer not register transfer has not becomeeffective under IC 26-1-8.1-403, or the issuer has complied withIC 26-1-8.1-403(b) but no legal process or indemnity bond isobtained as provided in IC 26-1-8.1-403(d); and
(7) the transfer is in fact rightful or is to a protected purchaser.
(b) If an issuer is under a duty to register a transfer of a security,the issuer is liable to a person presenting a certificated security or aninstruction for registration or to the person's principal for lossresulting from unreasonable delay in registration or failure or refusalto register the transfer.
As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-402
Issuer's right to assurances
Sec. 402. (a) An issuer may require the following assurance thateach necessary endorsement or each instruction is genuine andauthorized:
(1) in all cases, a guaranty of the signature of the person making
an endorsement or originating an instruction including, in thecase of an instruction, reasonable assurance