IC 26-1-8.1-101 Short title
Sec. 101. IC 26-1-8.1 may be cited as Uniform Commercial
Code.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 a
property interest in a financial asset and that it is a violation of
the rights of the claimant for another person to hold, transfer, or
deal with the financial asset.
(2) "Bearer form", as applied to a certificated security, means
a form in which the security is payable to the bearer of the
security certificate according to its terms but not by reason of
an endorsement.
(3) "Broker" means a person defined as a broker or dealer under
the federal securities laws, but without excluding a bank acting
in that capacity.
(4) "Certificated security" means a security that is represented
by a certificate.
(5) "Clearing corporation" means:
(i) a person that is registered as a "clearing agency" under
the federal securities laws;
(ii) a federal reserve bank; or
(iii) any other person that provides clearance or settlement
services with respect to financial assets that would require it
to register as a clearing agency under the federal securities
laws but for an exclusion or exemption from the registration
requirement, if its activities as a clearing corporation,
including promulgation of rules, are subject to regulation by
a federal or state governmental authority.
(6) "Communicate" means to:
(i) send a signed writing; or
(ii) transmit information by any mechanism agreed upon by
the persons transmitting and receiving the information.
(7) "Entitlement holder" means a person identified in the
records of a securities intermediary as the person having a
security entitlement against the securities intermediary. If a
person acquires a security entitlement by virtue of
IC 26-1-8.1-501(b)(2) or IC 26-1-8.1-501(b)(3), that person is
the entitlement holder.
(8) "Entitlement order" means a notification communicated to
a securities intermediary directing transfer or redemption of a
financial asset to which the entitlement holder has a security
entitlement.
(9) "Financial asset", except as otherwise provided in
IC 26-1-8.1-103, means:
(i) a security;
(ii) an obligation of a person or a share, participation, or
other interest in a person or in property or an enterprise of a
person, that is, or is of a type, dealt in or traded on financial
markets, or that is recognized in any area in which it is
issued or dealt in as a medium for investment; or
(iii) any property that is held by a securities intermediary for
another person in a securities account if the securities
intermediary has expressly agreed with the other person that
the property is to be treated as a financial asset under
IC 26-1-8.1.
As context requires, the term means either the interest itself or
the means by which a person's claim to it is evidenced,
including a certificated or an uncertificated security, a security
certificate, or a security entitlement.
(10) "Good faith", for purposes of the obligation of good faith
in the performance or enforcement of contracts or duties within
IC 26-1-8.1, means honesty in fact and the observance of
reasonable commercial standards of fair dealing.
(11) "Endorsement" means a signature that alone or
accompanied by other words is made on a security certificate in
registered form or on a separate document for the purpose of
assigning, transferring, or redeeming the security or granting a
power to assign, transfer, or redeem it.
(12) "Instruction" means a notification communicated to the
issuer of an uncertificated security which directs that the
transfer of the security be registered or that the security be
redeemed.
(13) "Registered form", as applied to a certificated security,
means a form in which:
(i) the security certificate specifies a person entitled to the
security; and
(ii) a transfer of the security may be registered upon books
maintained for that purpose by or on behalf of the issuer, or
the security certificate so states.
(14) "Securities intermediary" means:
(i) a clearing corporation; or
(ii) a person, including a bank or broker, that in the ordinary
course of its business maintains securities accounts for
others and is acting in that capacity.
(15) "Security", except as otherwise provided in
IC 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 an
enterprise of an issuer:
(i) which is represented by a security certificate in bearer or
registered form, or the transfer of which may be registered
upon books maintained for that purpose by or on behalf of
the issuer;
(ii) which is one (1) of a class or series or by its terms is
divisible 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 securities
exchanges or securities markets; or
(B) is a medium for investment and by its terms expressly
provides that it is a security governed by IC 26-1-8.1.
(16) "Security certificate" means a certificate representing a
security.
(17) "Security entitlement" means the rights and property
interest of an entitlement holder with respect to a financial asset
specified in IC 26-1-8.1-501 through IC 26-1-8.1-511.
(18) "Uncertificated security" means a security that is not
represented by a certificate.
(b) Other definitions applying to IC 26-1-8.1 and the sections in
which 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 and
principles of construction and interpretation applicable throughout
IC 26-1-8.1.
(d) The characterization of a person, business, or transaction for
purposes of IC 26-1-8.1 does not determine the characterization of
the 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 a
corporation, business trust, joint stock company, or similar entity is
a security.
(b) An "investment company security" is a security. "Investment
company security" means a share or similar equity interest issued by
an entity that is registered as an investment company under the
federal investment company laws, an interest in a unit investment
trust that is so registered, or a face amount certificate issued by a
face amount certificate company that is so registered. Investment
company security does not include an insurance policy or
endowment policy or annuity contract issued by an insurance
company.
(c) An interest in a partnership or limited liability company is not
a security unless it is dealt in or traded on securities exchanges or in
securities markets, its terms expressly provide that it is a security
governed by IC 26-1-8.1, or it is an investment company security.
However, an interest in a partnership or limited liability company is
a financial asset if it is held in a securities account.
(d) A writing that is a security certificate is governed by
IC 26-1-8.1 and not by IC 26-1-3.1, even though it also meets the
requirements of that article. However, a negotiable instrument
governed by IC 26-1-3.1 is a financial asset if it is held in a securities
account.
(e) An option or a similar obligation issued by a clearing
corporation to its participants is not a security, but it is a financial
asset.
(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 section
102(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 delivered
under IC 26-1-8.1-301; or
(2) the person acquires a security entitlement to the security
under IC 26-1-8.1-501.
(b) A person acquires a financial asset, other than a security, or an
interest therein, under IC 26-1-8.1, if the person acquires a security
entitlement to the financial asset.
(c) A person who acquires a security entitlement to a security or
other financial asset has the rights specified in IC 26-1-8.1-501
through IC 26-1-8.1-511, but is a purchaser of any security, security
entitlement, or other financial asset held by the securities
intermediary 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 agreement
to transfer, deliver, present, surrender, exchange, or otherwise put in
the possession of another person a security or financial asset satisfies
that requirement by causing the other person to acquire an interest in
the security or financial asset 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 there
is a significant probability that the adverse claim exists and
deliberately avoids information that would establish the
existence of the adverse claim; or
(3) the person has a duty, imposed by statute or regulation, to
investigate whether an adverse claim exists, and the
investigation so required would establish the existence of the
adverse claim.
(b) Having knowledge that a financial asset or interest therein is
or has been transferred by a representative imposes no duty of
inquiry into the rightfulness of a transaction and is not notice of an
adverse claim. However, a person who knows that a representative
has transferred a financial asset or interest therein in a transaction
that is, or whose proceeds are being used, for the individual benefit
of the representative or otherwise in breach of duty has notice of an
adverse claim.
(c) An act or event that creates a right to immediate performance
of the principal obligation represented by a security certificate or sets
a date on or after which the certificate is to be presented or
surrendered for redemption or exchange does not itself constitute
notice of an adverse claim except in the case of a transfer more than:
(1) one (1) year after a date set for presentment or surrender for
redemption or exchange; or
(2) six (6) months after a date set for payment of money against
presentation or surrender of the certificate, if money was
available for payment on that date.
(d) A purchaser of a certificated security has notice of an adverse
claim if the security certificate:
(1) whether in bearer or registered form, has been endorsed "for
collection" or "for surrender" or for some other purpose not
involving transfer; or
(2) is in bearer form and has on it an unambiguous statement
that it is the property of a person other than the transferor, but
the mere writing of a name on the certificate is not such a
statement.
(e) Filing of a financing statement under IC 26-1-9.1 is not notice
of 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 security
in bearer form if the certificated security is delivered to the
purchaser.
(b) A purchaser has "control" of a certificated security in
registered form if the certificated security is delivered to the
purchaser, and:
(1) the certificate is endorsed to the purchaser or in blank by an
effective 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 instructions
originated by the purchaser without further consent by the
registered 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 comply
with entitlement orders originated by the purchaser without
further consent by the entitlement holder; or
(3) another person has control of the security entitlement on
behalf of the purchaser or, having previously acquired control
of the security entitlement, acknowledges that it has control on
behalf of the purchaser.
(e) If an interest in a security entitlement is granted by the
entitlement holder to the entitlement holder's own securities
intermediary, the securities intermediary has control.
(f) A purchaser who has satisfied the requirements of subsection
(c) or (d) has control even if the registered owner in the case of
subsection (c) or the entitlement holder in the case of subsection (d)
retains the right to make substitutions for the uncertificated security
or security entitlement, to originate instructions or entitlement orders
to the issuer or a securities intermediary, or otherwise to deal with
the uncertificated security or security entitlement.
(g) An issuer or a securities intermediary may not enter into an
agreement of the kind described in subsection (c)(2) or (d)(2) without
the consent of the registered owner or entitlement holder, but an
issuer or a securities intermediary is not required to enter into such
an agreement even though the registered owner or entitlement holder
so directs. An issuer or securities intermediary that has entered into
such an agreement is not required to confirm the existence of the
agreement to another party unless requested to do so by the
registered owner or entitlement holder. 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 a
security certificate or by an effective special endorsement to be
entitled to the security;
(2) with respect to an instruction, the registered owner of an
uncertificated security;
(3) with respect to an entitlement order, the entitlement holder;
(4) if the person designated in subdivision (1), (2), or (3) is
deceased, the designated person's successor taking under other
law or the designated person's personal representative acting for
the estate of the decedent; or
(5) if the person designated in subdivision (1), (2), or (3) lacks
capacity, the designated person's guardian, conservator, or other
similar representative who has power under other law to
transfer the security or financial asset.
(b) An endorsement, instruction, or entitlement order is effective
if:
(1) it is made by the appropriate person;
(2) it is made by a person who has power under the law of
agency to transfer the security or financial asset on behalf of the
appropriate person, including, in the case of an instruction or
entitlement order, a person who has control under
IC 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 otherwise
precluded from asserting its ineffectiveness.
(c) An endorsement, instruction, or entitlement order made by a
representative is effective even if:
(1) the representative has failed to comply with a controlling
instrument or with the law of the state having jurisdiction of the
representative relationship, including any law requiring the
representative to obtain court approval of the transaction; or
(2) the representative's action in making the endorsement,
instruction, or entitlement order or using the proceeds of the
transaction is otherwise a breach of duty.
(d) If a security is registered in the name of or specially endorsed
to a person described as a representative, or if a securities account is
maintained in the name of a person described as a representative, an
endorsement, instruction, or entitlement order made by the person is
effective even though the person is no longer serving in the described
capacity.
(e) Effectiveness of an endorsement, instruction, or entitlement
order is determined as of the date the endorsement, instruction, or
entitlement order is made, and an endorsement, instruction, or
entitlement order does not become ineffective by reason of any later
change of circumstances. 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 a
purchaser for value warrants to the purchaser, and an endorser, if the
transfer 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 that
might impair the validity of the security;
(3) there is no adverse claim to the security;
(4) the transfer does not violate any restriction on transfer;
(5) if the transfer is by endorsement, the endorsement is made
by an appropriate person, or if the endorsement is by an agent,
the agent has actual authority to act on behalf of the appropriate
person; and
(6) the transfer is otherwise effective and rightful.
(b) A person who originates an instruction for registration of
transfer of an uncertificated security to a purchaser for value
warrants to the purchaser that:
(1) the instruction is made by an appropriate person, or if the
instruction is by an agent, the agent has actual authority to act
on behalf of the appropriate person;
(2) the security is valid;
(3) there is no adverse claim to the security; and
(4) at the time the instruction is presented to the issuer:
(i) the purchaser will be entitled to the registration of
transfer;
(ii) the transfer will be registered by the issuer free from all
liens, security interests, restrictions, and claims other than
those specified in the instruction;
(iii) the transfer will not violate any restriction on transfer;
and
(iv) the requested transfer will otherwise be effective and
rightful.
(c) A person who transfers an uncertificated security to a
purchaser for value and does not originate an instruction in
connection with the transfer warrants 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 the
issuer 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 of
transfer 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 the
purchaser will be entitled to the registration of transfer.
(f) A person who presents a certificated security for registration
of transfer or for payment or exchange warrants to the issuer that the
person is entitled to the registration, payment, or exchange, but a
purchaser for value and without notice of adverse claims to whom
transfer is registered warrants only that the person has no knowledge
of any unauthorized signature in a necessary endorsement.
(g) If a person acts as agent of another in delivering a certificated
security to a purchaser, the identity of the principal was known to the
person to whom the certificate was delivered, and the certificate
delivered by the agent was received by the agent from the principal
or received by the agent from another person at the direction of the
principal, the person delivering the security certificate warrants only
that the delivering person has authority to act for the principal and
does not know of any adverse claim to the certificated security.
(h) A secured party who redelivers a security certificate received,
or after payment and on order of the debtor delivers the security
certificate to another person, makes only the warranties of an agent
under subsection (g).
(i) Except as otherwise provided in subsection (g), a broker acting
for a customer makes to the issuer and a purchaser the warranties
provided in subsections (a) through (f). A broker that delivers a
security certificate to its customer, or causes its customer to be
registered as the owner of an uncertificated security, makes to the
customer the warranties provided in subsection (a) or (b), and has the
rights and privileges of a purchaser under this section. The
warranties of and in favor of the broker acting as an agent are in
addition to applicable warranties given by and in favor of the
customer. 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 a
securities intermediary warrants to the securities intermediary that:
(1) the entitlement order is made by an appropriate person, or
if the entitlement order is by an agent, the agent has actual
authority to act on behalf of the appropriate person; and
(2) there is no adverse claim to the security entitlement.
(b) A person who delivers a security certificate to a securities
intermediary for credit to a securities account or originates an
instruction with respect to an uncertificated security directing that
the uncertificated security be credited to a securities account makes
to the securities intermediary the warranties specified in
IC 26-1-8.1-108(a) or IC 26-1-8.1-108(b).
(c) If a securities intermediary delivers a security certificate to its
entitlement holder or causes its entitlement holder to be registered as
the owner of an uncertificated security, the securities intermediary
makes to the entitlement holder the warranties specified in
IC 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 specified
in subsection (d), governs:
(1) the validity of a security;
(2) the rights and duties of the issuer with respect to registration
of transfer;
(3) the effectiveness of registration of transfer by the issuer;
(4) whether the issuer owes any duties to an adverse claimant to
a security; and
(5) whether an adverse claim can be asserted against a person
to whom transfer of a certificated or uncertificated security is
registered or a person who obtains control of an uncertificated
security.
(b) The local law of the securities intermediary's jurisdiction, as
specified in subsection (e), governs:
(1) acquisition of a security entitlement from the securities
intermediary;
(2) the rights and duties of the securities intermediary and
entitlement holder arising out of a security entitlement;
(3) whether the securities intermediary owes any duties to an
adverse claimant to a security entitlement; and
(4) whether an adverse claim can be asserted against a person
who acquires a security entitlement from the securities
intermediary or a person who purchases a security entitlement
or interest therein from an entitlement holder.
(c) The local law of the jurisdiction in which a security certificate
is located at the time of delivery governs whether an adverse claim
can be asserted against a person to whom the security certificate is
delivered.
(d) "Issuer's jurisdiction" means the jurisdiction under which the
issuer of the security is organized or, if permitted by the law of that
jurisdiction, the law of another jurisdiction specified by the issuer.
An issuer organized under the law of this state may specify the law
of another jurisdiction as the law governing the matters specified in
subsection (a)(2) through (a)(5).
(e) The following rules determine a "securities intermediary's
jurisdiction" for purposes of this section:
(1) If an agreement between the securities intermediary and its
entitlement holder governing the securities account expressly
provides that a particular jurisdiction is the securities
intermediary's jurisdiction for purposes of IC 26-1-8.1-101
through IC 26-1-8.1-116, that jurisdiction is the securities
intermediary's jurisdiction.
(2) If subdivision (1) does not apply, and an agreement between
the securities intermediary and its entitlement holder expressly
provides that the agreement is governed by the law of a
particular jurisdiction, that jurisdiction is the securities
intermediary's jurisdiction.
(3) If neither subdivision (1) nor subdivision (2) applies, and an
agreement between the securities intermediary and its
entitlement holder governing the securities account expressly
provides that the securities account is maintained at an office in
a particular jurisdiction, that jurisdiction is the securities
intermediary's jurisdiction.
(4) If none of the preceding subdivisions apply, the securities
intermediary's jurisdiction is the jurisdiction in which the office
identified in an account statement as the office serving the
entitlement holder's account is located.
(5) If none of the preceding subdivisions apply, the securities
intermediary's jurisdiction is the jurisdiction in which the chief
executive office of the securities intermediary is located.
(f) A securities intermediary's jurisdiction is not determined by
the physical location of certificates representing financial assets, or
by the jurisdiction in which is organized the issuer of the financial
asset with respect to which an entitlement holder has a security
entitlement, or by the location of facilities for data processing or
other record keeping concerning the account. 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 governing
rights and obligations among the clearing corporation and its
participants in the clearing corporation is effective even if the rule
conflicts with IC 26-1-8.1 and affects another party who does not
consent 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 may
be reached by a creditor only by actual seizure of the security
certificate by the officer making the attachment or levy, except as
otherwise provided in subsection (d). However, a certificated
security for which the certificate has been surrendered to the issuer
may be reached by a creditor by legal process upon the issuer.
(b) The interest of a debtor in an uncertificated security may be
reached by a creditor only by legal process upon the issuer at its
chief executive office in the United States, except as otherwise
provided in subsection (d).
(c) The interest of a debtor in a security entitlement may be
reached by a creditor only by legal process upon the securities
intermediary with whom the debtor's securities account is
maintained, except as otherwise provided in subsection (d).
(d) The interest of a debtor in a certificated security for which the
certificate is in the possession of a secured party, or in an
uncertificated security registered in the name of a secured party, or
a security entitlement maintained in the name of a secured party, may
be reached by a creditor by legal process upon the secured party.
(e) A creditor whose debtor is the owner of a certificated security,
uncertificated security, or security entitlement is entitled to aid from
a court of competent jurisdiction, by injunction or otherwise, in
reaching the certificated security, uncertificated security, or security
entitlement or in satisfying the claim by means allowed at law or in
equity in regard to property that cannot readily be reached by other
legal process. 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 or
purchase of a security is enforceable whether or not there is a writing
signed or record authenticated by a party against whom enforcement
is sought, even if the contract or modification is not capable of
performance within one (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 certificated
security against the issuer:
(1) Unless specifically denied in the pleadings, each signature
on a security certificate or in a necessary endorsement is
admitted.
(2) If the effectiveness of a signature is put in issue, the burden
of establishing effectiveness is on the party claiming under the
signature, but the signature is presumed to be genuine or
authorized.
(3) If signatures on a security certificate are admitted or
established, production of the certificate entitles a holder to
recover on it unless the defendant establishes a defense or a
defect going to the validity of the security.
(4) If it is shown that a defense or defect exists, the plaintiff has
the burden of establishing that the plaintiff or some person
under whom the plaintiff claims is a person against whom the
defense or defect cannot be asserted. As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-115 Liability of securities intermediary, broker, or other agent or
bailee
Sec. 115. A securities intermediary that has transferred a financial
asset under an effective entitlement order, or a broker or other agent
or bailee that has dealt with a financial asset at the direction of its
customer or principal, is not liable to a person having an adverse
claim to the financial asset, unless the securities intermediary, or
broker or other agent or bailee:
(1) took the action after it had been served with an injunction,
restraining order, or other legal process enjoining it from doing
so, issued by a court of competent jurisdiction, and had a
reasonable opportunity to act on the injunction, restraining
order, or other legal process;
(2) acted in collusion with the wrongdoer in violating the rights
of the adverse claimant; 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 asset
and establishes a security entitlement to the financial asset in favor
of an entitlement holder is a purchaser for value of the financial
asset. A securities intermediary that acquires a security entitlement
to a financial asset from another securities intermediary acquires the
security entitlement for value if the securities intermediary acquiring
the security entitlement establishes a security entitlement to the
financial asset in favor of an entitlement holder. 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 a
security, an "issuer" includes a person that:
(1) places or authorizes the placing of its name on a security
certificate, other than as authenticating trustee, registrar,
transfer agent, or the like, to evidence a share, participation, or
other interest in its property or in an enterprise, or to evidence
its duty to perform an obligation represented by the certificate;
(2) creates a share, participation, or other interest in its property
or in an enterprise, or undertakes an obligation, that is an
uncertificated security;
(3) directly or indirectly creates a fractional interest in its rights
or property, if the fractional interest is represented by a security
certificate; or
(4) becomes responsible for, or is in place of, another person
described as an issuer in this section.
(b) With respect to an obligation on or defense to a security, a
guarantor is an issuer to the extent of its guaranty, whether or not its
obligation is noted on a security certificate.
(c) With respect to a registration of a transfer, issuer means a
person on whose behalf transfer books are maintained. As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-202 Terms of security; rules on validity; issuer's defenses; cancellation
of contracts
Sec. 202. (a) Even against a purchaser for value and without
notice, the terms of a certificated security include terms stated on the
certificate and terms made part of the security by reference on the
certificate to another instrument, indenture, or document or to a
constitution, a statute, an ordinance, a rule, a regulation, an order, or
the like, to the extent the terms referred to do not conflict with terms
stated on the certificate. A reference under this subsection does not
of itself charge a purchaser for value with notice of a defect going to
the validity of the security, even if the certificate expressly states that
a person accepting it admits notice. The terms of an uncertificated
security include those stated in any instrument, indenture, or
document or in a constitution, a statute, an ordinance, a rule, a
regulation, an order, or the like, under which the security is issued.
(b) The following rules apply if an issuer asserts that a security is
not valid:
(1) A security other than a security issued by a government or
governmental subdivision, agency, or instrumentality, even
though issued with a defect going to its validity, is valid in the
hands of a purchaser for value and without notice of the
particular defect unless the defect involves a violation of a
constitutional provision. In that case, the security is valid in the
hands of a purchaser for value and without notice of the defect,
other than one who takes by original issue.
(2) Subdivision (1) applies to an issuer that is a government or
governmental subdivision, agency, or instrumentality only if
there has been substantial compliance with the legal
requirements governing the issue or the issuer has received a
substantial consideration for the issue as a whole or for the
particular security and a stated purpose of the issue is one for
which the issuer has power to borrow money or issue the
security.
(c) Except as otherwise provided in IC 26-1-8.1-205, lack of
genuineness of a certificated security is a complete defense, even
against a purchaser for value and without notice.
(d) All other defenses of the issuer of a security, including
nondelivery and conditional delivery of a certificated security, are
ineffective against a purchaser for value who has taken the
certificated security without notice of the particular defense.
(e) This section does not affect the right of a party to cancel a
contract for a security "when, as, and if issued" or "when distributed"
in the event of a material change in the character of the security that
is the subject of the contract or in the plan or arrangement under
which the security is to be issued or distributed.
(f) If a security is held by a securities intermediary against whom
an entitlement holder has a security entitlement with respect to the
security, the issuer may not assert any defense that the issuer could
not assert if the entitlement holder held the security directly. 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 been
revoked, creating a right to immediate performance of the principal
obligation represented by a certificated security or setting a date on
or after which the security is to be presented or surrendered for
redemption or exchange, a purchaser is charged with notice of any
defect in its issue or defense of the issuer, if the act or event:
(1) requires the payment of money, the delivery of a certificated
security, the registration of transfer of an uncertificated
security, or any of them on presentation or surrender of the
security certificate, the money or security is available on the
date set for payment or exchange, and the purchaser takes the
security more than one (1) year after that date; or
(2) is not covered by subdivision (1) and the purchaser takes the
security more than two (2) years after the date set for surrender
or 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 the
issuer, even if otherwise lawful, is ineffective against a person
without knowledge of the restriction unless:
(1) the security is certificated and the restriction is noted
conspicuously on the security certificate; or
(2) the security is uncertificated and the registered owner has
been 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 security
certificate before or in the course of issue is ineffective, but the
signature is effective in favor of a purchaser for value of the
certificated security if the purchaser is without notice of the lack of
authority and the signing has been done by:
(1) an authenticating trustee, a registrar, a transfer agent, or
other person entrusted by the issuer with the signing of the
security certificate or of similar security certificates, or the
immediate preparation for signing of any of them; or
(2) an employee of the issuer, or of any of the persons listed in
subdivision (1), entrusted with responsible handling of the
security 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 signatures
necessary to its issue or transfer but is incomplete in any other
respect:
(1) any person may complete it by filling in the blanks as
authorized; and
(2) even if the blanks are incorrectly filled in, the security
certificate as completed is enforceable by a purchaser who took
it for value and without notice of the incorrectness.
(b) A complete security certificate that has been improperly
altered, even if fraudulently, remains enforceable, but only according
to its original terms. 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 absent
appropriate notice of transfer
Sec. 207. (a) Before due presentment for registration of transfer
of a certificated security in registered form or of an instruction
requesting registration of transfer of an uncertificated security, the
issuer or indenture trustee may treat the registered owner as the
person exclusively entitled to vote, receive notifications, and
otherwise exercise all the rights and powers of an owner.
(b) IC 26-1-8.1 does not affect the liability of the registered owner
of 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 as
authenticating trustee, registrar, transfer agent, or the like, warrants
to a purchaser for value of the certificated security, if the purchaser
is without notice of a particular defect, that:
(1) the certificate is genuine;
(2) the person's own participation in the issue of the security is
within the person's capacity and within the scope of the
authority received by the person from the issuer; and
(3) the person has reasonable grounds to believe that the
certificated security is in the form and within the amount the
issuer is authorized to issue.
(b) Unless otherwise agreed, a person signing under subsection (a)
does not assume responsibility for the validity of the security in other
respects. 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 security
is valid against a purchaser only if the right of the issuer to the lien
is 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 of
security
Sec. 210. (a) In this section, "overissue" means the issue of
securities in excess of the amount the issuer has corporate power to
issue, but an overissue does not occur if appropriate action has cured
the overissue.
(b) Except as otherwise provided in subsections (c) and (d), the
provisions of IC 26-1-8.1 which validate a security or compel its
issue or reissue do not apply to the extent that validation, issue, or
reissue would result in overissue.
(c) If an identical security not constituting an overissue is
reasonably available for purchase, a person entitled to issue or
validation may compel the issuer to purchase the security and deliver
it if certificated or register its transfer if uncertificated, against
surrender of any security certificate the person holds.
(d) If a security is not reasonably available for purchase, a person
entitled to issue or validation may recover from the issuer the price
the person or the last purchaser for value paid for it with interest
from the date of the person's demand. 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 purchaser
occurs when:
(1) the purchaser acquires possession of the security certificate;
(2) another person, other than a securities intermediary, either
acquires possession of the security certificate on behalf of the
purchaser or, having previously acquired possession of the
certificate, acknowledges that it holds for the purchaser; or
(3) a securities intermediary acting on behalf of the purchaser
acquires possession of the security certificate, only if the
certificate is in registered form and is (i) registered in the name
of the purchaser, (ii) payable to the order of the purchaser, or
(iii) specially endorsed to the purchaser by an effective
endorsement and has not been endorsed to the securities
intermediary or in blank.
(b) Delivery of an uncertificated security to a purchaser occurs
when:
(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, either
becomes the registered owner of the uncertificated security on
behalf of the purchaser or, having previously become the
registered owner, acknowledges that it holds for the purchaser. 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 acquires
all rights in the security that the transferor had or had power to
transfer.
(b) A purchaser of a limited interest acquires rights only to the
extent of the interest purchased.
(c) A purchaser of a certificated security who as a previous holder
had notice of an adverse claim does not improve its position by
taking from a protected purchaser. 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 of
adverse claims
Sec. 303. (a) "Protected purchaser" means a purchaser of a
certificated 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 protected
purchaser also acquires its interest in the security free of any adverse
claim. 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. An
endorsement in blank includes an endorsement to bearer. A special
endorsement specifies to whom a security is to be transferred or who
has power to transfer it. A holder may convert a blank endorsement
to a special endorsement.
(b) An endorsement purporting to be only of part of a security
certificate representing units intended by the issuer to be separately
transferable is effective to the extent of the endorsement.
(c) An endorsement, whether special or in blank, does not
constitute a transfer until delivery of the certificate on which it
appears or, if the endorsement is on a separate document, until
delivery of both the document and the certificate.
(d) If a security certificate in registered form has been delivered
to a purchaser without a necessary endorsement, the purchaser may
become a protected purchaser only when the endorsement is
supplied. However, against a transferor, a transfer is complete upon
delivery and the purchaser has a specifically enforceable right to
have any necessary endorsement supplied.
(e) An endorsement of a security certificate in bearer form may
give notice of an adverse claim to the certificate, but it does not
otherwise affect a right to registration that the holder possesses.
(f) Unless otherwise agreed, a person making an endorsement
assumes only the obligations provided in IC 26-1-8.1-108 and not an
obligation 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 initiating
instructions
Sec. 305. (a) If an instruction has been originated by an
appropriate person but is incomplete in any other respect, any person
may complete it as authorized and the issuer may rely on it as
completed, even though it has been completed incorrectly.
(b) Unless otherwise agreed, a person initiating an instruction
assumes only the obligations imposed by IC 26-1-8.1-108 and not an
obligation 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 endorser
of 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 the
signature is by an agent, the agent had actual authority to act on
behalf of the appropriate person; and
(3) the signer had legal capacity to sign.
(b) A person who guarantees a signature of the originator of an
instruction warrants that at the time of signing:
(1) the signature was genuine;
(2) the signer was an appropriate person to originate the
instruction, or if the signature is by an agent, the agent had
actual authority to act on behalf of the appropriate person, if the
person specified in the instruction as the registered owner was,
in fact, the registered owner, as to which fact the signature
guarantor does not make a warranty; and
(3) the signer had legal capacity to sign.
(c) A person who specially guarantees the signature of an
originator of an instruction makes the warranties of a signature
guarantor under subsection (b) and also warrants that at the time the
instruction is presented to the issuer:
(1) the person specified in the instruction as the registered
owner of the uncertificated security will be the registered
owner; and
(2) the transfer of the uncertificated security requested in the
instruction will be registered by the issuer free from all liens,
security interests, restrictions, and claims other than those
specified in the instruction.
(d) A guarantor under subsections (a) and (b) or a special
guarantor under subsection (c) does not otherwise warrant the
rightfulness of the transfer.
(e) A person who guarantees an endorsement of a security
certificate makes the warranties of a signature guarantor under
subsection (a) and also warrants the rightfulness of the transfer in all
respects.
(f) A person who guarantees an instruction requesting the transfer
of an uncertificated security makes the warranties of a special
signature guarantor under subsection (c) and also warrants the
rightfulness of the transfer in all respects.
(g) An issuer may not require a special guaranty of signature, a
guaranty of endorsement, or a guaranty of instruction as a condition
to registration of transfer.
(h) The warranties under this section are made to a person taking
or dealing with the security in reliance on the guaranty, and the
guarantor is liable to the person for loss resulting from their breach.
An endorser or originator of an instruction whose signature,
endorsement, or instruction has been guaranteed is liable to a
guarantor for any loss suffered by the guarantor as a result of breach
of the warranties of the guarantor.
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 on
due demand shall supply the purchaser with proof of authority to
transfer or with any other requisite necessary to obtain registration
of the transfer of the security, but if the transfer is not for value, a
transferor need not comply unless the purchaser pays the necessary
expenses. If the transferor fails within a reasonable time to comply
with the demand, the purchaser may reject or rescind the transfer. 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 is
presented to an issuer with a request to register transfer or an
instruction is presented to an issuer with a request to register transfer
of an uncertificated security, the issuer shall register the transfer as
requested if:
(1) under the terms of the security the person seeking
registration of transfer is eligible to have the security registered
in its name;
(2) the endorsement or instruction is made by the appropriate
person or by an agent who has actual authority to act on behalf
of the appropriate person;
(3) reasonable assurance is given that the endorsement or
instruction is genuine and authorized (IC 26-1-8.1-402);
(4) any applicable law relating to the collection of taxes has
been complied with;
(5) the transfer does not violate any restriction on transfer
imposed by the issuer in accordance with IC 26-1-8.1-204;
(6) a demand that the issuer not register transfer has not become
effective under IC 26-1-8.1-403, or the issuer has complied with
IC 26-1-8.1-403(b) but no legal process or indemnity bond is
obtained 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 an
instruction for registration or to the person's principal for loss
resulting from unreasonable delay in registration or failure or refusal
to register the transfer. 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 that
each necessary endorsement or each instruction is genuine and
authorized:
(1) in all cases, a guaranty of the signature of the person making
an endorsement or originating an instruction including, in the
case of an instruction, reasonable assurance
IC 26-1-8.1-101 Short title
Sec. 101. IC 26-1-8.1 may be cited as Uniform Commercial
Code.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 a
property interest in a financial asset and that it is a violation of
the rights of the claimant for another person to hold, transfer, or
deal with the financial asset.
(2) "Bearer form", as applied to a certificated security, means
a form in which the security is payable to the bearer of the
security certificate according to its terms but not by reason of
an endorsement.
(3) "Broker" means a person defined as a broker or dealer under
the federal securities laws, but without excluding a bank acting
in that capacity.
(4) "Certificated security" means a security that is represented
by a certificate.
(5) "Clearing corporation" means:
(i) a person that is registered as a "clearing agency" under
the federal securities laws;
(ii) a federal reserve bank; or
(iii) any other person that provides clearance or settlement
services with respect to financial assets that would require it
to register as a clearing agency under the federal securities
laws but for an exclusion or exemption from the registration
requirement, if its activities as a clearing corporation,
including promulgation of rules, are subject to regulation by
a federal or state governmental authority.
(6) "Communicate" means to:
(i) send a signed writing; or
(ii) transmit information by any mechanism agreed upon by
the persons transmitting and receiving the information.
(7) "Entitlement holder" means a person identified in the
records of a securities intermediary as the person having a
security entitlement against the securities intermediary. If a
person acquires a security entitlement by virtue of
IC 26-1-8.1-501(b)(2) or IC 26-1-8.1-501(b)(3), that person is
the entitlement holder.
(8) "Entitlement order" means a notification communicated to
a securities intermediary directing transfer or redemption of a
financial asset to which the entitlement holder has a security
entitlement.
(9) "Financial asset", except as otherwise provided in
IC 26-1-8.1-103, means:
(i) a security;
(ii) an obligation of a person or a share, participation, or
other interest in a person or in property or an enterprise of a
person, that is, or is of a type, dealt in or traded on financial
markets, or that is recognized in any area in which it is
issued or dealt in as a medium for investment; or
(iii) any property that is held by a securities intermediary for
another person in a securities account if the securities
intermediary has expressly agreed with the other person that
the property is to be treated as a financial asset under
IC 26-1-8.1.
As context requires, the term means either the interest itself or
the means by which a person's claim to it is evidenced,
including a certificated or an uncertificated security, a security
certificate, or a security entitlement.
(10) "Good faith", for purposes of the obligation of good faith
in the performance or enforcement of contracts or duties within
IC 26-1-8.1, means honesty in fact and the observance of
reasonable commercial standards of fair dealing.
(11) "Endorsement" means a signature that alone or
accompanied by other words is made on a security certificate in
registered form or on a separate document for the purpose of
assigning, transferring, or redeeming the security or granting a
power to assign, transfer, or redeem it.
(12) "Instruction" means a notification communicated to the
issuer of an uncertificated security which directs that the
transfer of the security be registered or that the security be
redeemed.
(13) "Registered form", as applied to a certificated security,
means a form in which:
(i) the security certificate specifies a person entitled to the
security; and
(ii) a transfer of the security may be registered upon books
maintained for that purpose by or on behalf of the issuer, or
the security certificate so states.
(14) "Securities intermediary" means:
(i) a clearing corporation; or
(ii) a person, including a bank or broker, that in the ordinary
course of its business maintains securities accounts for
others and is acting in that capacity.
(15) "Security", except as otherwise provided in
IC 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 an
enterprise of an issuer:
(i) which is represented by a security certificate in bearer or
registered form, or the transfer of which may be registered
upon books maintained for that purpose by or on behalf of
the issuer;
(ii) which is one (1) of a class or series or by its terms is
divisible 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 securities
exchanges or securities markets; or
(B) is a medium for investment and by its terms expressly
provides that it is a security governed by IC 26-1-8.1.
(16) "Security certificate" means a certificate representing a
security.
(17) "Security entitlement" means the rights and property
interest of an entitlement holder with respect to a financial asset
specified in IC 26-1-8.1-501 through IC 26-1-8.1-511.
(18) "Uncertificated security" means a security that is not
represented by a certificate.
(b) Other definitions applying to IC 26-1-8.1 and the sections in
which 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 and
principles of construction and interpretation applicable throughout
IC 26-1-8.1.
(d) The characterization of a person, business, or transaction for
purposes of IC 26-1-8.1 does not determine the characterization of
the 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 a
corporation, business trust, joint stock company, or similar entity is
a security.
(b) An "investment company security" is a security. "Investment
company security" means a share or similar equity interest issued by
an entity that is registered as an investment company under the
federal investment company laws, an interest in a unit investment
trust that is so registered, or a face amount certificate issued by a
face amount certificate company that is so registered. Investment
company security does not include an insurance policy or
endowment policy or annuity contract issued by an insurance
company.
(c) An interest in a partnership or limited liability company is not
a security unless it is dealt in or traded on securities exchanges or in
securities markets, its terms expressly provide that it is a security
governed by IC 26-1-8.1, or it is an investment company security.
However, an interest in a partnership or limited liability company is
a financial asset if it is held in a securities account.
(d) A writing that is a security certificate is governed by
IC 26-1-8.1 and not by IC 26-1-3.1, even though it also meets the
requirements of that article. However, a negotiable instrument
governed by IC 26-1-3.1 is a financial asset if it is held in a securities
account.
(e) An option or a similar obligation issued by a clearing
corporation to its participants is not a security, but it is a financial
asset.
(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 section
102(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 delivered
under IC 26-1-8.1-301; or
(2) the person acquires a security entitlement to the security
under IC 26-1-8.1-501.
(b) A person acquires a financial asset, other than a security, or an
interest therein, under IC 26-1-8.1, if the person acquires a security
entitlement to the financial asset.
(c) A person who acquires a security entitlement to a security or
other financial asset has the rights specified in IC 26-1-8.1-501
through IC 26-1-8.1-511, but is a purchaser of any security, security
entitlement, or other financial asset held by the securities
intermediary 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 agreement
to transfer, deliver, present, surrender, exchange, or otherwise put in
the possession of another person a security or financial asset satisfies
that requirement by causing the other person to acquire an interest in
the security or financial asset 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 there
is a significant probability that the adverse claim exists and
deliberately avoids information that would establish the
existence of the adverse claim; or
(3) the person has a duty, imposed by statute or regulation, to
investigate whether an adverse claim exists, and the
investigation so required would establish the existence of the
adverse claim.
(b) Having knowledge that a financial asset or interest therein is
or has been transferred by a representative imposes no duty of
inquiry into the rightfulness of a transaction and is not notice of an
adverse claim. However, a person who knows that a representative
has transferred a financial asset or interest therein in a transaction
that is, or whose proceeds are being used, for the individual benefit
of the representative or otherwise in breach of duty has notice of an
adverse claim.
(c) An act or event that creates a right to immediate performance
of the principal obligation represented by a security certificate or sets
a date on or after which the certificate is to be presented or
surrendered for redemption or exchange does not itself constitute
notice of an adverse claim except in the case of a transfer more than:
(1) one (1) year after a date set for presentment or surrender for
redemption or exchange; or
(2) six (6) months after a date set for payment of money against
presentation or surrender of the certificate, if money was
available for payment on that date.
(d) A purchaser of a certificated security has notice of an adverse
claim if the security certificate:
(1) whether in bearer or registered form, has been endorsed "for
collection" or "for surrender" or for some other purpose not
involving transfer; or
(2) is in bearer form and has on it an unambiguous statement
that it is the property of a person other than the transferor, but
the mere writing of a name on the certificate is not such a
statement.
(e) Filing of a financing statement under IC 26-1-9.1 is not notice
of 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 security
in bearer form if the certificated security is delivered to the
purchaser.
(b) A purchaser has "control" of a certificated security in
registered form if the certificated security is delivered to the
purchaser, and:
(1) the certificate is endorsed to the purchaser or in blank by an
effective 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 instructions
originated by the purchaser without further consent by the
registered 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 comply
with entitlement orders originated by the purchaser without
further consent by the entitlement holder; or
(3) another person has control of the security entitlement on
behalf of the purchaser or, having previously acquired control
of the security entitlement, acknowledges that it has control on
behalf of the purchaser.
(e) If an interest in a security entitlement is granted by the
entitlement holder to the entitlement holder's own securities
intermediary, the securities intermediary has control.
(f) A purchaser who has satisfied the requirements of subsection
(c) or (d) has control even if the registered owner in the case of
subsection (c) or the entitlement holder in the case of subsection (d)
retains the right to make substitutions for the uncertificated security
or security entitlement, to originate instructions or entitlement orders
to the issuer or a securities intermediary, or otherwise to deal with
the uncertificated security or security entitlement.
(g) An issuer or a securities intermediary may not enter into an
agreement of the kind described in subsection (c)(2) or (d)(2) without
the consent of the registered owner or entitlement holder, but an
issuer or a securities intermediary is not required to enter into such
an agreement even though the registered owner or entitlement holder
so directs. An issuer or securities intermediary that has entered into
such an agreement is not required to confirm the existence of the
agreement to another party unless requested to do so by the
registered owner or entitlement holder. 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 a
security certificate or by an effective special endorsement to be
entitled to the security;
(2) with respect to an instruction, the registered owner of an
uncertificated security;
(3) with respect to an entitlement order, the entitlement holder;
(4) if the person designated in subdivision (1), (2), or (3) is
deceased, the designated person's successor taking under other
law or the designated person's personal representative acting for
the estate of the decedent; or
(5) if the person designated in subdivision (1), (2), or (3) lacks
capacity, the designated person's guardian, conservator, or other
similar representative who has power under other law to
transfer the security or financial asset.
(b) An endorsement, instruction, or entitlement order is effective
if:
(1) it is made by the appropriate person;
(2) it is made by a person who has power under the law of
agency to transfer the security or financial asset on behalf of the
appropriate person, including, in the case of an instruction or
entitlement order, a person who has control under
IC 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 otherwise
precluded from asserting its ineffectiveness.
(c) An endorsement, instruction, or entitlement order made by a
representative is effective even if:
(1) the representative has failed to comply with a controlling
instrument or with the law of the state having jurisdiction of the
representative relationship, including any law requiring the
representative to obtain court approval of the transaction; or
(2) the representative's action in making the endorsement,
instruction, or entitlement order or using the proceeds of the
transaction is otherwise a breach of duty.
(d) If a security is registered in the name of or specially endorsed
to a person described as a representative, or if a securities account is
maintained in the name of a person described as a representative, an
endorsement, instruction, or entitlement order made by the person is
effective even though the person is no longer serving in the described
capacity.
(e) Effectiveness of an endorsement, instruction, or entitlement
order is determined as of the date the endorsement, instruction, or
entitlement order is made, and an endorsement, instruction, or
entitlement order does not become ineffective by reason of any later
change of circumstances. 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 a
purchaser for value warrants to the purchaser, and an endorser, if the
transfer 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 that
might impair the validity of the security;
(3) there is no adverse claim to the security;
(4) the transfer does not violate any restriction on transfer;
(5) if the transfer is by endorsement, the endorsement is made
by an appropriate person, or if the endorsement is by an agent,
the agent has actual authority to act on behalf of the appropriate
person; and
(6) the transfer is otherwise effective and rightful.
(b) A person who originates an instruction for registration of
transfer of an uncertificated security to a purchaser for value
warrants to the purchaser that:
(1) the instruction is made by an appropriate person, or if the
instruction is by an agent, the agent has actual authority to act
on behalf of the appropriate person;
(2) the security is valid;
(3) there is no adverse claim to the security; and
(4) at the time the instruction is presented to the issuer:
(i) the purchaser will be entitled to the registration of
transfer;
(ii) the transfer will be registered by the issuer free from all
liens, security interests, restrictions, and claims other than
those specified in the instruction;
(iii) the transfer will not violate any restriction on transfer;
and
(iv) the requested transfer will otherwise be effective and
rightful.
(c) A person who transfers an uncertificated security to a
purchaser for value and does not originate an instruction in
connection with the transfer warrants 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 the
issuer 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 of
transfer 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 the
purchaser will be entitled to the registration of transfer.
(f) A person who presents a certificated security for registration
of transfer or for payment or exchange warrants to the issuer that the
person is entitled to the registration, payment, or exchange, but a
purchaser for value and without notice of adverse claims to whom
transfer is registered warrants only that the person has no knowledge
of any unauthorized signature in a necessary endorsement.
(g) If a person acts as agent of another in delivering a certificated
security to a purchaser, the identity of the principal was known to the
person to whom the certificate was delivered, and the certificate
delivered by the agent was received by the agent from the principal
or received by the agent from another person at the direction of the
principal, the person delivering the security certificate warrants only
that the delivering person has authority to act for the principal and
does not know of any adverse claim to the certificated security.
(h) A secured party who redelivers a security certificate received,
or after payment and on order of the debtor delivers the security
certificate to another person, makes only the warranties of an agent
under subsection (g).
(i) Except as otherwise provided in subsection (g), a broker acting
for a customer makes to the issuer and a purchaser the warranties
provided in subsections (a) through (f). A broker that delivers a
security certificate to its customer, or causes its customer to be
registered as the owner of an uncertificated security, makes to the
customer the warranties provided in subsection (a) or (b), and has the
rights and privileges of a purchaser under this section. The
warranties of and in favor of the broker acting as an agent are in
addition to applicable warranties given by and in favor of the
customer. 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 a
securities intermediary warrants to the securities intermediary that:
(1) the entitlement order is made by an appropriate person, or
if the entitlement order is by an agent, the agent has actual
authority to act on behalf of the appropriate person; and
(2) there is no adverse claim to the security entitlement.
(b) A person who delivers a security certificate to a securities
intermediary for credit to a securities account or originates an
instruction with respect to an uncertificated security directing that
the uncertificated security be credited to a securities account makes
to the securities intermediary the warranties specified in
IC 26-1-8.1-108(a) or IC 26-1-8.1-108(b).
(c) If a securities intermediary delivers a security certificate to its
entitlement holder or causes its entitlement holder to be registered as
the owner of an uncertificated security, the securities intermediary
makes to the entitlement holder the warranties specified in
IC 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 specified
in subsection (d), governs:
(1) the validity of a security;
(2) the rights and duties of the issuer with respect to registration
of transfer;
(3) the effectiveness of registration of transfer by the issuer;
(4) whether the issuer owes any duties to an adverse claimant to
a security; and
(5) whether an adverse claim can be asserted against a person
to whom transfer of a certificated or uncertificated security is
registered or a person who obtains control of an uncertificated
security.
(b) The local law of the securities intermediary's jurisdiction, as
specified in subsection (e), governs:
(1) acquisition of a security entitlement from the securities
intermediary;
(2) the rights and duties of the securities intermediary and
entitlement holder arising out of a security entitlement;
(3) whether the securities intermediary owes any duties to an
adverse claimant to a security entitlement; and
(4) whether an adverse claim can be asserted against a person
who acquires a security entitlement from the securities
intermediary or a person who purchases a security entitlement
or interest therein from an entitlement holder.
(c) The local law of the jurisdiction in which a security certificate
is located at the time of delivery governs whether an adverse claim
can be asserted against a person to whom the security certificate is
delivered.
(d) "Issuer's jurisdiction" means the jurisdiction under which the
issuer of the security is organized or, if permitted by the law of that
jurisdiction, the law of another jurisdiction specified by the issuer.
An issuer organized under the law of this state may specify the law
of another jurisdiction as the law governing the matters specified in
subsection (a)(2) through (a)(5).
(e) The following rules determine a "securities intermediary's
jurisdiction" for purposes of this section:
(1) If an agreement between the securities intermediary and its
entitlement holder governing the securities account expressly
provides that a particular jurisdiction is the securities
intermediary's jurisdiction for purposes of IC 26-1-8.1-101
through IC 26-1-8.1-116, that jurisdiction is the securities
intermediary's jurisdiction.
(2) If subdivision (1) does not apply, and an agreement between
the securities intermediary and its entitlement holder expressly
provides that the agreement is governed by the law of a
particular jurisdiction, that jurisdiction is the securities
intermediary's jurisdiction.
(3) If neither subdivision (1) nor subdivision (2) applies, and an
agreement between the securities intermediary and its
entitlement holder governing the securities account expressly
provides that the securities account is maintained at an office in
a particular jurisdiction, that jurisdiction is the securities
intermediary's jurisdiction.
(4) If none of the preceding subdivisions apply, the securities
intermediary's jurisdiction is the jurisdiction in which the office
identified in an account statement as the office serving the
entitlement holder's account is located.
(5) If none of the preceding subdivisions apply, the securities
intermediary's jurisdiction is the jurisdiction in which the chief
executive office of the securities intermediary is located.
(f) A securities intermediary's jurisdiction is not determined by
the physical location of certificates representing financial assets, or
by the jurisdiction in which is organized the issuer of the financial
asset with respect to which an entitlement holder has a security
entitlement, or by the location of facilities for data processing or
other record keeping concerning the account. 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 governing
rights and obligations among the clearing corporation and its
participants in the clearing corporation is effective even if the rule
conflicts with IC 26-1-8.1 and affects another party who does not
consent 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 may
be reached by a creditor only by actual seizure of the security
certificate by the officer making the attachment or levy, except as
otherwise provided in subsection (d). However, a certificated
security for which the certificate has been surrendered to the issuer
may be reached by a creditor by legal process upon the issuer.
(b) The interest of a debtor in an uncertificated security may be
reached by a creditor only by legal process upon the issuer at its
chief executive office in the United States, except as otherwise
provided in subsection (d).
(c) The interest of a debtor in a security entitlement may be
reached by a creditor only by legal process upon the securities
intermediary with whom the debtor's securities account is
maintained, except as otherwise provided in subsection (d).
(d) The interest of a debtor in a certificated security for which the
certificate is in the possession of a secured party, or in an
uncertificated security registered in the name of a secured party, or
a security entitlement maintained in the name of a secured party, may
be reached by a creditor by legal process upon the secured party.
(e) A creditor whose debtor is the owner of a certificated security,
uncertificated security, or security entitlement is entitled to aid from
a court of competent jurisdiction, by injunction or otherwise, in
reaching the certificated security, uncertificated security, or security
entitlement or in satisfying the claim by means allowed at law or in
equity in regard to property that cannot readily be reached by other
legal process. 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 or
purchase of a security is enforceable whether or not there is a writing
signed or record authenticated by a party against whom enforcement
is sought, even if the contract or modification is not capable of
performance within one (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 certificated
security against the issuer:
(1) Unless specifically denied in the pleadings, each signature
on a security certificate or in a necessary endorsement is
admitted.
(2) If the effectiveness of a signature is put in issue, the burden
of establishing effectiveness is on the party claiming under the
signature, but the signature is presumed to be genuine or
authorized.
(3) If signatures on a security certificate are admitted or
established, production of the certificate entitles a holder to
recover on it unless the defendant establishes a defense or a
defect going to the validity of the security.
(4) If it is shown that a defense or defect exists, the plaintiff has
the burden of establishing that the plaintiff or some person
under whom the plaintiff claims is a person against whom the
defense or defect cannot be asserted. As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-115 Liability of securities intermediary, broker, or other agent or
bailee
Sec. 115. A securities intermediary that has transferred a financial
asset under an effective entitlement order, or a broker or other agent
or bailee that has dealt with a financial asset at the direction of its
customer or principal, is not liable to a person having an adverse
claim to the financial asset, unless the securities intermediary, or
broker or other agent or bailee:
(1) took the action after it had been served with an injunction,
restraining order, or other legal process enjoining it from doing
so, issued by a court of competent jurisdiction, and had a
reasonable opportunity to act on the injunction, restraining
order, or other legal process;
(2) acted in collusion with the wrongdoer in violating the rights
of the adverse claimant; 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 asset
and establishes a security entitlement to the financial asset in favor
of an entitlement holder is a purchaser for value of the financial
asset. A securities intermediary that acquires a security entitlement
to a financial asset from another securities intermediary acquires the
security entitlement for value if the securities intermediary acquiring
the security entitlement establishes a security entitlement to the
financial asset in favor of an entitlement holder. 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 a
security, an "issuer" includes a person that:
(1) places or authorizes the placing of its name on a security
certificate, other than as authenticating trustee, registrar,
transfer agent, or the like, to evidence a share, participation, or
other interest in its property or in an enterprise, or to evidence
its duty to perform an obligation represented by the certificate;
(2) creates a share, participation, or other interest in its property
or in an enterprise, or undertakes an obligation, that is an
uncertificated security;
(3) directly or indirectly creates a fractional interest in its rights
or property, if the fractional interest is represented by a security
certificate; or
(4) becomes responsible for, or is in place of, another person
described as an issuer in this section.
(b) With respect to an obligation on or defense to a security, a
guarantor is an issuer to the extent of its guaranty, whether or not its
obligation is noted on a security certificate.
(c) With respect to a registration of a transfer, issuer means a
person on whose behalf transfer books are maintained. As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-202 Terms of security; rules on validity; issuer's defenses; cancellation
of contracts
Sec. 202. (a) Even against a purchaser for value and without
notice, the terms of a certificated security include terms stated on the
certificate and terms made part of the security by reference on the
certificate to another instrument, indenture, or document or to a
constitution, a statute, an ordinance, a rule, a regulation, an order, or
the like, to the extent the terms referred to do not conflict with terms
stated on the certificate. A reference under this subsection does not
of itself charge a purchaser for value with notice of a defect going to
the validity of the security, even if the certificate expressly states that
a person accepting it admits notice. The terms of an uncertificated
security include those stated in any instrument, indenture, or
document or in a constitution, a statute, an ordinance, a rule, a
regulation, an order, or the like, under which the security is issued.
(b) The following rules apply if an issuer asserts that a security is
not valid:
(1) A security other than a security issued by a government or
governmental subdivision, agency, or instrumentality, even
though issued with a defect going to its validity, is valid in the
hands of a purchaser for value and without notice of the
particular defect unless the defect involves a violation of a
constitutional provision. In that case, the security is valid in the
hands of a purchaser for value and without notice of the defect,
other than one who takes by original issue.
(2) Subdivision (1) applies to an issuer that is a government or
governmental subdivision, agency, or instrumentality only if
there has been substantial compliance with the legal
requirements governing the issue or the issuer has received a
substantial consideration for the issue as a whole or for the
particular security and a stated purpose of the issue is one for
which the issuer has power to borrow money or issue the
security.
(c) Except as otherwise provided in IC 26-1-8.1-205, lack of
genuineness of a certificated security is a complete defense, even
against a purchaser for value and without notice.
(d) All other defenses of the issuer of a security, including
nondelivery and conditional delivery of a certificated security, are
ineffective against a purchaser for value who has taken the
certificated security without notice of the particular defense.
(e) This section does not affect the right of a party to cancel a
contract for a security "when, as, and if issued" or "when distributed"
in the event of a material change in the character of the security that
is the subject of the contract or in the plan or arrangement under
which the security is to be issued or distributed.
(f) If a security is held by a securities intermediary against whom
an entitlement holder has a security entitlement with respect to the
security, the issuer may not assert any defense that the issuer could
not assert if the entitlement holder held the security directly. 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 been
revoked, creating a right to immediate performance of the principal
obligation represented by a certificated security or setting a date on
or after which the security is to be presented or surrendered for
redemption or exchange, a purchaser is charged with notice of any
defect in its issue or defense of the issuer, if the act or event:
(1) requires the payment of money, the delivery of a certificated
security, the registration of transfer of an uncertificated
security, or any of them on presentation or surrender of the
security certificate, the money or security is available on the
date set for payment or exchange, and the purchaser takes the
security more than one (1) year after that date; or
(2) is not covered by subdivision (1) and the purchaser takes the
security more than two (2) years after the date set for surrender
or 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 the
issuer, even if otherwise lawful, is ineffective against a person
without knowledge of the restriction unless:
(1) the security is certificated and the restriction is noted
conspicuously on the security certificate; or
(2) the security is uncertificated and the registered owner has
been 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 security
certificate before or in the course of issue is ineffective, but the
signature is effective in favor of a purchaser for value of the
certificated security if the purchaser is without notice of the lack of
authority and the signing has been done by:
(1) an authenticating trustee, a registrar, a transfer agent, or
other person entrusted by the issuer with the signing of the
security certificate or of similar security certificates, or the
immediate preparation for signing of any of them; or
(2) an employee of the issuer, or of any of the persons listed in
subdivision (1), entrusted with responsible handling of the
security 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 signatures
necessary to its issue or transfer but is incomplete in any other
respect:
(1) any person may complete it by filling in the blanks as
authorized; and
(2) even if the blanks are incorrectly filled in, the security
certificate as completed is enforceable by a purchaser who took
it for value and without notice of the incorrectness.
(b) A complete security certificate that has been improperly
altered, even if fraudulently, remains enforceable, but only according
to its original terms. 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 absent
appropriate notice of transfer
Sec. 207. (a) Before due presentment for registration of transfer
of a certificated security in registered form or of an instruction
requesting registration of transfer of an uncertificated security, the
issuer or indenture trustee may treat the registered owner as the
person exclusively entitled to vote, receive notifications, and
otherwise exercise all the rights and powers of an owner.
(b) IC 26-1-8.1 does not affect the liability of the registered owner
of 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 as
authenticating trustee, registrar, transfer agent, or the like, warrants
to a purchaser for value of the certificated security, if the purchaser
is without notice of a particular defect, that:
(1) the certificate is genuine;
(2) the person's own participation in the issue of the security is
within the person's capacity and within the scope of the
authority received by the person from the issuer; and
(3) the person has reasonable grounds to believe that the
certificated security is in the form and within the amount the
issuer is authorized to issue.
(b) Unless otherwise agreed, a person signing under subsection (a)
does not assume responsibility for the validity of the security in other
respects. 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 security
is valid against a purchaser only if the right of the issuer to the lien
is 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 of
security
Sec. 210. (a) In this section, "overissue" means the issue of
securities in excess of the amount the issuer has corporate power to
issue, but an overissue does not occur if appropriate action has cured
the overissue.
(b) Except as otherwise provided in subsections (c) and (d), the
provisions of IC 26-1-8.1 which validate a security or compel its
issue or reissue do not apply to the extent that validation, issue, or
reissue would result in overissue.
(c) If an identical security not constituting an overissue is
reasonably available for purchase, a person entitled to issue or
validation may compel the issuer to purchase the security and deliver
it if certificated or register its transfer if uncertificated, against
surrender of any security certificate the person holds.
(d) If a security is not reasonably available for purchase, a person
entitled to issue or validation may recover from the issuer the price
the person or the last purchaser for value paid for it with interest
from the date of the person's demand. 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 purchaser
occurs when:
(1) the purchaser acquires possession of the security certificate;
(2) another person, other than a securities intermediary, either
acquires possession of the security certificate on behalf of the
purchaser or, having previously acquired possession of the
certificate, acknowledges that it holds for the purchaser; or
(3) a securities intermediary acting on behalf of the purchaser
acquires possession of the security certificate, only if the
certificate is in registered form and is (i) registered in the name
of the purchaser, (ii) payable to the order of the purchaser, or
(iii) specially endorsed to the purchaser by an effective
endorsement and has not been endorsed to the securities
intermediary or in blank.
(b) Delivery of an uncertificated security to a purchaser occurs
when:
(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, either
becomes the registered owner of the uncertificated security on
behalf of the purchaser or, having previously become the
registered owner, acknowledges that it holds for the purchaser. 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 acquires
all rights in the security that the transferor had or had power to
transfer.
(b) A purchaser of a limited interest acquires rights only to the
extent of the interest purchased.
(c) A purchaser of a certificated security who as a previous holder
had notice of an adverse claim does not improve its position by
taking from a protected purchaser. 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 of
adverse claims
Sec. 303. (a) "Protected purchaser" means a purchaser of a
certificated 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 protected
purchaser also acquires its interest in the security free of any adverse
claim. 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. An
endorsement in blank includes an endorsement to bearer. A special
endorsement specifies to whom a security is to be transferred or who
has power to transfer it. A holder may convert a blank endorsement
to a special endorsement.
(b) An endorsement purporting to be only of part of a security
certificate representing units intended by the issuer to be separately
transferable is effective to the extent of the endorsement.
(c) An endorsement, whether special or in blank, does not
constitute a transfer until delivery of the certificate on which it
appears or, if the endorsement is on a separate document, until
delivery of both the document and the certificate.
(d) If a security certificate in registered form has been delivered
to a purchaser without a necessary endorsement, the purchaser may
become a protected purchaser only when the endorsement is
supplied. However, against a transferor, a transfer is complete upon
delivery and the purchaser has a specifically enforceable right to
have any necessary endorsement supplied.
(e) An endorsement of a security certificate in bearer form may
give notice of an adverse claim to the certificate, but it does not
otherwise affect a right to registration that the holder possesses.
(f) Unless otherwise agreed, a person making an endorsement
assumes only the obligations provided in IC 26-1-8.1-108 and not an
obligation 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 initiating
instructions
Sec. 305. (a) If an instruction has been originated by an
appropriate person but is incomplete in any other respect, any person
may complete it as authorized and the issuer may rely on it as
completed, even though it has been completed incorrectly.
(b) Unless otherwise agreed, a person initiating an instruction
assumes only the obligations imposed by IC 26-1-8.1-108 and not an
obligation 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 endorser
of 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 the
signature is by an agent, the agent had actual authority to act on
behalf of the appropriate person; and
(3) the signer had legal capacity to sign.
(b) A person who guarantees a signature of the originator of an
instruction warrants that at the time of signing:
(1) the signature was genuine;
(2) the signer was an appropriate person to originate the
instruction, or if the signature is by an agent, the agent had
actual authority to act on behalf of the appropriate person, if the
person specified in the instruction as the registered owner was,
in fact, the registered owner, as to which fact the signature
guarantor does not make a warranty; and
(3) the signer had legal capacity to sign.
(c) A person who specially guarantees the signature of an
originator of an instruction makes the warranties of a signature
guarantor under subsection (b) and also warrants that at the time the
instruction is presented to the issuer:
(1) the person specified in the instruction as the registered
owner of the uncertificated security will be the registered
owner; and
(2) the transfer of the uncertificated security requested in the
instruction will be registered by the issuer free from all liens,
security interests, restrictions, and claims other than those
specified in the instruction.
(d) A guarantor under subsections (a) and (b) or a special
guarantor under subsection (c) does not otherwise warrant the
rightfulness of the transfer.
(e) A person who guarantees an endorsement of a security
certificate makes the warranties of a signature guarantor under
subsection (a) and also warrants the rightfulness of the transfer in all
respects.
(f) A person who guarantees an instruction requesting the transfer
of an uncertificated security makes the warranties of a special
signature guarantor under subsection (c) and also warrants the
rightfulness of the transfer in all respects.
(g) An issuer may not require a special guaranty of signature, a
guaranty of endorsement, or a guaranty of instruction as a condition
to registration of transfer.
(h) The warranties under this section are made to a person taking
or dealing with the security in reliance on the guaranty, and the
guarantor is liable to the person for loss resulting from their breach.
An endorser or originator of an instruction whose signature,
endorsement, or instruction has been guaranteed is liable to a
guarantor for any loss suffered by the guarantor as a result of breach
of the warranties of the guarantor.
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 on
due demand shall supply the purchaser with proof of authority to
transfer or with any other requisite necessary to obtain registration
of the transfer of the security, but if the transfer is not for value, a
transferor need not comply unless the purchaser pays the necessary
expenses. If the transferor fails within a reasonable time to comply
with the demand, the purchaser may reject or rescind the transfer. 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 is
presented to an issuer with a request to register transfer or an
instruction is presented to an issuer with a request to register transfer
of an uncertificated security, the issuer shall register the transfer as
requested if:
(1) under the terms of the security the person seeking
registration of transfer is eligible to have the security registered
in its name;
(2) the endorsement or instruction is made by the appropriate
person or by an agent who has actual authority to act on behalf
of the appropriate person;
(3) reasonable assurance is given that the endorsement or
instruction is genuine and authorized (IC 26-1-8.1-402);
(4) any applicable law relating to the collection of taxes has
been complied with;
(5) the transfer does not violate any restriction on transfer
imposed by the issuer in accordance with IC 26-1-8.1-204;
(6) a demand that the issuer not register transfer has not become
effective under IC 26-1-8.1-403, or the issuer has complied with
IC 26-1-8.1-403(b) but no legal process or indemnity bond is
obtained 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 an
instruction for registration or to the person's principal for loss
resulting from unreasonable delay in registration or failure or refusal
to register the transfer. 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 that
each necessary endorsement or each instruction is genuine and
authorized:
(1) in all cases, a guaranty of the signature of the person making
an endorsement or originating an instruction including, in the
case of an instruction, reasonable assurance
IC 26-1-8.1-101 Short title
Sec. 101. IC 26-1-8.1 may be cited as Uniform Commercial
Code.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 a
property interest in a financial asset and that it is a violation of
the rights of the claimant for another person to hold, transfer, or
deal with the financial asset.
(2) "Bearer form", as applied to a certificated security, means
a form in which the security is payable to the bearer of the
security certificate according to its terms but not by reason of
an endorsement.
(3) "Broker" means a person defined as a broker or dealer under
the federal securities laws, but without excluding a bank acting
in that capacity.
(4) "Certificated security" means a security that is represented
by a certificate.
(5) "Clearing corporation" means:
(i) a person that is registered as a "clearing agency" under
the federal securities laws;
(ii) a federal reserve bank; or
(iii) any other person that provides clearance or settlement
services with respect to financial assets that would require it
to register as a clearing agency under the federal securities
laws but for an exclusion or exemption from the registration
requirement, if its activities as a clearing corporation,
including promulgation of rules, are subject to regulation by
a federal or state governmental authority.
(6) "Communicate" means to:
(i) send a signed writing; or
(ii) transmit information by any mechanism agreed upon by
the persons transmitting and receiving the information.
(7) "Entitlement holder" means a person identified in the
records of a securities intermediary as the person having a
security entitlement against the securities intermediary. If a
person acquires a security entitlement by virtue of
IC 26-1-8.1-501(b)(2) or IC 26-1-8.1-501(b)(3), that person is
the entitlement holder.
(8) "Entitlement order" means a notification communicated to
a securities intermediary directing transfer or redemption of a
financial asset to which the entitlement holder has a security
entitlement.
(9) "Financial asset", except as otherwise provided in
IC 26-1-8.1-103, means:
(i) a security;
(ii) an obligation of a person or a share, participation, or
other interest in a person or in property or an enterprise of a
person, that is, or is of a type, dealt in or traded on financial
markets, or that is recognized in any area in which it is
issued or dealt in as a medium for investment; or
(iii) any property that is held by a securities intermediary for
another person in a securities account if the securities
intermediary has expressly agreed with the other person that
the property is to be treated as a financial asset under
IC 26-1-8.1.
As context requires, the term means either the interest itself or
the means by which a person's claim to it is evidenced,
including a certificated or an uncertificated security, a security
certificate, or a security entitlement.
(10) "Good faith", for purposes of the obligation of good faith
in the performance or enforcement of contracts or duties within
IC 26-1-8.1, means honesty in fact and the observance of
reasonable commercial standards of fair dealing.
(11) "Endorsement" means a signature that alone or
accompanied by other words is made on a security certificate in
registered form or on a separate document for the purpose of
assigning, transferring, or redeeming the security or granting a
power to assign, transfer, or redeem it.
(12) "Instruction" means a notification communicated to the
issuer of an uncertificated security which directs that the
transfer of the security be registered or that the security be
redeemed.
(13) "Registered form", as applied to a certificated security,
means a form in which:
(i) the security certificate specifies a person entitled to the
security; and
(ii) a transfer of the security may be registered upon books
maintained for that purpose by or on behalf of the issuer, or
the security certificate so states.
(14) "Securities intermediary" means:
(i) a clearing corporation; or
(ii) a person, including a bank or broker, that in the ordinary
course of its business maintains securities accounts for
others and is acting in that capacity.
(15) "Security", except as otherwise provided in
IC 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 an
enterprise of an issuer:
(i) which is represented by a security certificate in bearer or
registered form, or the transfer of which may be registered
upon books maintained for that purpose by or on behalf of
the issuer;
(ii) which is one (1) of a class or series or by its terms is
divisible 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 securities
exchanges or securities markets; or
(B) is a medium for investment and by its terms expressly
provides that it is a security governed by IC 26-1-8.1.
(16) "Security certificate" means a certificate representing a
security.
(17) "Security entitlement" means the rights and property
interest of an entitlement holder with respect to a financial asset
specified in IC 26-1-8.1-501 through IC 26-1-8.1-511.
(18) "Uncertificated security" means a security that is not
represented by a certificate.
(b) Other definitions applying to IC 26-1-8.1 and the sections in
which 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 and
principles of construction and interpretation applicable throughout
IC 26-1-8.1.
(d) The characterization of a person, business, or transaction for
purposes of IC 26-1-8.1 does not determine the characterization of
the 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 a
corporation, business trust, joint stock company, or similar entity is
a security.
(b) An "investment company security" is a security. "Investment
company security" means a share or similar equity interest issued by
an entity that is registered as an investment company under the
federal investment company laws, an interest in a unit investment
trust that is so registered, or a face amount certificate issued by a
face amount certificate company that is so registered. Investment
company security does not include an insurance policy or
endowment policy or annuity contract issued by an insurance
company.
(c) An interest in a partnership or limited liability company is not
a security unless it is dealt in or traded on securities exchanges or in
securities markets, its terms expressly provide that it is a security
governed by IC 26-1-8.1, or it is an investment company security.
However, an interest in a partnership or limited liability company is
a financial asset if it is held in a securities account.
(d) A writing that is a security certificate is governed by
IC 26-1-8.1 and not by IC 26-1-3.1, even though it also meets the
requirements of that article. However, a negotiable instrument
governed by IC 26-1-3.1 is a financial asset if it is held in a securities
account.
(e) An option or a similar obligation issued by a clearing
corporation to its participants is not a security, but it is a financial
asset.
(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 section
102(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 delivered
under IC 26-1-8.1-301; or
(2) the person acquires a security entitlement to the security
under IC 26-1-8.1-501.
(b) A person acquires a financial asset, other than a security, or an
interest therein, under IC 26-1-8.1, if the person acquires a security
entitlement to the financial asset.
(c) A person who acquires a security entitlement to a security or
other financial asset has the rights specified in IC 26-1-8.1-501
through IC 26-1-8.1-511, but is a purchaser of any security, security
entitlement, or other financial asset held by the securities
intermediary 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 agreement
to transfer, deliver, present, surrender, exchange, or otherwise put in
the possession of another person a security or financial asset satisfies
that requirement by causing the other person to acquire an interest in
the security or financial asset 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 there
is a significant probability that the adverse claim exists and
deliberately avoids information that would establish the
existence of the adverse claim; or
(3) the person has a duty, imposed by statute or regulation, to
investigate whether an adverse claim exists, and the
investigation so required would establish the existence of the
adverse claim.
(b) Having knowledge that a financial asset or interest therein is
or has been transferred by a representative imposes no duty of
inquiry into the rightfulness of a transaction and is not notice of an
adverse claim. However, a person who knows that a representative
has transferred a financial asset or interest therein in a transaction
that is, or whose proceeds are being used, for the individual benefit
of the representative or otherwise in breach of duty has notice of an
adverse claim.
(c) An act or event that creates a right to immediate performance
of the principal obligation represented by a security certificate or sets
a date on or after which the certificate is to be presented or
surrendered for redemption or exchange does not itself constitute
notice of an adverse claim except in the case of a transfer more than:
(1) one (1) year after a date set for presentment or surrender for
redemption or exchange; or
(2) six (6) months after a date set for payment of money against
presentation or surrender of the certificate, if money was
available for payment on that date.
(d) A purchaser of a certificated security has notice of an adverse
claim if the security certificate:
(1) whether in bearer or registered form, has been endorsed "for
collection" or "for surrender" or for some other purpose not
involving transfer; or
(2) is in bearer form and has on it an unambiguous statement
that it is the property of a person other than the transferor, but
the mere writing of a name on the certificate is not such a
statement.
(e) Filing of a financing statement under IC 26-1-9.1 is not notice
of 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 security
in bearer form if the certificated security is delivered to the
purchaser.
(b) A purchaser has "control" of a certificated security in
registered form if the certificated security is delivered to the
purchaser, and:
(1) the certificate is endorsed to the purchaser or in blank by an
effective 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 instructions
originated by the purchaser without further consent by the
registered 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 comply
with entitlement orders originated by the purchaser without
further consent by the entitlement holder; or
(3) another person has control of the security entitlement on
behalf of the purchaser or, having previously acquired control
of the security entitlement, acknowledges that it has control on
behalf of the purchaser.
(e) If an interest in a security entitlement is granted by the
entitlement holder to the entitlement holder's own securities
intermediary, the securities intermediary has control.
(f) A purchaser who has satisfied the requirements of subsection
(c) or (d) has control even if the registered owner in the case of
subsection (c) or the entitlement holder in the case of subsection (d)
retains the right to make substitutions for the uncertificated security
or security entitlement, to originate instructions or entitlement orders
to the issuer or a securities intermediary, or otherwise to deal with
the uncertificated security or security entitlement.
(g) An issuer or a securities intermediary may not enter into an
agreement of the kind described in subsection (c)(2) or (d)(2) without
the consent of the registered owner or entitlement holder, but an
issuer or a securities intermediary is not required to enter into such
an agreement even though the registered owner or entitlement holder
so directs. An issuer or securities intermediary that has entered into
such an agreement is not required to confirm the existence of the
agreement to another party unless requested to do so by the
registered owner or entitlement holder. 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 a
security certificate or by an effective special endorsement to be
entitled to the security;
(2) with respect to an instruction, the registered owner of an
uncertificated security;
(3) with respect to an entitlement order, the entitlement holder;
(4) if the person designated in subdivision (1), (2), or (3) is
deceased, the designated person's successor taking under other
law or the designated person's personal representative acting for
the estate of the decedent; or
(5) if the person designated in subdivision (1), (2), or (3) lacks
capacity, the designated person's guardian, conservator, or other
similar representative who has power under other law to
transfer the security or financial asset.
(b) An endorsement, instruction, or entitlement order is effective
if:
(1) it is made by the appropriate person;
(2) it is made by a person who has power under the law of
agency to transfer the security or financial asset on behalf of the
appropriate person, including, in the case of an instruction or
entitlement order, a person who has control under
IC 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 otherwise
precluded from asserting its ineffectiveness.
(c) An endorsement, instruction, or entitlement order made by a
representative is effective even if:
(1) the representative has failed to comply with a controlling
instrument or with the law of the state having jurisdiction of the
representative relationship, including any law requiring the
representative to obtain court approval of the transaction; or
(2) the representative's action in making the endorsement,
instruction, or entitlement order or using the proceeds of the
transaction is otherwise a breach of duty.
(d) If a security is registered in the name of or specially endorsed
to a person described as a representative, or if a securities account is
maintained in the name of a person described as a representative, an
endorsement, instruction, or entitlement order made by the person is
effective even though the person is no longer serving in the described
capacity.
(e) Effectiveness of an endorsement, instruction, or entitlement
order is determined as of the date the endorsement, instruction, or
entitlement order is made, and an endorsement, instruction, or
entitlement order does not become ineffective by reason of any later
change of circumstances. 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 a
purchaser for value warrants to the purchaser, and an endorser, if the
transfer 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 that
might impair the validity of the security;
(3) there is no adverse claim to the security;
(4) the transfer does not violate any restriction on transfer;
(5) if the transfer is by endorsement, the endorsement is made
by an appropriate person, or if the endorsement is by an agent,
the agent has actual authority to act on behalf of the appropriate
person; and
(6) the transfer is otherwise effective and rightful.
(b) A person who originates an instruction for registration of
transfer of an uncertificated security to a purchaser for value
warrants to the purchaser that:
(1) the instruction is made by an appropriate person, or if the
instruction is by an agent, the agent has actual authority to act
on behalf of the appropriate person;
(2) the security is valid;
(3) there is no adverse claim to the security; and
(4) at the time the instruction is presented to the issuer:
(i) the purchaser will be entitled to the registration of
transfer;
(ii) the transfer will be registered by the issuer free from all
liens, security interests, restrictions, and claims other than
those specified in the instruction;
(iii) the transfer will not violate any restriction on transfer;
and
(iv) the requested transfer will otherwise be effective and
rightful.
(c) A person who transfers an uncertificated security to a
purchaser for value and does not originate an instruction in
connection with the transfer warrants 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 the
issuer 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 of
transfer 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 the
purchaser will be entitled to the registration of transfer.
(f) A person who presents a certificated security for registration
of transfer or for payment or exchange warrants to the issuer that the
person is entitled to the registration, payment, or exchange, but a
purchaser for value and without notice of adverse claims to whom
transfer is registered warrants only that the person has no knowledge
of any unauthorized signature in a necessary endorsement.
(g) If a person acts as agent of another in delivering a certificated
security to a purchaser, the identity of the principal was known to the
person to whom the certificate was delivered, and the certificate
delivered by the agent was received by the agent from the principal
or received by the agent from another person at the direction of the
principal, the person delivering the security certificate warrants only
that the delivering person has authority to act for the principal and
does not know of any adverse claim to the certificated security.
(h) A secured party who redelivers a security certificate received,
or after payment and on order of the debtor delivers the security
certificate to another person, makes only the warranties of an agent
under subsection (g).
(i) Except as otherwise provided in subsection (g), a broker acting
for a customer makes to the issuer and a purchaser the warranties
provided in subsections (a) through (f). A broker that delivers a
security certificate to its customer, or causes its customer to be
registered as the owner of an uncertificated security, makes to the
customer the warranties provided in subsection (a) or (b), and has the
rights and privileges of a purchaser under this section. The
warranties of and in favor of the broker acting as an agent are in
addition to applicable warranties given by and in favor of the
customer. 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 a
securities intermediary warrants to the securities intermediary that:
(1) the entitlement order is made by an appropriate person, or
if the entitlement order is by an agent, the agent has actual
authority to act on behalf of the appropriate person; and
(2) there is no adverse claim to the security entitlement.
(b) A person who delivers a security certificate to a securities
intermediary for credit to a securities account or originates an
instruction with respect to an uncertificated security directing that
the uncertificated security be credited to a securities account makes
to the securities intermediary the warranties specified in
IC 26-1-8.1-108(a) or IC 26-1-8.1-108(b).
(c) If a securities intermediary delivers a security certificate to its
entitlement holder or causes its entitlement holder to be registered as
the owner of an uncertificated security, the securities intermediary
makes to the entitlement holder the warranties specified in
IC 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 specified
in subsection (d), governs:
(1) the validity of a security;
(2) the rights and duties of the issuer with respect to registration
of transfer;
(3) the effectiveness of registration of transfer by the issuer;
(4) whether the issuer owes any duties to an adverse claimant to
a security; and
(5) whether an adverse claim can be asserted against a person
to whom transfer of a certificated or uncertificated security is
registered or a person who obtains control of an uncertificated
security.
(b) The local law of the securities intermediary's jurisdiction, as
specified in subsection (e), governs:
(1) acquisition of a security entitlement from the securities
intermediary;
(2) the rights and duties of the securities intermediary and
entitlement holder arising out of a security entitlement;
(3) whether the securities intermediary owes any duties to an
adverse claimant to a security entitlement; and
(4) whether an adverse claim can be asserted against a person
who acquires a security entitlement from the securities
intermediary or a person who purchases a security entitlement
or interest therein from an entitlement holder.
(c) The local law of the jurisdiction in which a security certificate
is located at the time of delivery governs whether an adverse claim
can be asserted against a person to whom the security certificate is
delivered.
(d) "Issuer's jurisdiction" means the jurisdiction under which the
issuer of the security is organized or, if permitted by the law of that
jurisdiction, the law of another jurisdiction specified by the issuer.
An issuer organized under the law of this state may specify the law
of another jurisdiction as the law governing the matters specified in
subsection (a)(2) through (a)(5).
(e) The following rules determine a "securities intermediary's
jurisdiction" for purposes of this section:
(1) If an agreement between the securities intermediary and its
entitlement holder governing the securities account expressly
provides that a particular jurisdiction is the securities
intermediary's jurisdiction for purposes of IC 26-1-8.1-101
through IC 26-1-8.1-116, that jurisdiction is the securities
intermediary's jurisdiction.
(2) If subdivision (1) does not apply, and an agreement between
the securities intermediary and its entitlement holder expressly
provides that the agreement is governed by the law of a
particular jurisdiction, that jurisdiction is the securities
intermediary's jurisdiction.
(3) If neither subdivision (1) nor subdivision (2) applies, and an
agreement between the securities intermediary and its
entitlement holder governing the securities account expressly
provides that the securities account is maintained at an office in
a particular jurisdiction, that jurisdiction is the securities
intermediary's jurisdiction.
(4) If none of the preceding subdivisions apply, the securities
intermediary's jurisdiction is the jurisdiction in which the office
identified in an account statement as the office serving the
entitlement holder's account is located.
(5) If none of the preceding subdivisions apply, the securities
intermediary's jurisdiction is the jurisdiction in which the chief
executive office of the securities intermediary is located.
(f) A securities intermediary's jurisdiction is not determined by
the physical location of certificates representing financial assets, or
by the jurisdiction in which is organized the issuer of the financial
asset with respect to which an entitlement holder has a security
entitlement, or by the location of facilities for data processing or
other record keeping concerning the account. 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 governing
rights and obligations among the clearing corporation and its
participants in the clearing corporation is effective even if the rule
conflicts with IC 26-1-8.1 and affects another party who does not
consent 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 may
be reached by a creditor only by actual seizure of the security
certificate by the officer making the attachment or levy, except as
otherwise provided in subsection (d). However, a certificated
security for which the certificate has been surrendered to the issuer
may be reached by a creditor by legal process upon the issuer.
(b) The interest of a debtor in an uncertificated security may be
reached by a creditor only by legal process upon the issuer at its
chief executive office in the United States, except as otherwise
provided in subsection (d).
(c) The interest of a debtor in a security entitlement may be
reached by a creditor only by legal process upon the securities
intermediary with whom the debtor's securities account is
maintained, except as otherwise provided in subsection (d).
(d) The interest of a debtor in a certificated security for which the
certificate is in the possession of a secured party, or in an
uncertificated security registered in the name of a secured party, or
a security entitlement maintained in the name of a secured party, may
be reached by a creditor by legal process upon the secured party.
(e) A creditor whose debtor is the owner of a certificated security,
uncertificated security, or security entitlement is entitled to aid from
a court of competent jurisdiction, by injunction or otherwise, in
reaching the certificated security, uncertificated security, or security
entitlement or in satisfying the claim by means allowed at law or in
equity in regard to property that cannot readily be reached by other
legal process. 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 or
purchase of a security is enforceable whether or not there is a writing
signed or record authenticated by a party against whom enforcement
is sought, even if the contract or modification is not capable of
performance within one (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 certificated
security against the issuer:
(1) Unless specifically denied in the pleadings, each signature
on a security certificate or in a necessary endorsement is
admitted.
(2) If the effectiveness of a signature is put in issue, the burden
of establishing effectiveness is on the party claiming under the
signature, but the signature is presumed to be genuine or
authorized.
(3) If signatures on a security certificate are admitted or
established, production of the certificate entitles a holder to
recover on it unless the defendant establishes a defense or a
defect going to the validity of the security.
(4) If it is shown that a defense or defect exists, the plaintiff has
the burden of establishing that the plaintiff or some person
under whom the plaintiff claims is a person against whom the
defense or defect cannot be asserted. As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-115 Liability of securities intermediary, broker, or other agent or
bailee
Sec. 115. A securities intermediary that has transferred a financial
asset under an effective entitlement order, or a broker or other agent
or bailee that has dealt with a financial asset at the direction of its
customer or principal, is not liable to a person having an adverse
claim to the financial asset, unless the securities intermediary, or
broker or other agent or bailee:
(1) took the action after it had been served with an injunction,
restraining order, or other legal process enjoining it from doing
so, issued by a court of competent jurisdiction, and had a
reasonable opportunity to act on the injunction, restraining
order, or other legal process;
(2) acted in collusion with the wrongdoer in violating the rights
of the adverse claimant; 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 asset
and establishes a security entitlement to the financial asset in favor
of an entitlement holder is a purchaser for value of the financial
asset. A securities intermediary that acquires a security entitlement
to a financial asset from another securities intermediary acquires the
security entitlement for value if the securities intermediary acquiring
the security entitlement establishes a security entitlement to the
financial asset in favor of an entitlement holder. 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 a
security, an "issuer" includes a person that:
(1) places or authorizes the placing of its name on a security
certificate, other than as authenticating trustee, registrar,
transfer agent, or the like, to evidence a share, participation, or
other interest in its property or in an enterprise, or to evidence
its duty to perform an obligation represented by the certificate;
(2) creates a share, participation, or other interest in its property
or in an enterprise, or undertakes an obligation, that is an
uncertificated security;
(3) directly or indirectly creates a fractional interest in its rights
or property, if the fractional interest is represented by a security
certificate; or
(4) becomes responsible for, or is in place of, another person
described as an issuer in this section.
(b) With respect to an obligation on or defense to a security, a
guarantor is an issuer to the extent of its guaranty, whether or not its
obligation is noted on a security certificate.
(c) With respect to a registration of a transfer, issuer means a
person on whose behalf transfer books are maintained. As added by P.L.247-1995, SEC.10.
IC 26-1-8.1-202 Terms of security; rules on validity; issuer's defenses; cancellation
of contracts
Sec. 202. (a) Even against a purchaser for value and without
notice, the terms of a certificated security include terms stated on the
certificate and terms made part of the security by reference on the
certificate to another instrument, indenture, or document or to a
constitution, a statute, an ordinance, a rule, a regulation, an order, or
the like, to the extent the terms referred to do not conflict with terms
stated on the certificate. A reference under this subsection does not
of itself charge a purchaser for value with notice of a defect going to
the validity of the security, even if the certificate expressly states that
a person accepting it admits notice. The terms of an uncertificated
security include those stated in any instrument, indenture, or
document or in a constitution, a statute, an ordinance, a rule, a
regulation, an order, or the like, under which the security is issued.
(b) The following rules apply if an issuer asserts that a security is
not valid:
(1) A security other than a security issued by a government or
governmental subdivision, agency, or instrumentality, even
though issued with a defect going to its validity, is valid in the
hands of a purchaser for value and without notice of the
particular defect unless the defect involves a violation of a
constitutional provision. In that case, the security is valid in the
hands of a purchaser for value and without notice of the defect,
other than one who takes by original issue.
(2) Subdivision (1) applies to an issuer that is a government or
governmental subdivision, agency, or instrumentality only if
there has been substantial compliance with the legal
requirements governing the issue or the issuer has received a
substantial consideration for the issue as a whole or for the
particular security and a stated purpose of the issue is one for
which the issuer has power to borrow money or issue the
security.
(c) Except as otherwise provided in IC 26-1-8.1-205, lack of
genuineness of a certificated security is a complete defense, even
against a purchaser for value and without notice.
(d) All other defenses of the issuer of a security, including
nondelivery and conditional delivery of a certificated security, are
ineffective against a purchaser for value who has taken the
certificated security without notice of the particular defense.
(e) This section does not affect the right of a party to cancel a
contract for a security "when, as, and if issued" or "when distributed"
in the event of a material change in the character of the security that
is the subject of the contract or in the plan or arrangement under
which the security is to be issued or distributed.
(f) If a security is held by a securities intermediary against whom
an entitlement holder has a security entitlement with respect to the
security, the issuer may not assert any defense that the issuer could
not assert if the entitlement holder held the security directly. 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 been
revoked, creating a right to immediate performance of the principal
obligation represented by a certificated security or setting a date on
or after which the security is to be presented or surrendered for
redemption or exchange, a purchaser is charged with notice of any
defect in its issue or defense of the issuer, if the act or event:
(1) requires the payment of money, the delivery of a certificated
security, the registration of transfer of an uncertificated
security, or any of them on presentation or surrender of the
security certificate, the money or security is available on the
date set for payment or exchange, and the purchaser takes the
security more than one (1) year after that date; or
(2) is not covered by subdivision (1) and the purchaser takes the
security more than two (2) years after the date set for surrender
or 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 the
issuer, even if otherwise lawful, is ineffective against a person
without knowledge of the restriction unless:
(1) the security is certificated and the restriction is noted
conspicuously on the security certificate; or
(2) the security is uncertificated and the registered owner has
been 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 security
certificate before or in the course of issue is ineffective, but the
signature is effective in favor of a purchaser for value of the
certificated security if the purchaser is without notice of the lack of
authority and the signing has been done by:
(1) an authenticating trustee, a registrar, a transfer agent, or
other person entrusted by the issuer with the signing of the
security certificate or of similar security certificates, or the
immediate preparation for signing of any of them; or
(2) an employee of the issuer, or of any of the persons listed in
subdivision (1), entrusted with responsible handling of the
security 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 signatures
necessary to its issue or transfer but is incomplete in any other
respect:
(1) any person may complete it by filling in the blanks as
authorized; and
(2) even if the blanks are incorrectly filled in, the security
certificate as completed is enforceable by a purchaser who took
it for value and without notice of the incorrectness.
(b) A complete security certificate that has been improperly
altered, even if fraudulently, remains enforceable, but only according
to its original terms. 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 absent
appropriate notice of transfer
Sec. 207. (a) Before due presentment for registration of transfer
of a certificated security in registered form or of an instruction
requesting registration of transfer of an uncertificated security, the
issuer or indenture trustee may treat the registered owner as the
person exclusively entitled to vote, receive notifications, and
otherwise exercise all the rights and powers of an owner.
(b) IC 26-1-8.1 does not affect the liability of the registered owner
of 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 as
authenticating trustee, registrar, transfer agent, or the like, warrants
to a purchaser for value of the certificated security, if the purchaser
is without notice of a particular defect, that:
(1) the certificate is genuine;
(2) the person's own participation in the issue of the security is
within the person's capacity and within the scope of the
authority received by the person from the issuer; and
(3) the person has reasonable grounds to believe that the
certificated security is in the form and within the amount the
issuer is authorized to issue.
(b) Unless otherwise agreed, a person signing under subsection (a)
does not assume responsibility for the validity of the security in other
respects. 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 security
is valid against a purchaser only if the right of the issuer to the lien
is 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 of
security
Sec. 210. (a) In this section, "overissue" means the issue of
securities in excess of the amount the issuer has corporate power to
issue, but an overissue does not occur if appropriate action has cured
the overissue.
(b) Except as otherwise provided in subsections (c) and (d), the
provisions of IC 26-1-8.1 which validate a security or compel its
issue or reissue do not apply to the extent that validation, issue, or
reissue would result in overissue.
(c) If an identical security not constituting an overissue is
reasonably available for purchase, a person entitled to issue or
validation may compel the issuer to purchase the security and deliver
it if certificated or register its transfer if uncertificated, against
surrender of any security certificate the person holds.
(d) If a security is not reasonably available for purchase, a person
entitled to issue or validation may recover from the issuer the price
the person or the last purchaser for value paid for it with interest
from the date of the person's demand. 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 purchaser
occurs when:
(1) the purchaser acquires possession of the security certificate;
(2) another person, other than a securities intermediary, either
acquires possession of the security certificate on behalf of the
purchaser or, having previously acquired possession of the
certificate, acknowledges that it holds for the purchaser; or
(3) a securities intermediary acting on behalf of the purchaser
acquires possession of the security certificate, only if the
certificate is in registered form and is (i) registered in the name
of the purchaser, (ii) payable to the order of the purchaser, or
(iii) specially endorsed to the purchaser by an effective
endorsement and has not been endorsed to the securities
intermediary or in blank.
(b) Delivery of an uncertificated security to a purchaser occurs
when:
(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, either
becomes the registered owner of the uncertificated security on
behalf of the purchaser or, having previously become the
registered owner, acknowledges that it holds for the purchaser. 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 acquires
all rights in the security that the transferor had or had power to
transfer.
(b) A purchaser of a limited interest acquires rights only to the
extent of the interest purchased.
(c) A purchaser of a certificated security who as a previous holder
had notice of an adverse claim does not improve its position by
taking from a protected purchaser. 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 of
adverse claims
Sec. 303. (a) "Protected purchaser" means a purchaser of a
certificated 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 protected
purchaser also acquires its interest in the security free of any adverse
claim. 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. An
endorsement in blank includes an endorsement to bearer. A special
endorsement specifies to whom a security is to be transferred or who
has power to transfer it. A holder may convert a blank endorsement
to a special endorsement.
(b) An endorsement purporting to be only of part of a security
certificate representing units intended by the issuer to be separately
transferable is effective to the extent of the endorsement.
(c) An endorsement, whether special or in blank, does not
constitute a transfer until delivery of the certificate on which it
appears or, if the endorsement is on a separate document, until
delivery of both the document and the certificate.
(d) If a security certificate in registered form has been delivered
to a purchaser without a necessary endorsement, the purchaser may
become a protected purchaser only when the endorsement is
supplied. However, against a transferor, a transfer is complete upon
delivery and the purchaser has a specifically enforceable right to
have any necessary endorsement supplied.
(e) An endorsement of a security certificate in bearer form may
give notice of an adverse claim to the certificate, but it does not
otherwise affect a right to registration that the holder possesses.
(f) Unless otherwise agreed, a person making an endorsement
assumes only the obligations provided in IC 26-1-8.1-108 and not an
obligation 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 initiating
instructions
Sec. 305. (a) If an instruction has been originated by an
appropriate person but is incomplete in any other respect, any person
may complete it as authorized and the issuer may rely on it as
completed, even though it has been completed incorrectly.
(b) Unless otherwise agreed, a person initiating an instruction
assumes only the obligations imposed by IC 26-1-8.1-108 and not an
obligation 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 endorser
of 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 the
signature is by an agent, the agent had actual authority to act on
behalf of the appropriate person; and
(3) the signer had legal capacity to sign.
(b) A person who guarantees a signature of the originator of an
instruction warrants that at the time of signing:
(1) the signature was genuine;
(2) the signer was an appropriate person to originate the
instruction, or if the signature is by an agent, the agent had
actual authority to act on behalf of the appropriate person, if the
person specified in the instruction as the registered owner was,
in fact, the registered owner, as to which fact the signature
guarantor does not make a warranty; and
(3) the signer had legal capacity to sign.
(c) A person who specially guarantees the signature of an
originator of an instruction makes the warranties of a signature
guarantor under subsection (b) and also warrants that at the time the
instruction is presented to the issuer:
(1) the person specified in the instruction as the registered
owner of the uncertificated security will be the registered
owner; and
(2) the transfer of the uncertificated security requested in the
instruction will be registered by the issuer free from all liens,
security interests, restrictions, and claims other than those
specified in the instruction.
(d) A guarantor under subsections (a) and (b) or a special
guarantor under subsection (c) does not otherwise warrant the
rightfulness of the transfer.
(e) A person who guarantees an endorsement of a security
certificate makes the warranties of a signature guarantor under
subsection (a) and also warrants the rightfulness of the transfer in all
respects.
(f) A person who guarantees an instruction requesting the transfer
of an uncertificated security makes the warranties of a special
signature guarantor under subsection (c) and also warrants the
rightfulness of the transfer in all respects.
(g) An issuer may not require a special guaranty of signature, a
guaranty of endorsement, or a guaranty of instruction as a condition
to registration of transfer.
(h) The warranties under this section are made to a person taking
or dealing with the security in reliance on the guaranty, and the
guarantor is liable to the person for loss resulting from their breach.
An endorser or originator of an instruction whose signature,
endorsement, or instruction has been guaranteed is liable to a
guarantor for any loss suffered by the guarantor as a result of breach
of the warranties of the guarantor.
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 on
due demand shall supply the purchaser with proof of authority to
transfer or with any other requisite necessary to obtain registration
of the transfer of the security, but if the transfer is not for value, a
transferor need not comply unless the purchaser pays the necessary
expenses. If the transferor fails within a reasonable time to comply
with the demand, the purchaser may reject or rescind the transfer. 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 is
presented to an issuer with a request to register transfer or an
instruction is presented to an issuer with a request to register transfer
of an uncertificated security, the issuer shall register the transfer as
requested if:
(1) under the terms of the security the person seeking
registration of transfer is eligible to have the security registered
in its name;
(2) the endorsement or instruction is made by the appropriate
person or by an agent who has actual authority to act on behalf
of the appropriate person;
(3) reasonable assurance is given that the endorsement or
instruction is genuine and authorized (IC 26-1-8.1-402);
(4) any applicable law relating to the collection of taxes has
been complied with;
(5) the transfer does not violate any restriction on transfer
imposed by the issuer in accordance with IC 26-1-8.1-204;
(6) a demand that the issuer not register transfer has not become
effective under IC 26-1-8.1-403, or the issuer has complied with
IC 26-1-8.1-403(b) but no legal process or indemnity bond is
obtained 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 an
instruction for registration or to the person's principal for loss
resulting from unreasonable delay in registration or failure or refusal
to register the transfer. 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 that
each necessary endorsement or each instruction is genuine and
authorized:
(1) in all cases, a guaranty of the signature of the person making
an endorsement or originating an instruction including, in the
case of an instruction, reasonable assurance
