By Brady H.B. No. 3200
74R8503 E
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to regulation of investment securities; revising Chapter 8
1-3 of the Business & Commerce Code.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Chapter 8, Business & Commerce Code, is revised
1-6 to read as follows:
1-7 CHAPTER 8. INVESTMENT SECURITIES
1-8 SUBCHAPTER A. SHORT TITLE AND GENERAL MATTERS
1-9 Sec. 8.101. SHORT TITLE. This chapter may be cited as
1-10 Uniform Commercial Code--Investment Securities.
1-11 Sec. 8.102. DEFINITIONS. (a) In this chapter:
1-12 (1) "Adverse claim" means a claim that a claimant has
1-13 a property interest in a financial asset and that it is a violation
1-14 of the rights of the claimant for another person to hold, transfer,
1-15 or deal with the financial asset.
1-16 (2) "Bearer form," as applied to a certificated
1-17 security, means a form in which the security is payable to the
1-18 bearer of the security certificate according to its terms but not
1-19 by reason of an indorsement.
1-20 (3) "Broker" means a person defined as a broker or
1-21 dealer under the federal securities laws, but without excluding a
1-22 bank acting in that capacity.
1-23 (4) "Certificated security" means a security that is
1-24 represented by a certificate.
2-1 (5) "Clearing corporation" means:
2-2 (A) a person that is registered as a "clearing
2-3 agency" under the federal securities laws;
2-4 (B) a federal reserve bank; or
2-5 (C) any other person that provides clearance or
2-6 settlement services with respect to financial assets that would
2-7 require it to register as a clearing agency under the federal
2-8 securities laws but for an exclusion or exemption from the
2-9 registration requirement, if its activities as a clearing
2-10 corporation, including promulgation of rules, are subject to
2-11 regulation by a federal or state governmental authority.
2-12 (6) "Communicate" means to:
2-13 (A) send a signed writing; or
2-14 (B) transmit information by any mechanism agreed
2-15 on by the persons transmitting and receiving the information.
2-16 (7) "Entitlement holder" means a person identified in
2-17 the records of a securities intermediary as the person having a
2-18 security entitlement against the securities intermediary. If a
2-19 person acquires a security entitlement by virtue of Section
2-20 8.501(b)(2) or (3), that person is the entitlement holder.
2-21 (8) "Entitlement order" means a notification
2-22 communicated to a securities intermediary directing transfer or
2-23 redemption of a financial asset to which the entitlement holder has
2-24 a security entitlement.
2-25 (9) "Financial asset," except as otherwise provided in
2-26 Section 8.103, means:
2-27 (A) a security;
3-1 (B) an obligation of a person or a share,
3-2 participation, or other interest in a person or in property or an
3-3 enterprise of a person that is, or is of a type, dealt in or traded
3-4 on financial markets or that is recognized in any area in which it
3-5 is issued or dealt in as a medium for investment; or
3-6 (C) any property that is held by a securities
3-7 intermediary for another person in a securities account if the
3-8 securities intermediary has expressly agreed with the other person
3-9 that the property is to be treated as a financial asset under this
3-10 chapter.
3-11 As context requires, the term means either the interest
3-12 itself or the means by which a person's claim to it is evidenced,
3-13 including a certificated or uncertificated security, a security
3-14 certificate, or a security entitlement.
3-15 (10) "Good faith," for purposes of the obligation of
3-16 good faith in the performance or enforcement of contracts or duties
3-17 within this chapter, means honesty in fact and the observance of
3-18 reasonable commercial standards of fair dealing.
3-19 (11) "Indorsement" means a signature that alone or
3-20 accompanied by other words is made on a security certificate in
3-21 registered form or on a separate document for the purpose of
3-22 assigning, transferring, or redeeming the security or granting a
3-23 power to assign, transfer, or redeem it.
3-24 (12) "Instruction" means a notification communicated
3-25 to the issuer of an uncertificated security that directs that the
3-26 transfer of the security be registered or that the security be
3-27 redeemed.
4-1 (13) "Registered form," as applied to a certificated
4-2 security, means a form in which:
4-3 (A) the security certificate specifies a person
4-4 entitled to the security; and
4-5 (B) a transfer of the security may be registered
4-6 on books maintained for that purpose by or on behalf of the issuer,
4-7 or the security certificate so states.
4-8 (14) "Securities intermediary" means:
4-9 (A) a clearing corporation; or
4-10 (B) a person, including a bank or broker, that
4-11 in the ordinary course of its business maintains securities
4-12 accounts for others and is acting in that capacity.
4-13 (15) "Security," except as otherwise provided in
4-14 Section 8.103, means an obligation of an issuer or a share,
4-15 participation, or other interest in an issuer or in property or an
4-16 enterprise of an issuer:
4-17 (A) that is represented by a security
4-18 certificate in bearer or registered form, or the transfer of which
4-19 may be registered on books maintained for that purpose by or on
4-20 behalf of the issuer;
4-21 (B) that is one of a class or series or by its
4-22 terms is divisible into a class or series of shares,
4-23 participations, interests, or obligations; and
4-24 (C) that:
4-25 (i) is, or is of a type, dealt in or
4-26 traded on securities exchanges or securities markets; or
4-27 (ii) is a medium for investment and by its
5-1 terms expressly provides that it is a security governed by this
5-2 chapter.
5-3 (16) "Security certificate" means a certificate
5-4 representing a security.
5-5 (17) "Security entitlement" means the rights and
5-6 property interest of an entitlement holder with respect to a
5-7 financial asset specified in Subchapter E.
5-8 (18) "Uncertificated security" means a security that
5-9 is not represented by a certificate.
5-10 (b) Other definitions applying to this chapter and the
5-11 sections in which they appear are:
5-12 Appropriate person Section 8.107
5-13 Control Section 8.106
5-14 Delivery Section 8.301
5-15 Investment company security Section 8.103
5-16 Issuer Section 8.201
5-17 Overissue Section 8.210
5-18 Protected purchaser Section 8.303
5-19 Securities account Section 8.501
5-20 (c) In addition, Chapter 1 contains general definitions and
5-21 principles of construction and interpretation applicable throughout
5-22 this chapter.
5-23 (d) The characterization of a person, business, or
5-24 transaction for purposes of this chapter does not determine the
5-25 characterization of the person, business, or transaction for
5-26 purposes of any other law, regulation, or rule.
5-27 Sec. 8.103. RULES FOR DETERMINING WHETHER CERTAIN
6-1 OBLIGATIONS AND INTERESTS ARE SECURITIES OR FINANCIAL ASSETS. (a)
6-2 A share or similar equity interest issued by a corporation,
6-3 business trust, joint stock company, or similar entity is a
6-4 security.
6-5 (b) An investment company security is a security.
6-6 "Investment company security" means a share or similar equity
6-7 interest issued by an entity that is registered as an investment
6-8 company under the federal investment company laws, an interest in a
6-9 unit investment trust that is so registered, or a face-amount
6-10 certificate issued by a face-amount certificate company that is so
6-11 registered. "Investment company security" does not include an
6-12 insurance policy or endowment policy or annuity contract issued by
6-13 an insurance company.
6-14 (c) An interest in a partnership or limited liability
6-15 company is not a security unless it is dealt in or traded on
6-16 securities exchanges or in securities markets, its terms expressly
6-17 provide that it is a security governed by this chapter, or it is an
6-18 investment company security. However, an interest in a partnership
6-19 or limited liability company is a financial asset if it is held in
6-20 a securities account.
6-21 (d) A writing that is a security certificate is governed by
6-22 this chapter and not by Chapter 3, even though it also meets the
6-23 requirements of that chapter. However, a negotiable instrument
6-24 governed by Chapter 3 is a financial asset if it is held in a
6-25 securities account.
6-26 (e) An option or similar obligation issued by a clearing
6-27 corporation to its participants is not a security, but is a
7-1 financial asset.
7-2 (f) A commodity contract, as defined in Section 9.115, is
7-3 not a security or a financial asset.
7-4 Sec. 8.104. ACQUISITION OF SECURITY OR FINANCIAL ASSET OR
7-5 INTEREST THEREIN. (a) A person acquires a security or an interest
7-6 therein under this chapter if:
7-7 (1) the person is a purchaser to whom a security is
7-8 delivered pursuant to Section 8.301; or
7-9 (2) the person acquires a security entitlement to the
7-10 security pursuant to Section 8.501.
7-11 (b) A person acquires a financial asset, other than a
7-12 security, or an interest therein, under this chapter, if the person
7-13 acquires a security entitlement to the financial asset.
7-14 (c) A person who acquires a security entitlement to a
7-15 security or other financial asset has the rights specified in
7-16 Subchapter E, but is a purchaser of any security, security
7-17 entitlement, or other financial asset held by the securities
7-18 intermediary only to the extent provided in Section 8.503.
7-19 (d) Unless the context shows that a different meaning is
7-20 intended, a person who is required by other law, regulation, rule,
7-21 or agreement to transfer, deliver, present, surrender, exchange, or
7-22 otherwise put in the possession of another person a security or
7-23 financial asset satisfies that requirement by causing the other
7-24 person to acquire an interest in the security or financial asset
7-25 pursuant to Subsection (a) or (b).
7-26 Sec. 8.105. NOTICE OF ADVERSE CLAIM. (a) A person has
7-27 notice of an adverse claim if:
8-1 (1) the person knows of the adverse claim;
8-2 (2) the person is aware of facts sufficient to
8-3 indicate that there is a significant probability that the adverse
8-4 claim exists and deliberately avoids information that would
8-5 establish the existence of the adverse claim; or
8-6 (3) the person has a duty, imposed by statute or
8-7 regulation, to investigate whether an adverse claim exists, and the
8-8 investigation so required would establish the existence of the
8-9 adverse claim.
8-10 (b) Having knowledge that a financial asset or interest
8-11 therein is or has been transferred by a representative imposes no
8-12 duty of inquiry into the rightfulness of a transaction and is not
8-13 notice of an adverse claim. However, a person who knows that a
8-14 representative has transferred a financial asset or interest
8-15 therein in a transaction that is, or whose proceeds are being used,
8-16 for the individual benefit of the representative or otherwise in
8-17 breach of duty has notice of an adverse claim.
8-18 (c) An act or event that creates a right to immediate
8-19 performance of the principal obligation represented by a security
8-20 certificate or sets a date on or after which the certificate is to
8-21 be presented or surrendered for redemption or exchange does not
8-22 itself constitute notice of an adverse claim except in the case of
8-23 a transfer more than:
8-24 (1) one year after a date set for presentment or
8-25 surrender for redemption or exchange; or
8-26 (2) six months after a date set for payment of money
8-27 against presentation or surrender of the certificate, if money was
9-1 available for payment on that date.
9-2 (d) A purchaser of a certificated security has notice of an
9-3 adverse claim if the security certificate:
9-4 (1) whether in bearer or registered form, has been
9-5 indorsed "for collection" or "for surrender" or for some other
9-6 purpose not involving transfer; or
9-7 (2) is in bearer form and has on it an unambiguous
9-8 statement that it is the property of a person other than the
9-9 transferor, but the mere writing of a name on the certificate is
9-10 not such a statement.
9-11 (e) Filing of a financing statement under Chapter 9 is not
9-12 notice of an adverse claim to a financial asset.
9-13 Sec. 8.106. CONTROL. (a) A purchaser has control of a
9-14 certificated security in bearer form if the certificated security
9-15 is delivered to the purchaser.
9-16 (b) A purchaser has control of a certificated security in
9-17 registered form if the certificated security is delivered to the
9-18 purchaser and:
9-19 (1) the certificate is indorsed to the purchaser or in
9-20 blank by an effective indorsement; or
9-21 (2) the certificate is registered in the name of the
9-22 purchaser, on original issue or registration of transfer by the
9-23 issuer.
9-24 (c) A purchaser has control of an uncertificated security
9-25 if:
9-26 (1) the uncertificated security is delivered to the
9-27 purchaser; or
10-1 (2) the issuer has agreed that it will comply with
10-2 instructions originated by the purchaser without further consent by
10-3 the registered owner.
10-4 (d) A purchaser has control of a security entitlement if:
10-5 (1) the purchaser becomes the entitlement holder; or
10-6 (2) the securities intermediary has agreed that it
10-7 will comply with entitlement orders originated by the purchaser
10-8 without further consent by the entitlement holder.
10-9 (e) If an interest in a security entitlement is granted by
10-10 the entitlement holder to the entitlement holder's own securities
10-11 intermediary, the securities intermediary has control.
10-12 (f) A purchaser who has satisfied the requirements of
10-13 Subsection (c)(2) or (d)(2) has control even if the registered
10-14 owner in the case of Subsection (c)(2) or the entitlement holder in
10-15 the case of Subsection (d)(2) retains the right to make
10-16 substitutions for the uncertificated security or security
10-17 entitlement, to originate instructions or entitlement orders to the
10-18 issuer or securities intermediary, or otherwise to deal with the
10-19 uncertificated security or security entitlement.
10-20 (g) An issuer or a securities intermediary may not enter
10-21 into an agreement of the kind described in Subsection (c)(2) or
10-22 (d)(2) without the consent of the registered owner or entitlement
10-23 holder, but an issuer or a securities intermediary is not required
10-24 to enter into such an agreement even though the registered owner or
10-25 entitlement holder so directs. An issuer or securities
10-26 intermediary that has entered into such an agreement is not
10-27 required to confirm the existence of the agreement to another party
11-1 unless requested to do so by the registered owner or entitlement
11-2 holder.
11-3 Sec. 8.107. WHETHER INDORSEMENT, INSTRUCTION, OR ENTITLEMENT
11-4 ORDER IS EFFECTIVE. (a) "Appropriate person" means:
11-5 (1) with respect to an indorsement, the person
11-6 specified by a security certificate or by an effective special
11-7 indorsement to be entitled to the security;
11-8 (2) with respect to an instruction, the registered
11-9 owner of an uncertificated security;
11-10 (3) with respect to an entitlement order, the
11-11 entitlement holder;
11-12 (4) if the person designated in Subdivision (1), (2),
11-13 or (3) is deceased, the designated person's successor taking under
11-14 other law or the designated person's personal representative acting
11-15 for the estate of the decedent; or
11-16 (5) if the person designated in Subdivision (1), (2),
11-17 or (3) lacks capacity, the designated person's guardian,
11-18 conservator, or other similar representative who has power under
11-19 other law to transfer the security or financial asset.
11-20 (b) An indorsement, instruction, or entitlement order is
11-21 effective if:
11-22 (1) it is made by the appropriate person;
11-23 (2) it is made by a person who has power under the law
11-24 of agency to transfer the security or financial asset on behalf of
11-25 the appropriate person, including, in the case of an instruction or
11-26 entitlement order, a person who has control under Section
11-27 8.106(c)(2) or (d)(2); or
12-1 (3) the appropriate person has ratified it or is
12-2 otherwise precluded from asserting its ineffectiveness.
12-3 (c) An indorsement, instruction, or entitlement order made
12-4 by a representative is effective even if:
12-5 (1) the representative has failed to comply with a
12-6 controlling instrument or with the law of the state having
12-7 jurisdiction of the representative relationship, including any law
12-8 requiring the representative to obtain court approval of the
12-9 transaction; or
12-10 (2) the representative's action in making the
12-11 indorsement, instruction, or entitlement order or using the
12-12 proceeds of the transaction is otherwise a breach of duty.
12-13 (d) If a security is registered in the name of or specially
12-14 indorsed to a person described as a representative, or if a
12-15 securities account is maintained in the name of a person described
12-16 as a representative, an indorsement, instruction, or entitlement
12-17 order made by the person is effective even though the person is no
12-18 longer serving in the described capacity.
12-19 (e) Effectiveness of an indorsement, instruction, or
12-20 entitlement order is determined as of the date the indorsement,
12-21 instruction, or entitlement order is made, and an indorsement,
12-22 instruction, or entitlement order does not become ineffective by
12-23 reason of any later change of circumstances.
12-24 Sec. 8.108. WARRANTIES IN DIRECT HOLDING. (a) A person who
12-25 transfers a certificated security to a purchaser for value warrants
12-26 to the purchaser, and an indorser, if the transfer is by
12-27 indorsement, warrants to any subsequent purchaser, that:
13-1 (1) the certificate is genuine and has not been
13-2 materially altered;
13-3 (2) the transferor or indorser does not know of any
13-4 fact that might impair the validity of the security;
13-5 (3) there is no adverse claim to the security;
13-6 (4) the transfer does not violate any restriction on
13-7 transfer;
13-8 (5) if the transfer is by indorsement, the indorsement
13-9 is made by an appropriate person, or if the indorsement is by an
13-10 agent, the agent has actual authority to act on behalf of the
13-11 appropriate person; and
13-12 (6) the transfer is otherwise effective and rightful.
13-13 (b) A person who originates an instruction for registration
13-14 of transfer of an uncertificated security to a purchaser for value
13-15 warrants to the purchaser that:
13-16 (1) the instruction is made by an appropriate person,
13-17 or if the instruction is by an agent, the agent has actual
13-18 authority to act on behalf of the appropriate person;
13-19 (2) the security is valid;
13-20 (3) there is no adverse claim to the security; and
13-21 (4) at the time the instruction is presented to the
13-22 issuer:
13-23 (A) the purchaser will be entitled to the
13-24 registration of transfer;
13-25 (B) the transfer will be registered by the
13-26 issuer free from all liens, security interests, restrictions, and
13-27 claims other than those specified in the instruction;
14-1 (C) the transfer will not violate any
14-2 restriction on transfer; and
14-3 (D) the requested transfer will otherwise be
14-4 effective and rightful.
14-5 (c) A person who transfers an uncertificated security to a
14-6 purchaser for value and does not originate an instruction in
14-7 connection with the transfer warrants that:
14-8 (1) the uncertificated security is valid;
14-9 (2) there is no adverse claim to the security;
14-10 (3) the transfer does not violate any restriction on
14-11 transfer; and
14-12 (4) the transfer is otherwise effective and rightful.
14-13 (d) A person who indorses a security certificate warrants to
14-14 the issuer that:
14-15 (1) there is no adverse claim to the security; and
14-16 (2) the indorsement is effective.
14-17 (e) A person who originates an instruction for registration
14-18 of transfer of an uncertificated security warrants to the issuer
14-19 that:
14-20 (1) the instruction is effective; and
14-21 (2) at the time the instruction is presented to the
14-22 issuer the purchaser will be entitled to the registration of
14-23 transfer.
14-24 (f) A person who presents a certificated security for
14-25 registration of transfer or for payment or exchange warrants to the
14-26 issuer that the person is entitled to the registration, payment, or
14-27 exchange, but a purchaser for value and without notice of adverse
15-1 claims to whom transfer is registered warrants only that the person
15-2 has no knowledge of any unauthorized signature in a necessary
15-3 indorsement.
15-4 (g) If a person acts as agent of another in delivering a
15-5 certificated security to a purchaser, the identity of the principal
15-6 was known to the person to whom the certificate was delivered, and
15-7 the certificate delivered by the agent was received by the agent
15-8 from the principal or received by the agent from another person at
15-9 the direction of the principal, the person delivering the security
15-10 certificate warrants only that the delivering person has authority
15-11 to act for the principal and does not know of any adverse claim to
15-12 the certificated security.
15-13 (h) A secured party who redelivers a security certificate
15-14 received, or after payment and on order of the debtor delivers the
15-15 security certificate to another person, makes only the warranties
15-16 of an agent under Subsection (g).
15-17 (i) Except as otherwise provided in Subsection (g), a broker
15-18 acting for a customer makes to the issuer and a purchaser the
15-19 warranties provided in Subsections (a)-(f). A broker that delivers
15-20 a security certificate to its customer, or causes its customer to
15-21 be registered as the owner of an uncertificated security, makes to
15-22 the customer the warranties provided in Subsection (a) or (b), and
15-23 has the rights and privileges of a purchaser under this section.
15-24 The warranties of and in favor of the broker acting as an agent are
15-25 in addition to applicable warranties given by and in favor of the
15-26 customer.
15-27 Sec. 8.109. WARRANTIES IN INDIRECT HOLDING. (a) A person
16-1 who originates an entitlement order to a securities intermediary
16-2 warrants to the securities intermediary that:
16-3 (1) the entitlement order is made by an appropriate
16-4 person, or if the entitlement order is by an agent, the agent has
16-5 actual authority to act on behalf of the appropriate person; and
16-6 (2) there is no adverse claim to the security
16-7 entitlement.
16-8 (b) A person who delivers a security certificate to a
16-9 securities intermediary for credit to a securities account or
16-10 originates an instruction with respect to an uncertificated
16-11 security directing that the uncertificated security be credited to
16-12 a securities account makes to the securities intermediary the
16-13 warranties specified in Section 8.108(a) or (b).
16-14 (c) If a securities intermediary delivers a security
16-15 certificate to its entitlement holder or causes its entitlement
16-16 holder to be registered as the owner of an uncertificated security,
16-17 the securities intermediary makes to the entitlement holder the
16-18 warranties specified in Section 8.108(a) or (b).
16-19 Sec. 8.110. APPLICABILITY; CHOICE OF LAW. (a) The local
16-20 law of the issuer's jurisdiction, as specified in Subsection (d),
16-21 governs:
16-22 (1) the validity of a security;
16-23 (2) the rights and duties of the issuer with respect
16-24 to registration of transfer;
16-25 (3) the effectiveness of registration of transfer by
16-26 the issuer;
16-27 (4) whether the issuer owes any duties to an adverse
17-1 claimant to a security; and
17-2 (5) whether an adverse claim can be asserted against a
17-3 person to whom transfer of a certificated or uncertificated
17-4 security is registered or a person who obtains control of an
17-5 uncertificated security.
17-6 (b) The local law of the securities intermediary's
17-7 jurisdiction, as specified in Subsection (e), governs:
17-8 (1) acquisition of a security entitlement from the
17-9 securities intermediary;
17-10 (2) the rights and duties of the securities
17-11 intermediary and entitlement holder arising out of a security
17-12 entitlement;
17-13 (3) whether the securities intermediary owes any
17-14 duties to an adverse claimant to a security entitlement; and
17-15 (4) whether an adverse claim can be asserted against a
17-16 person who acquires a security entitlement from the securities
17-17 intermediary or a person who purchases a security entitlement or
17-18 interest therein from an entitlement holder.
17-19 (c) The local law of the jurisdiction in which a security
17-20 certificate is located at the time of delivery governs whether an
17-21 adverse claim can be asserted against a person to whom the security
17-22 certificate is delivered.
17-23 (d) "Issuer's jurisdiction" means the jurisdiction under
17-24 which the issuer of the security is organized or, if permitted by
17-25 the law of that jurisdiction, the law of another jurisdiction
17-26 specified by the issuer. An issuer organized under the law of this
17-27 state may specify the law of another jurisdiction as the law
18-1 governing the matters specified in Subsections (a)(2)-(5).
18-2 (e) The following rules determine a securities
18-3 intermediary's jurisdiction for purposes of this section:
18-4 (1) If an agreement between the securities
18-5 intermediary and its entitlement holder specifies that it is
18-6 governed by the law of a particular jurisdiction, that jurisdiction
18-7 is the securities intermediary's jurisdiction.
18-8 (2) If an agreement between the securities
18-9 intermediary and its entitlement holder does not specify the
18-10 governing law as provided in Subdivision (1), but expressly
18-11 specifies that the securities account is maintained at an office in
18-12 a particular jurisdiction, that jurisdiction is the securities
18-13 intermediary's jurisdiction.
18-14 (3) If an agreement between the securities
18-15 intermediary and its entitlement holder does not specify a
18-16 jurisdiction as provided in Subdivision (1) or (2), the securities
18-17 intermediary's jurisdiction is the jurisdiction in which is located
18-18 the office identified in an account statement as the office serving
18-19 the entitlement holder's account.
18-20 (4) If an agreement between the securities
18-21 intermediary and its entitlement holder does not specify a
18-22 jurisdiction as provided in Subdivision (1) or (2) and an account
18-23 statement does not identify an office serving the entitlement
18-24 holder's account as provided in Subdivision (3), the securities
18-25 intermediary's jurisdiction is the jurisdiction in which is located
18-26 the chief executive office of the securities intermediary.
18-27 (f) A securities intermediary's jurisdiction is not
19-1 determined by:
19-2 (1) the physical location of certificates representing
19-3 financial assets;
19-4 (2) the jurisdiction in which is organized the issuer
19-5 of the financial asset with respect to which an entitlement holder
19-6 has a security entitlement; or
19-7 (3) the location of facilities for data processing or
19-8 other recordkeeping concerning the account.
19-9 Sec. 8.111. CLEARING CORPORATION RULES. A rule adopted by a
19-10 clearing corporation governing rights and obligations among the
19-11 clearing corporation and its participants in the clearing
19-12 corporation is effective even if the rule conflicts with this
19-13 chapter and affects another party who does not consent to the rule.
19-14 Sec. 8.112. CREDITOR'S LEGAL PROCESS. (a) The interest of
19-15 a debtor in a certificated security may be reached by a creditor
19-16 only by actual seizure of the security certificate by the officer
19-17 making the attachment or levy, except as otherwise provided in
19-18 Subsection (d). However, a certificated security for which the
19-19 certificate has been surrendered to the issuer may be reached by a
19-20 creditor by legal process on the issuer.
19-21 (b) The interest of a debtor in an uncertificated security
19-22 may be reached by a creditor only by legal process on the issuer at
19-23 its chief executive office in the United States, except as
19-24 otherwise provided in Subsection (d).
19-25 (c) The interest of a debtor in a security entitlement may
19-26 be reached by a creditor only by legal process on the securities
19-27 intermediary with whom the debtor's securities account is
20-1 maintained, except as otherwise provided in Subsection (d).
20-2 (d) The interest of a debtor in a certificated security for
20-3 which the certificate is in the possession of a secured party, or
20-4 in an uncertificated security registered in the name of a secured
20-5 party, or in a security entitlement maintained in the name of a
20-6 secured party may be reached by a creditor by legal process on the
20-7 secured party.
20-8 (e) A creditor whose debtor is the owner of a certificated
20-9 security, uncertificated security, or security entitlement is
20-10 entitled to aid from a court of competent jurisdiction, by
20-11 injunction or otherwise, in reaching the certificated security,
20-12 uncertificated security, or security entitlement or in satisfying
20-13 the claim by means allowed at law or in equity in regard to
20-14 property that cannot readily be reached by other legal process.
20-15 Sec. 8.113. STATUTE OF FRAUDS INAPPLICABLE. A contract or
20-16 modification of a contract for the sale or purchase of a security
20-17 is enforceable whether or not there is a writing signed or record
20-18 authenticated by a party against whom enforcement is sought, even
20-19 if the contract or modification is not capable of performance
20-20 within one year of its making.
20-21 Sec. 8.114. EVIDENTIARY RULES CONCERNING CERTIFICATED
20-22 SECURITIES. The following rules apply in an action on a
20-23 certificated security against the issuer:
20-24 (1) Unless specifically denied in the pleadings, each
20-25 signature on a security certificate or in a necessary indorsement
20-26 is admitted.
20-27 (2) If the effectiveness of a signature is put in
21-1 issue, the burden of establishing effectiveness is on the party
21-2 claiming under the signature, but the signature is presumed to be
21-3 genuine or authorized.
21-4 (3) If signatures on a security certificate are
21-5 admitted or established, production of the certificate entitles a
21-6 holder to recover on it unless the defendant establishes a defense
21-7 or a defect going to the validity of the security.
21-8 (4) If it is shown that a defense or defect exists,
21-9 the plaintiff has the burden of establishing that the plaintiff, or
21-10 some person under whom the plaintiff claims, is a person against
21-11 whom the defense or defect cannot be asserted.
21-12 Sec. 8.115. SECURITIES INTERMEDIARY AND OTHERS NOT LIABLE TO
21-13 ADVERSE CLAIMANT. A securities intermediary that has transferred a
21-14 financial asset pursuant to an effective entitlement order, or a
21-15 broker or other agent or bailee that has dealt with a financial
21-16 asset at the direction of its customer or principal, is not liable
21-17 to a person having an adverse claim to the financial asset, unless
21-18 the securities intermediary, or broker or other agent or bailee:
21-19 (1) took the action after it had been served with an
21-20 injunction, restraining order, or other legal process enjoining it
21-21 from doing so issued by a court of competent jurisdiction and had a
21-22 reasonable opportunity to act on the injunction, restraining order,
21-23 or other legal process;
21-24 (2) acted in collusion with the wrongdoer in violating
21-25 the rights of the adverse claimant; or
21-26 (3) in the case of a security certificate that has
21-27 been stolen, acted with notice of the adverse claim.
22-1 Sec. 8.116. SECURITIES INTERMEDIARY AS PURCHASER FOR VALUE.
22-2 A securities intermediary that receives a financial asset and
22-3 establishes a security entitlement to the financial asset in favor
22-4 of an entitlement holder is a purchaser for value of the financial
22-5 asset. A securities intermediary that acquires a security
22-6 entitlement to a financial asset from another securities
22-7 intermediary acquires the security entitlement for value if the
22-8 securities intermediary acquiring the security entitlement
22-9 establishes a security entitlement to the financial asset in favor
22-10 of an entitlement holder.
22-11 SUBCHAPTER B. ISSUE AND ISSUER
22-12 Sec. 8.201. ISSUER. (a) With respect to an obligation on
22-13 or a defense to a security, "issuer" includes a person that:
22-14 (1) places or authorizes the placing of its name on a
22-15 security certificate, other than as authenticating trustee,
22-16 registrar, transfer agent, or the like, to evidence a share,
22-17 participation, or other interest in its property or in an
22-18 enterprise or to evidence its duty to perform an obligation
22-19 represented by the certificate;
22-20 (2) creates a share, participation, or other interest
22-21 in its property or in an enterprise, or undertakes an obligation,
22-22 that is an uncertificated security;
22-23 (3) directly or indirectly creates a fractional
22-24 interest in its rights or property, if the fractional interest is
22-25 represented by a security certificate; or
22-26 (4) becomes responsible for, or in place of, another
22-27 person described as an issuer in this section.
23-1 (b) With respect to an obligation on or defense to a
23-2 security, a guarantor is an issuer to the extent of its guaranty,
23-3 whether or not its obligation is noted on a security certificate.
23-4 (c) With respect to a registration of a transfer, "issuer"
23-5 means a person on whose behalf transfer books are maintained.
23-6 Sec. 8.202. ISSUER'S RESPONSIBILITY AND DEFENSES; NOTICE OF
23-7 DEFECT OR DEFENSE. (a) Even against a purchaser for value and
23-8 without notice, the terms of a certificated security include terms
23-9 stated on the certificate and terms made part of the security by
23-10 reference on the certificate to another instrument, indenture, or
23-11 document or to a constitution, statute, ordinance, rule,
23-12 regulation, order, or the like to the extent the terms referred to
23-13 do not conflict with terms stated on the certificate. A reference
23-14 under this subsection does not of itself charge a purchaser for
23-15 value with notice of a defect going to the validity of the
23-16 security, even if the certificate expressly states that a person
23-17 accepting it admits notice. The terms of an uncertificated
23-18 security include those stated in any instrument, indenture, or
23-19 document or in a constitution, statute, ordinance, rule,
23-20 regulation, order, or the like pursuant to which the security is
23-21 issued.
23-22 (b) The following rules apply if an issuer asserts that a
23-23 security is not valid:
23-24 (1) A security other than one issued by a government
23-25 or governmental subdivision, agency, or instrumentality, even
23-26 though issued with a defect going to its validity, is valid in the
23-27 hands of a purchaser for value and without notice of the particular
24-1 defect unless the defect involves a violation of a constitutional
24-2 provision. In that case, the security is valid in the hands of a
24-3 purchaser for value and without notice of the defect, other than a
24-4 purchaser who takes by original issue.
24-5 (2) Subdivision (1) applies to an issuer that is a
24-6 government or governmental subdivision, agency, or instrumentality
24-7 only if:
24-8 (A) there has been substantial compliance with
24-9 the legal requirements governing the issue; or
24-10 (B) the issuer has received a substantial
24-11 consideration for the issue as a whole or for the particular
24-12 security and a stated purpose of the issue is one for which the
24-13 issuer has power to borrow money or issue the security.
24-14 (c) Except as otherwise provided in Section 8.205, lack of
24-15 genuineness of a certificated security is a complete defense, even
24-16 against a purchaser for value and without notice.
24-17 (d) All other defenses of the issuer of a security,
24-18 including nondelivery and conditional delivery of a certificated
24-19 security, are ineffective against a purchaser for value who has
24-20 taken the certificated security without notice of the particular
24-21 defense.
24-22 (e) This section does not affect the right of a party to
24-23 cancel a contract for a security "when, as and if issued" or "when
24-24 distributed" in the event of a material change in the character of
24-25 the security that is the subject of the contract or in the plan or
24-26 arrangement pursuant to which the security is to be issued or
24-27 distributed.
25-1 (f) If a security is held by a securities intermediary
25-2 against whom an entitlement holder has a security entitlement with
25-3 respect to the security, the issuer may not assert any defense that
25-4 the issuer could not assert if the entitlement holder held the
25-5 security directly.
25-6 Sec. 8.203. STALENESS AS NOTICE OF DEFECT OR DEFENSE. After
25-7 an act or event, other than a call that has been revoked, creating
25-8 a right to immediate performance of the principal obligation
25-9 represented by a certificated security or setting a date on or
25-10 after which the security is to be presented or surrendered for
25-11 redemption or exchange, a purchaser is charged with notice of any
25-12 defect in its issue or defense of the issuer if the act or event:
25-13 (1) requires the payment of money, the delivery of a
25-14 certificated security, the registration of transfer of an
25-15 uncertificated security, or any of them on presentation or
25-16 surrender of the security certificate, the money or security is
25-17 available on the date set for payment or exchange, and the
25-18 purchaser takes the security more than one year after that date; or
25-19 (2) is not covered by Subdivision (1) and the
25-20 purchaser takes the security more than two years after the date set
25-21 for surrender or presentation or the date on which performance
25-22 became due.
25-23 Sec. 8.204. EFFECT OF ISSUER'S RESTRICTION ON TRANSFER. A
25-24 restriction on transfer of a security imposed by the issuer, even
25-25 if otherwise lawful, is ineffective against a person without
25-26 knowledge of the restriction unless:
25-27 (1) the security is certificated and the restriction
26-1 is noted conspicuously on the security certificate; or
26-2 (2) the security is uncertificated and the registered
26-3 owner has been notified of the restriction.
26-4 Sec. 8.205. EFFECT OF UNAUTHORIZED SIGNATURE ON SECURITY
26-5 CERTIFICATE. An unauthorized signature placed on a security
26-6 certificate before or in the course of issue is ineffective, but
26-7 the signature is effective in favor of a purchaser for value of the
26-8 certificated security if the purchaser is without notice of the
26-9 lack of authority and the signing has been done by:
26-10 (1) an authenticating trustee, registrar, transfer
26-11 agent, or other person entrusted by the issuer with the signing of
26-12 the security certificate or of similar security certificates or
26-13 with the immediate preparation for signing of any of them; or
26-14 (2) an employee of the issuer, or of any of the
26-15 persons listed in Subdivision (1), entrusted with responsible
26-16 handling of the security certificate.
26-17 Sec. 8.206. COMPLETION OR ALTERATION OF SECURITY
26-18 CERTIFICATE. (a) If a security certificate contains the
26-19 signatures necessary to its issue or transfer but is incomplete in
26-20 any other respect:
26-21 (1) any person may complete it by filling in the
26-22 blanks as authorized; and
26-23 (2) even if the blanks are incorrectly filled in, the
26-24 security certificate as completed is enforceable by a purchaser who
26-25 took it for value and without notice of the incorrectness.
26-26 (b) A complete security certificate that has been improperly
26-27 altered, even if fraudulently, remains enforceable, but only
27-1 according to its original terms.
27-2 Sec. 8.207. RIGHTS AND DUTIES OF ISSUER WITH RESPECT TO
27-3 REGISTERED OWNERS. (a) Before due presentment for registration of
27-4 transfer of a certificated security in registered form or of an
27-5 instruction requesting registration of transfer of an
27-6 uncertificated security, the issuer or indenture trustee may treat
27-7 the registered owner as the person exclusively entitled to vote,
27-8 receive notifications, and otherwise exercise all the rights and
27-9 powers of an owner.
27-10 (b) This chapter does not affect the liability of the
27-11 registered owner of a security for a call, assessment, or the like.
27-12 Sec. 8.208. EFFECT OF SIGNATURE OF AUTHENTICATING TRUSTEE,
27-13 REGISTRAR, OR TRANSFER AGENT. (a) A person signing a security
27-14 certificate as authenticating trustee, registrar, transfer agent,
27-15 or the like warrants to a purchaser for value of the certificated
27-16 security, if the purchaser is without notice of a particular
27-17 defect, that:
27-18 (1) the certificate is genuine;
27-19 (2) the person's own participation in the issue of the
27-20 security is within the person's capacity and within the scope of
27-21 the authority received by the person from the issuer; and
27-22 (3) the person has reasonable grounds to believe that
27-23 the certificated security is in the form and within the amount the
27-24 issuer is authorized to issue.
27-25 (b) Unless otherwise agreed, a person signing under
27-26 Subsection (a) does not assume responsibility for the validity of
27-27 the security in other respects.
28-1 Sec. 8.209. ISSUER'S LIEN. A lien in favor of an issuer on
28-2 a certificated security is valid against a purchaser only if the
28-3 right of the issuer to the lien is noted conspicuously on the
28-4 security certificate.
28-5 Sec. 8.210. OVERISSUE. (a) In this section, "overissue"
28-6 means the issue of securities in excess of the amount the issuer
28-7 has corporate power to issue, but an overissue does not occur if
28-8 appropriate action has cured the overissue.
28-9 (b) Except as otherwise provided in Subsections (c) and (d),
28-10 the provisions of this chapter that validate a security or compel
28-11 its issue or reissue do not apply to the extent that validation,
28-12 issue, or reissue would result in overissue.
28-13 (c) If an identical security not constituting an overissue
28-14 is reasonably available for purchase, a person entitled to issue or
28-15 validation may compel the issuer to purchase the security and
28-16 deliver it if certificated or register its transfer if
28-17 uncertificated, against surrender of any security certificate the
28-18 person holds.
28-19 (d) If a security is not reasonably available for purchase,
28-20 a person entitled to issue or validation may recover from the
28-21 issuer the price the person or the last purchaser for value paid
28-22 for it with interest from the date of the person's demand.
28-23 SUBCHAPTER C. TRANSFER OF CERTIFICATED AND
28-24 UNCERTIFICATED SECURITIES
28-25 Sec. 8.301. DELIVERY. (a) Delivery of a certificated
28-26 security to a purchaser occurs when:
28-27 (1) the purchaser acquires possession of the security
29-1 certificate;
29-2 (2) another person, other than a securities
29-3 intermediary, either acquires possession of the security
29-4 certificate on behalf of the purchaser or, having previously
29-5 acquired possession of the certificate, acknowledges that it holds
29-6 for the purchaser; or
29-7 (3) a securities intermediary acting on behalf of the
29-8 purchaser acquires possession of the security certificate, only if
29-9 the certificate is in registered form and has been specially
29-10 indorsed to the purchaser by an effective indorsement.
29-11 (b) Delivery of an uncertificated security to a purchaser
29-12 occurs when:
29-13 (1) the issuer registers the purchaser as the
29-14 registered owner, on original issue or registration of transfer; or
29-15 (2) another person, other than a securities
29-16 intermediary, either becomes the registered owner of the
29-17 uncertificated security on behalf of the purchaser or, having
29-18 previously become the registered owner, acknowledges that it holds
29-19 for the purchaser.
29-20 Sec. 8.302. RIGHTS OF PURCHASER. (a) Except as otherwise
29-21 provided in Subsections (b) and (c), on delivery of a certificated
29-22 or uncertificated security to a purchaser, the purchaser acquires
29-23 all rights in the security that the transferor had or had power to
29-24 transfer.
29-25 (b) A purchaser of a limited interest acquires rights only
29-26 to the extent of the interest purchased.
29-27 (c) A purchaser of a certificated security who as a previous
30-1 holder had notice of an adverse claim does not improve its position
30-2 by taking from a protected purchaser.
30-3 Sec. 8.303. PROTECTED PURCHASER. (a) "Protected purchaser"
30-4 means a purchaser of a certificated or uncertificated security, or
30-5 of an interest therein, who:
30-6 (1) gives value;
30-7 (2) does not have notice of any adverse claim to the
30-8 security; and
30-9 (3) obtains control of the certificated or
30-10 uncertificated security.
30-11 (b) In addition to acquiring the rights of a purchaser, a
30-12 protected purchaser also acquires its interest in the security free
30-13 of any adverse claim.
30-14 Sec. 8.304. INDORSEMENT. (a) An indorsement may be in
30-15 blank or special. An indorsement in blank includes an indorsement
30-16 to bearer. A special indorsement specifies to whom a security is
30-17 to be transferred or who has power to transfer it. A holder may
30-18 convert a blank indorsement to a special indorsement.
30-19 (b) An indorsement purporting to be only of part of a
30-20 security certificate representing units intended by the issuer to
30-21 be separately transferable is effective to the extent of the
30-22 indorsement.
30-23 (c) An indorsement, whether special or in blank, does not
30-24 constitute a transfer until delivery of the certificate on which it
30-25 appears or, if the indorsement is on a separate document, until
30-26 delivery of both the document and the certificate.
30-27 (d) If a security certificate in registered form has been
31-1 delivered to a purchaser without a necessary indorsement, the
31-2 purchaser may become a protected purchaser only when the
31-3 indorsement is supplied. However, against a transferor, a transfer
31-4 is complete on delivery and the purchaser has a specifically
31-5 enforceable right to have any necessary indorsement supplied.
31-6 (e) An indorsement of a security certificate in bearer form
31-7 may give notice of an adverse claim to the certificate, but it does
31-8 not otherwise affect a right to registration that the holder
31-9 possesses.
31-10 (f) Unless otherwise agreed, a person making an indorsement
31-11 assumes only the obligations provided in Section 8.108 and not an
31-12 obligation that the security will be honored by the issuer.
31-13 Sec. 8.305. INSTRUCTION. (a) If an instruction has been
31-14 originated by an appropriate person but is incomplete in any other
31-15 respect, any person may complete it as authorized and the issuer
31-16 may rely on it as completed, even though it has been completed
31-17 incorrectly.
31-18 (b) Unless otherwise agreed, a person initiating an
31-19 instruction assumes only the obligations imposed by Section 8.108
31-20 and not an obligation that the security will be honored by the
31-21 issuer.
31-22 Sec. 8.306. EFFECT OF GUARANTEEING SIGNATURE, INDORSEMENT,
31-23 OR INSTRUCTION. (a) A person who guarantees a signature of an
31-24 indorser of a security certificate warrants that at the time of
31-25 signing:
31-26 (1) the signature was genuine;
31-27 (2) the signer was an appropriate person to indorse
32-1 or, if the signature is by an agent, the agent had actual authority
32-2 to act on behalf of the appropriate person; and
32-3 (3) the signer had legal capacity to sign.
32-4 (b) A person who guarantees a signature of the originator of
32-5 an instruction warrants that at the time of signing:
32-6 (1) the signature was genuine;
32-7 (2) the signer was an appropriate person to originate
32-8 the instruction or, if the signature is by an agent, the agent had
32-9 actual authority to act on behalf of the appropriate person, if the
32-10 person specified in the instruction as the registered owner was, in
32-11 fact, the registered owner, as to which fact the signature
32-12 guarantor does not make a warranty; and
32-13 (3) the signer had legal capacity to sign.
32-14 (c) A person who specially guarantees the signature of an
32-15 originator of an instruction makes the warranties of a signature
32-16 guarantor under Subsection (b) and also warrants that at the time
32-17 the instruction is presented to the issuer:
32-18 (1) the person specified in the instruction as the
32-19 registered owner of the uncertificated security will be the
32-20 registered owner; and
32-21 (2) the transfer of the uncertificated security
32-22 requested in the instruction will be registered by the issuer free
32-23 from all liens, security interests, restrictions, and claims other
32-24 than those specified in the instruction.
32-25 (d) A guarantor under Subsections (a) and (b) or a special
32-26 guarantor under Subsection (c) does not otherwise warrant the
32-27 rightfulness of the transfer.
33-1 (e) A person who guarantees an indorsement of a security
33-2 certificate makes the warranties of a signature guarantor under
33-3 Subsection (a) and also warrants the rightfulness of the transfer
33-4 in all respects.
33-5 (f) A person who guarantees an instruction requesting the
33-6 transfer of an uncertificated security makes the warranties of a
33-7 special signature guarantor under Subsection (c) and also warrants
33-8 the rightfulness of the transfer in all respects.
33-9 (g) An issuer may not require a special guaranty of
33-10 signature, a guaranty of indorsement, or a guaranty of instruction
33-11 as a condition to registration of transfer.
33-12 (h) The warranties under this section are made to a person
33-13 taking or dealing with the security in reliance on the guaranty,
33-14 and the guarantor is liable to the person for loss resulting from
33-15 their breach. An indorser or originator of an instruction whose
33-16 signature, indorsement, or instruction has been guaranteed is
33-17 liable to a guarantor for any loss suffered by the guarantor as a
33-18 result of breach of the warranties of the guarantor.
33-19 Sec. 8.307. PURCHASER'S RIGHT TO REQUISITES FOR REGISTRATION
33-20 OF TRANSFER. Unless otherwise agreed, the transferor of a security
33-21 on due demand shall supply the purchaser with proof of authority to
33-22 transfer or with any other requisite necessary to obtain
33-23 registration of the transfer of the security, but if the transfer
33-24 is not for value, a transferor need not comply unless the purchaser
33-25 pays the necessary expenses. If the transferor fails within a
33-26 reasonable time to comply with the demand, the purchaser may reject
33-27 or rescind the transfer.
34-1 SUBCHAPTER D. REGISTRATION
34-2 Sec. 8.401. DUTY OF ISSUER TO REGISTER TRANSFER. (a) If a
34-3 certificated security in registered form is presented to an issuer
34-4 with a request to register transfer or an instruction is presented
34-5 to an issuer with a request to register transfer of an
34-6 uncertificated security, the issuer shall register the transfer as
34-7 requested if:
34-8 (1) under the terms of the security the person seeking
34-9 registration of transfer is eligible to have the security
34-10 registered in its name;
34-11 (2) the indorsement or instruction is made by the
34-12 appropriate person or by an agent who has actual authority to act
34-13 on behalf of the appropriate person;
34-14 (3) reasonable assurance is given that the indorsement
34-15 or instruction is genuine and authorized (Section 8.402);
34-16 (4) any applicable law relating to the collection of
34-17 taxes has been complied with;
34-18 (5) the transfer does not violate any restriction on
34-19 transfer imposed by the issuer in accordance with Section 8.204;
34-20 (6) a demand that the issuer not register transfer has
34-21 not become effective under Section 8.403, or the issuer has
34-22 complied with Section 8.403(b) but no legal process or indemnity
34-23 bond is obtained as provided in Section 8.403(d); and
34-24 (7) the transfer is in fact rightful or is to a
34-25 protected purchaser.
34-26 (b) If an issuer is under a duty to register a transfer of a
34-27 security, the issuer is liable to a person presenting a
35-1 certificated security or an instruction for registration or to the
35-2 person's principal for loss resulting from unreasonable delay in
35-3 registration or failure or refusal to register the transfer.
35-4 Sec. 8.402. ASSURANCE THAT INDORSEMENT OR INSTRUCTION IS
35-5 EFFECTIVE. (a) An issuer may require the following assurance that
35-6 each necessary indorsement or each instruction is genuine and
35-7 authorized:
35-8 (1) in all cases, a guaranty of the signature of the
35-9 person making an indorsement or originating an instruction,
35-10 including, in the case of an instruction, reasonable assurance of
35-11 identity;
35-12 (2) if the indorsement is made or the instruction is
35-13 originated by an agent, appropriate assurance of actual authority
35-14 to sign;
35-15 (3) if the indorsement is made or the instruction is
35-16 originated by a fiduciary pursuant to Section 8.107(a)(4) or (5),
35-17 appropriate evidence of appointment or incumbency;
35-18 (4) if there is more than one fiduciary, reasonable
35-19 assurance that all who are required to sign have done so; and
35-20 (5) if the indorsement is made or the instruction is
35-21 originated by a person not covered by another provision of this
35-22 subsection, assurance appropriate to the case corresponding as
35-23 nearly as may be to the provisions of this subsection.
35-24 (b) An issuer may elect to require reasonable assurance
35-25 beyond that specified in this section.
35-26 (c) In this section:
35-27 (1) "Appropriate evidence of appointment or
36-1 incumbency" means:
36-2 (A) in the case of a fiduciary appointed or
36-3 qualified by a court, a certificate issued by or under the
36-4 direction or supervision of the court or an officer thereof and
36-5 dated within 60 days before the date of presentation for transfer;
36-6 or
36-7 (B) in any other case, a copy of a document
36-8 showing the appointment or a certificate issued by or on behalf of
36-9 a person reasonably believed by an issuer to be responsible or, in
36-10 the absence of that document or certificate, other evidence the
36-11 issuer reasonably considers appropriate.
36-12 (2) "Guaranty of the signature" means a guaranty
36-13 signed by or on behalf of a person reasonably believed by the
36-14 issuer to be responsible. An issuer may adopt standards with
36-15 respect to responsibility if they are not manifestly unreasonable.
36-16 Sec. 8.403. DEMAND THAT ISSUER NOT REGISTER TRANSFER. (a)
36-17 A person who is an appropriate person to make an indorsement or
36-18 originate an instruction may demand that the issuer not register
36-19 transfer of a security by communicating to the issuer a
36-20 notification that identifies the registered owner and the issue of
36-21 which the security is a part and provides an address for
36-22 communications directed to the person making the demand. The
36-23 demand is effective only if it is received by the issuer at a time
36-24 and in a manner affording the issuer reasonable opportunity to act
36-25 on it.
36-26 (b) If a certificated security in registered form is
36-27 presented to an issuer with a request to register transfer or an
37-1 instruction is presented to an issuer with a request to register
37-2 transfer of an uncertificated security after a demand that the
37-3 issuer not register transfer has become effective, the issuer shall
37-4 promptly communicate to (i) the person who initiated the demand at
37-5 the address provided in the demand and (ii) the person who
37-6 presented the security for registration of transfer or initiated
37-7 the instruction requesting registration of transfer a notification
37-8 stating that:
37-9 (1) the certificated security has been presented for
37-10 registration of transfer or the instruction for registration of
37-11 transfer of the uncertificated security has been received;
37-12 (2) a demand that the issuer not register transfer had
37-13 previously been received; and
37-14 (3) the issuer will withhold registration of transfer
37-15 for a period of time stated in the notification in order to provide
37-16 the person who initiated the demand an opportunity to obtain legal
37-17 process or an indemnity bond.
37-18 (c) The period described in Subsection (b)(3) may not exceed
37-19 30 days after the date of communication of the notification. A
37-20 shorter period may be specified by the issuer if it is not
37-21 manifestly unreasonable.
37-22 (d) An issuer is not liable to a person who initiated a
37-23 demand that the issuer not register transfer for any loss the
37-24 person suffers as a result of registration of a transfer pursuant
37-25 to an effective indorsement or instruction if the person who
37-26 initiated the demand does not, within the time stated in the
37-27 issuer's communication, either:
38-1 (1) obtain an appropriate injunction, restraining
38-2 order, or other process from a court of competent jurisdiction
38-3 enjoining the issuer from registering the transfer; or
38-4 (2) file with the issuer an indemnity bond, sufficient
38-5 in the issuer's judgment to protect the issuer and any transfer
38-6 agent, registrar, or other agent of the issuer involved from any
38-7 loss it or they may suffer by refusing to register the transfer.
38-8 (e) This section does not relieve an issuer from liability
38-9 for registering transfer pursuant to an indorsement or instruction
38-10 that was not effective.
38-11 Sec. 8.404. WRONGFUL REGISTRATION. (a) Except as otherwise
38-12 provided in Section 8.406, an issuer is liable for wrongful
38-13 registration of transfer if the issuer has registered a transfer of
38-14 a security to a person not entitled to it, and the transfer was
38-15 registered:
38-16 (1) pursuant to an ineffective indorsement or
38-17 instruction;
38-18 (2) after a demand that the issuer not register
38-19 transfer became effective under Section 8.403(a) and the issuer did
38-20 not comply with Section 8.403(b);
38-21 (3) after the issuer had been served with an
38-22 appropriate injunction, restraining order, or other process from a
38-23 court of competent jurisdiction enjoining it from registering the
38-24 transfer, and the issuer had a reasonable opportunity to act on the
38-25 injunction, restraining order, or other legal process; or
38-26 (4) by an issuer acting in collusion with the
38-27 wrongdoer.
39-1 (b) An issuer that is liable for wrongful registration of
39-2 transfer under Subsection (a) on demand shall provide the person
39-3 entitled to the security with a like certificated or uncertificated
39-4 security and any payments or distributions that the person did not
39-5 receive as a result of the wrongful registration. If an overissue
39-6 would result, the issuer's liability to provide the person with a
39-7 like security is governed by Section 8.210.
39-8 (c) Except as otherwise provided in Subsection (a) or in a
39-9 law relating to the collection of taxes, an issuer is not liable to
39-10 an owner or other person suffering loss as a result of the
39-11 registration of a transfer of a security if registration was made
39-12 pursuant to an effective indorsement or instruction.
39-13 Sec. 8.405. REPLACEMENT OF LOST, DESTROYED, OR WRONGFULLY
39-14 TAKEN SECURITY CERTIFICATE. (a) If an owner of a certificated
39-15 security, whether in registered or bearer form, claims that the
39-16 certificate has been lost, destroyed, or wrongfully taken, the
39-17 issuer shall issue a new certificate if the owner:
39-18 (1) so requests before the issuer has notice that the
39-19 certificate has been acquired by a protected purchaser;
39-20 (2) files with the issuer a sufficient indemnity bond;
39-21 and
39-22 (3) satisfies other reasonable requirements imposed by
39-23 the issuer.
39-24 (b) If, after the issue of a new security certificate, a
39-25 protected purchaser of the original certificate presents it for
39-26 registration of transfer, the issuer shall register the transfer
39-27 unless an overissue would result. In that case, the issuer's
40-1 liability is governed by Section 8.210. In addition to any rights
40-2 on the indemnity bond, an issuer may recover the new certificate
40-3 from a person to whom it was issued or any person taking under that
40-4 person, except a protected purchaser.
40-5 Sec. 8.406. OBLIGATION TO NOTIFY ISSUER OF LOST, DESTROYED,
40-6 OR WRONGFULLY TAKEN SECURITY CERTIFICATE. If a security
40-7 certificate has been lost, apparently destroyed, or wrongfully
40-8 taken, and the owner fails to notify the issuer of that fact within
40-9 a reasonable time after the owner has notice of it and the issuer
40-10 registers a transfer of the security before receiving notification,
40-11 the owner may not assert against the issuer a claim for registering
40-12 the transfer under Section 8.404 or a claim to a new security
40-13 certificate under Section 8.405.
40-14 Sec. 8.407. AUTHENTICATING TRUSTEE, TRANSFER AGENT, AND
40-15 REGISTRAR. A person acting as authenticating trustee, transfer
40-16 agent, registrar, or other agent for an issuer in the registration
40-17 of a transfer of its securities, in the issue of new security
40-18 certificates or uncertificated securities, or in the cancellation
40-19 of surrendered security certificates has the same obligation to the
40-20 holder or owner of a certificated or uncertificated security with
40-21 regard to the particular functions performed as the issuer has in
40-22 regard to those functions.
40-23 SUBCHAPTER E. SECURITY ENTITLEMENTS
40-24 Sec. 8.501. SECURITIES ACCOUNT; ACQUISITION OF SECURITY
40-25 ENTITLEMENT FROM SECURITIES INTERMEDIARY. (a) "Securities
40-26 account" means an account to which a financial asset is or may be
40-27 credited in accordance with an agreement under which the person
41-1 maintaining the account undertakes to treat the person for whom the
41-2 account is maintained as entitled to exercise the rights that
41-3 comprise the financial asset.
41-4 (b) Except as otherwise provided in Subsections (d) and (e),
41-5 a person acquires a security entitlement if a securities
41-6 intermediary:
41-7 (1) indicates by book entry that a financial asset has
41-8 been credited to the person's securities account;
41-9 (2) receives a financial asset from the person or
41-10 acquires a financial asset for the person and, in either case,
41-11 accepts it for credit to the person's securities account; or
41-12 (3) becomes obligated under other law, regulation, or
41-13 rule to credit a financial asset to the person's securities
41-14 account.
41-15 (c) If a condition of Subsection (b) has been met, a person
41-16 has a security entitlement even though the securities intermediary
41-17 does not itself hold the financial asset.
41-18 (d) If a securities intermediary holds a financial asset for
41-19 another person, and the financial asset is registered in the name
41-20 of, payable to the order of, or specially indorsed to the other
41-21 person and has not been indorsed to the securities intermediary or
41-22 in blank, the other person is treated as holding the financial
41-23 asset directly rather than as having a security entitlement with
41-24 respect to the financial asset.
41-25 (e) Issuance of a security is not establishment of a
41-26 security entitlement.
41-27 Sec. 8.502. ASSERTION OF ADVERSE CLAIM AGAINST ENTITLEMENT
42-1 HOLDER. An action based on an adverse claim to a financial asset,
42-2 whether framed in conversion, replevin, constructive trust,
42-3 equitable lien, or other theory, may not be asserted against a
42-4 person who acquires a security entitlement under Section 8.501 for
42-5 value and without notice of the adverse claim.
42-6 Sec. 8.503. PROPERTY INTEREST OF ENTITLEMENT HOLDER IN
42-7 FINANCIAL ASSET HELD BY SECURITIES INTERMEDIARY. (a) To the
42-8 extent necessary for a securities intermediary to satisfy all
42-9 security entitlements with respect to a particular financial asset,
42-10 all interests in that financial asset held by the securities
42-11 intermediary are held by the securities intermediary for the
42-12 entitlement holders, are not property of the securities
42-13 intermediary, and are not subject to claims of creditors of the
42-14 securities intermediary, except as otherwise provided in Section
42-15 8.511.
42-16 (b) An entitlement holder's property interest with respect
42-17 to a particular financial asset under Subsection (a) is a pro rata
42-18 property interest in all interests in that financial asset held by
42-19 the securities intermediary, without regard to the time the
42-20 entitlement holder acquired the security entitlement or the time
42-21 the securities intermediary acquired the interest in that financial
42-22 asset.
42-23 (c) An entitlement holder's property interest with respect
42-24 to a particular financial asset under Subsection (a) may be
42-25 enforced against the securities intermediary only by exercise of
42-26 the entitlement holder's rights under Sections 8.505-8.508.
42-27 (d) An entitlement holder's property interest with respect
43-1 to a particular financial asset under Subsection (a) may be
43-2 enforced against a purchaser of the financial asset or interest
43-3 therein only if:
43-4 (1) insolvency proceedings have been initiated by or
43-5 against the securities intermediary;
43-6 (2) the securities intermediary does not have
43-7 sufficient interests in the financial asset to satisfy the security
43-8 entitlements of all of its entitlement holders to that financial
43-9 asset;
43-10 (3) the securities intermediary violated its
43-11 obligations under Section 8.504 by transferring the financial asset
43-12 or interest therein to the purchaser; and
43-13 (4) the purchaser is not protected under Subsection
43-14 (f).
43-15 (e) The trustee or other liquidator, acting on behalf of all
43-16 entitlement holders having security entitlements with respect to a
43-17 particular financial asset, may recover the financial asset, or
43-18 interest therein, from the purchaser. If the trustee or other
43-19 liquidator elects not to pursue that right, an entitlement holder
43-20 whose security entitlement remains unsatisfied has the right to
43-21 recover its interest in the financial asset from the purchaser.
43-22 (f) An action based on the entitlement holder's property
43-23 interest with respect to a particular financial asset under
43-24 Subsection (a), whether framed in conversion, replevin,
43-25 constructive trust, equitable lien, or other theory, may not be
43-26 asserted against any purchaser of a financial asset or interest
43-27 therein who gives value, obtains control, and does not act in
44-1 collusion with the securities intermediary in violating the
44-2 securities intermediary's obligations under Section 8.504.
44-3 Sec. 8.504. DUTY OF SECURITIES INTERMEDIARY TO MAINTAIN
44-4 FINANCIAL ASSET. (a) A securities intermediary shall promptly
44-5 obtain and thereafter maintain a financial asset in a quantity
44-6 corresponding to the aggregate of all security entitlements it has
44-7 established in favor of its entitlement holders with respect to
44-8 that financial asset. The securities intermediary may maintain
44-9 those financial assets directly or through one or more other
44-10 securities intermediaries.
44-11 (b) Except to the extent otherwise agreed on by its
44-12 entitlement holder, a securities intermediary may not grant any
44-13 security interests in a financial asset it is obligated to maintain
44-14 pursuant to Subsection (a).
44-15 (c) A securities intermediary satisfies the duty in
44-16 Subsection (a) if:
44-17 (1) the securities intermediary acts with respect to
44-18 the duty as agreed on by the entitlement holder and the securities
44-19 intermediary; or
44-20 (2) in the absence of agreement, the securities
44-21 intermediary exercises due care in accordance with reasonable
44-22 commercial standards to obtain and maintain the financial asset.
44-23 (d) This section does not apply to a clearing corporation
44-24 that is itself the obligor of an option or similar obligation to
44-25 which its entitlement holders have security entitlements.
44-26 Sec. 8.505. DUTY OF SECURITIES INTERMEDIARY WITH RESPECT TO
44-27 PAYMENTS AND DISTRIBUTIONS. (a) A securities intermediary shall
45-1 take action to obtain a payment or distribution made by the issuer
45-2 of a financial asset. A securities intermediary satisfies the duty
45-3 if:
45-4 (1) the securities intermediary acts with respect to
45-5 the duty as agreed on by the entitlement holder and the securities
45-6 intermediary; or
45-7 (2) in the absence of agreement, the securities
45-8 intermediary exercises due care in accordance with reasonable
45-9 commercial standards to attempt to obtain the payment or
45-10 distribution.
45-11 (b) A securities intermediary is obligated to its
45-12 entitlement holder for a payment or distribution made by the issuer
45-13 of a financial asset if the payment or distribution is received by
45-14 the securities intermediary.
45-15 Sec. 8.506. DUTY OF SECURITIES INTERMEDIARY TO EXERCISE
45-16 RIGHTS AS DIRECTED BY ENTITLEMENT HOLDER. A securities
45-17 intermediary shall exercise rights with respect to a financial
45-18 asset if directed to do so by an entitlement holder. A securities
45-19 intermediary satisfies the duty if:
45-20 (1) the securities intermediary acts with respect to
45-21 the duty as agreed on by the entitlement holder and the securities
45-22 intermediary; or
45-23 (2) in the absence of agreement, the securities
45-24 intermediary either places the entitlement holder in a position to
45-25 exercise the rights directly or exercises due care in accordance
45-26 with reasonable commercial standards to follow the direction of the
45-27 entitlement holder.
46-1 Sec. 8.507. DUTY OF SECURITIES INTERMEDIARY TO COMPLY WITH
46-2 ENTITLEMENT ORDER. (a) A securities intermediary shall comply
46-3 with an entitlement order if the entitlement order is originated by
46-4 the appropriate person, the securities intermediary has had
46-5 reasonable opportunity to assure itself that the entitlement order
46-6 is genuine and authorized, and the securities intermediary has had
46-7 reasonable opportunity to comply with the entitlement order. A
46-8 securities intermediary satisfies the duty if:
46-9 (1) the securities intermediary acts with respect to
46-10 the duty as agreed on by the entitlement holder and the securities
46-11 intermediary; or
46-12 (2) in the absence of agreement, the securities
46-13 intermediary exercises due care in accordance with reasonable
46-14 commercial standards to comply with the entitlement order.
46-15 (b) If a securities intermediary transfers a financial asset
46-16 pursuant to an ineffective entitlement order, the securities
46-17 intermediary shall reestablish a security entitlement in favor of
46-18 the person entitled to it and pay or credit any payments or
46-19 distributions that the person did not receive as a result of the
46-20 wrongful transfer. If the securities intermediary does not
46-21 reestablish a security entitlement, the securities intermediary is
46-22 liable to the entitlement holder for damages.
46-23 Sec. 8.508. DUTY OF SECURITIES INTERMEDIARY TO CHANGE
46-24 ENTITLEMENT HOLDER'S POSITION TO OTHER FORM OF SECURITY HOLDING. A
46-25 securities intermediary shall act at the direction of an
46-26 entitlement holder to change a security entitlement into another
46-27 available form of holding for which the entitlement holder is
47-1 eligible or to cause the financial asset to be transferred to a
47-2 securities account of the entitlement holder with another
47-3 securities intermediary. A securities intermediary satisfies the
47-4 duty if:
47-5 (1) the securities intermediary acts as agreed on by
47-6 the entitlement holder and the securities intermediary; or
47-7 (2) in the absence of agreement, the securities
47-8 intermediary exercises due care in accordance with reasonable
47-9 commercial standards to follow the direction of the entitlement
47-10 holder.
47-11 Sec. 8.509. SPECIFICATION OF DUTIES OF SECURITIES
47-12 INTERMEDIARY BY OTHER STATUTE OR REGULATION; MANNER OF PERFORMANCE
47-13 OF DUTIES OF SECURITIES INTERMEDIARY AND EXERCISE OF RIGHTS OF
47-14 ENTITLEMENT HOLDER. (a) If the substance of a duty imposed on a
47-15 securities intermediary by Sections 8.504-8.508 is the subject of
47-16 another statute, regulation, or rule, compliance with that statute,
47-17 regulation, or rule satisfies the duty.
47-18 (b) To the extent that specific standards for the
47-19 performance of the duties of a securities intermediary or the
47-20 exercise of the rights of an entitlement holder are not specified
47-21 by another statute, regulation, or rule or by agreement between the
47-22 securities intermediary and the entitlement holder, the securities
47-23 intermediary shall perform its duties and the entitlement holder
47-24 shall exercise its rights in a commercially reasonable manner.
47-25 (c) The obligation of a securities intermediary to perform
47-26 the duties imposed by Sections 8.504-8.508 is subject to:
47-27 (1) rights of the securities intermediary arising out
48-1 of a security interest under a security agreement with the
48-2 entitlement holder or otherwise; and
48-3 (2) rights of the securities intermediary under
48-4 another law, regulation, rule, or agreement to withhold performance
48-5 of its duties as a result of unfulfilled obligations of the
48-6 entitlement holder to the securities intermediary.
48-7 (d) Sections 8.504-8.508 do not require a securities
48-8 intermediary to take any action that is prohibited by another
48-9 statute, regulation, or rule.
48-10 Sec. 8.510. RIGHTS OF PURCHASER OF SECURITY ENTITLEMENT FROM
48-11 ENTITLEMENT HOLDER. (a) An action based on an adverse claim to a
48-12 financial asset or security entitlement, whether framed in
48-13 conversion, replevin, constructive trust, equitable lien, or other
48-14 theory, may not be asserted against a person who purchases a
48-15 security entitlement, or an interest therein, from an entitlement
48-16 holder if the purchaser gives value, does not have notice of the
48-17 adverse claim, and obtains control.
48-18 (b) If an adverse claim could not have been asserted against
48-19 an entitlement holder under Section 8.502, the adverse claim cannot
48-20 be asserted against a person who purchases from the entitlement
48-21 holder a security entitlement or an interest therein.
48-22 (c) In a case not covered by the priority rules in Chapter
48-23 9, a purchaser for value of a security entitlement, or an interest
48-24 therein, who obtains control has priority over a purchaser of a
48-25 security entitlement, or an interest therein, who does not obtain
48-26 control. Purchasers who have control rank equally, except that a
48-27 securities intermediary as purchaser has priority over a
49-1 conflicting purchaser who has control unless otherwise agreed on by
49-2 the securities intermediary.
49-3 Sec. 8.511. PRIORITY AMONG SECURITY INTERESTS AND
49-4 ENTITLEMENT HOLDERS. (a) Except as otherwise provided in
49-5 Subsections (b) and (c), if a securities intermediary does not have
49-6 sufficient interests in a particular financial asset to satisfy
49-7 both its obligations to entitlement holders who have security
49-8 entitlements to that financial asset and its obligation to a
49-9 creditor of the securities intermediary who has a security interest
49-10 in that financial asset, the claims of entitlement holders, other
49-11 than the creditor, have priority over the claim of the creditor.
49-12 (b) A claim of a creditor of a securities intermediary who
49-13 has a security interest in a financial asset held by a securities
49-14 intermediary has priority over claims of the securities
49-15 intermediary's entitlement holders who have security entitlements
49-16 with respect to that financial asset if the creditor has control
49-17 over the financial asset.
49-18 (c) If a clearing corporation does not have sufficient
49-19 financial assets to satisfy both its obligations to entitlement
49-20 holders who have security entitlements with respect to a financial
49-21 asset and its obligation to a creditor of the clearing corporation
49-22 who has a security interest in that financial asset, the claim of
49-23 the creditor has priority over the claims of entitlement holders.
49-24 SECTION 2. Section 9.103(f), Business & Commerce Code, is
49-25 amended to read as follows:
49-26 (f) Investment property <Uncertificated securities>.
49-27 (1) This subsection applies to investment property.
50-1 (2) Except as otherwise provided in Subdivision (6),
50-2 during the time that a security certificate is located in a
50-3 jurisdiction, perfection of a security interest, the effect of
50-4 perfection or non-perfection, and the priority of a security
50-5 interest in the certificated security represented thereby are
50-6 governed by the local law of that jurisdiction.
50-7 (3) Except as otherwise provided in Subdivision (6),
50-8 perfection of a security interest, the effect of perfection or
50-9 non-perfection, and the priority of a security interest in an
50-10 uncertificated security are governed by the local law of the
50-11 issuer's jurisdiction as specified in Section 8.110(d).
50-12 (4) Except as otherwise provided in Subdivision (6),
50-13 perfection of a security interest, the effect of perfection or
50-14 non-perfection, and the priority of a security interest in a
50-15 security entitlement or securities account are governed by the
50-16 local law of the securities intermediary's jurisdiction as
50-17 specified in Section 8.110(e).
50-18 (5) Except as otherwise provided in Subdivision (6),
50-19 perfection of a security interest, the effect of perfection or
50-20 non-perfection, and the priority of a security interest in a
50-21 commodity contract or commodity account are governed by the local
50-22 law of the commodity intermediary's jurisdiction. The following
50-23 rules determine a commodity intermediary's jurisdiction for
50-24 purposes of this subdivision:
50-25 (A) If an agreement between the commodity
50-26 intermediary and the commodity customer specifies that it is
50-27 governed by the law of a particular jurisdiction, that jurisdiction
51-1 is the commodity intermediary's jurisdiction.
51-2 (B) If an agreement between the commodity
51-3 intermediary and the commodity customer does not specify the
51-4 governing law as provided in Paragraph (A), but expressly specifies
51-5 that the commodity account is maintained at an office in a
51-6 particular jurisdiction, that jurisdiction is the commodity
51-7 intermediary's jurisdiction.
51-8 (C) If an agreement between the commodity
51-9 intermediary and the commodity customer does not specify a
51-10 jurisdiction as provided in Paragraph (A) or (B), the commodity
51-11 intermediary's jurisdiction is the jurisdiction in which is located
51-12 the office identified in an account statement as the office serving
51-13 the commodity customer's account.
51-14 (D) If an agreement between the commodity
51-15 intermediary and the commodity customer does not specify a
51-16 jurisdiction as provided in Paragraph (A) or (B) and an account
51-17 statement does not identify an office serving the commodity
51-18 customer's account as provided in Paragraph (C), the commodity
51-19 intermediary's jurisdiction is the jurisdiction in which is located
51-20 the chief executive office of the commodity intermediary.
51-21 (6) Perfection of a security interest by filing,
51-22 automatic perfection of a security interest in investment property
51-23 granted by a broker or securities intermediary, and automatic
51-24 perfection of a security interest in a commodity contract or
51-25 commodity account granted by a commodity intermediary are governed
51-26 by the local law of the jurisdiction in which the debtor is
51-27 located. <The law (including the conflict of laws rules) of the
52-1 jurisdiction of organization of the issuer governs the perfection
52-2 and the effect of perfection or non-perfection of a security
52-3 interest in uncertificated securities.>
52-4 SECTION 3. Section 9.105, Business & Commerce Code, is
52-5 amended to read as follows:
52-6 Sec. 9.105. Definitions and Index of Definitions. (a) In
52-7 this chapter, unless the context otherwise requires:
52-8 (1) "Account debtor" means the person who is obligated
52-9 on an account, chattel paper or general intangible.<;>
52-10 (2) "Chattel paper" means a writing or writings which
52-11 evidence both a monetary obligation and a security interest in or a
52-12 lease of specific goods, but a charter or other contract involving
52-13 the use or hire of a vessel is not chattel paper. When a
52-14 transaction is evidenced both by such a security agreement or a
52-15 lease and by an instrument or a series of instruments, the group of
52-16 writings taken together constitutes chattel paper.<;>
52-17 (3) "Collateral" means the property subject to a
52-18 security interest, and includes accounts and chattel paper which
52-19 have been sold.<;>
52-20 (4) "Debtor" means the person who owes payment or
52-21 other performance of the obligation secured, whether or not he owns
52-22 or has rights in the collateral, and includes the seller of
52-23 accounts or chattel paper. Where the debtor and the owner of the
52-24 collateral are not the same person, the term "debtor" means the
52-25 owner of the collateral in any provision of the chapter dealing
52-26 with the collateral, the obligor in any provision dealing with the
52-27 obligation, and may include both where the context so requires.<;>
53-1 (5) "Deposit account" means a demand, time, savings,
53-2 passbook or like account maintained with a bank, savings and loan
53-3 association, credit union or like organization, other than an
53-4 account evidenced by a certificate of deposit.<;>
53-5 (6) "Document" means document of title as defined in
53-6 the general definitions of Chapter 1 (Section 1.201), and a receipt
53-7 of the kind described in Subsection (b) of Section 7.201.<;>
53-8 (7) "Encumbrance" includes real estate mortgages and
53-9 other liens on real estate and all other rights in real estate that
53-10 are not ownership interests.<;>
53-11 (8) "Goods" includes all things which are movable at
53-12 the time the security interest attaches or which are fixtures
53-13 (Section 9.313), but does not include money, documents,
53-14 instruments, investment property, accounts, chattel paper, general
53-15 intangibles, or minerals or the like (including oil and gas) before
53-16 extraction. "Goods" also includes standing timber which is to be
53-17 cut and removed under a conveyance or contract for sale, the unborn
53-18 young of animals, and growing crops.<;>
53-19 (9) "Instrument" means a negotiable instrument
53-20 (defined in Section 3.104)<, or a certificated security (defined in
53-21 Section 8.102)> or any other writing which evidences a right to the
53-22 payment of money and is not itself a security agreement or lease
53-23 and is of a type which is in ordinary course of business
53-24 transferred by delivery with any necessary indorsement or
53-25 assignment, but the term does not include investment property.<;>
53-26 (10) "Mortgage" means a consensual interest created by
53-27 a real estate mortgage, a trust deed on real estate, or the
54-1 like.<;>
54-2 (11) An advance is made "pursuant to commitment" if
54-3 the secured party has bound himself to make it, whether or not a
54-4 subsequent event of default or other event not within his control
54-5 has relieved or may relieve him from his obligation.<;>
54-6 (12) "Security agreement" means an agreement which
54-7 creates or provides for a security interest.<;>
54-8 (13) "Secured party" means a lender, seller or other
54-9 person in whose favor there is a security interest, including a
54-10 person to whom accounts or chattel paper have been sold. When the
54-11 holders of obligations issued under an indenture of trust,
54-12 equipment trust agreement or the like are represented by a trustee
54-13 or other person, the representative is the secured party.
54-14 (b) Other definitions applying to this chapter and the
54-15 sections in which they appear are:
54-16 "Account". Section 9.106.
54-17 "Attach". Section 9.203.
54-18 "Commodity contract". Section 9.115.
54-19 "Commodity customer". Section 9.115.
54-20 "Commodity intermediary". Section 9.115.
54-21 "Construction mortgage". Section 9.313(a).
54-22 "Consumer goods". Section 9.109(1).
54-23 "Control". Section 9.115.
54-24 "Equipment". Section 9.109(2).
54-25 "Farm products". Section 9.109(3).
54-26 "Fixture". Section 9.313.
54-27 "Fixture filing". Section 9.313.
55-1 "General intangibles". Section 9.106.
55-2 "Inventory". Section 9.109(4).
55-3 "Investment property". Section 9.115.
55-4 "Lien creditor". Section 9.301(c).
55-5 "Proceeds". Section 9.306(a).
55-6 "Purchase money security interest". Section 9.107.
55-7 "United States". Section 9.103.
55-8 (c) The following definitions in other chapters apply to
55-9 this chapter:
55-10 "Broker". Section 8.102.
55-11 "Certificated security". Section 8.102.
55-12 "Check". Section 3.104.
55-13 "Clearing corporation". Section 8.102.
55-14 "Contract for sale". Section 2.106.
55-15 "Control". Section 8.106.
55-16 "Delivery". Section 8.301.
55-17 "Entitlement holder". Section 8.102.
55-18 "Financial asset". Section 8.102.
55-19 "Holder in due course". Section 3.302.
55-20 "Note". Section 3.104.
55-21 "Sale". Section 2.106.
55-22 "Securities intermediary". Section 8.102.
55-23 "Security". Section 8.102.
55-24 "Security certificate". Section 8.102.
55-25 "Security entitlement". Section 8.102.
55-26 "Uncertificated security". Section 8.102.
55-27 (d) In addition, Chapter 1 contains general definitions and
56-1 principles of construction and interpretation applicable throughout
56-2 this chapter.
56-3 SECTION 4. Section 9.106, Business & Commerce Code, is
56-4 amended to read as follows:
56-5 Sec. 9.106. Definitions: "Account"; "General Intangibles".
56-6 "Account" means any right to payment for goods sold or leased or
56-7 for services rendered which is not evidenced by an instrument or
56-8 chattel paper, whether or not it has been earned by performance.
56-9 "General intangibles" means any personal property (including things
56-10 in action) other than goods, accounts, chattel paper, documents,
56-11 instruments, investment property, and money. All rights to payment
56-12 earned or unearned under a charter or other contract involving the
56-13 use or hire of a vessel and all rights incident to the charter or
56-14 contract are accounts.
56-15 SECTION 5. Subchapter A, Chapter 9, Business & Commerce
56-16 Code, is amended by adding Sections 9.115 and 9.116 to read as
56-17 follows:
56-18 Sec. 9.115. INVESTMENT PROPERTY. (a) In this chapter:
56-19 (1) "Commodity account" means an account maintained by
56-20 a commodity intermediary in which a commodity contract is carried
56-21 for a commodity customer.
56-22 (2) "Commodity contract" means a commodity futures
56-23 contract, an option on a commodity futures contract, a commodity
56-24 option, or other contract that, in each case, is:
56-25 (A) traded on or subject to the rules of a board
56-26 of trade that has been designated as a contract market for such a
56-27 contract pursuant to the federal commodities laws; or
57-1 (B) traded on a foreign commodity board of
57-2 trade, exchange, or market, and is carried on the books of a
57-3 commodity intermediary for a commodity customer.
57-4 (3) "Commodity customer" means a person for whom a
57-5 commodity intermediary carries a commodity contract on its books.
57-6 (4) "Commodity intermediary" means:
57-7 (A) a person who is registered as a futures
57-8 commission merchant under the federal commodities laws; or
57-9 (B) a person who in the ordinary course of its
57-10 business provides clearance or settlement services for a board of
57-11 trade that has been designated as a contract market pursuant to the
57-12 federal commodities laws.
57-13 (5) "Control," with respect to a certificated
57-14 security, uncertificated security, or security entitlement, has the
57-15 meaning specified in Section 8.106. A secured party has control
57-16 over a commodity contract if, by agreement among the commodity
57-17 customer, the commodity intermediary, and the secured party, the
57-18 commodity intermediary has agreed that it will apply any value
57-19 distributed on account of the commodity contract as directed by the
57-20 secured party without further consent by the commodity customer.
57-21 If a commodity customer grants a security interest in a commodity
57-22 contract to its own commodity intermediary, the commodity
57-23 intermediary as secured party has control. A secured party has
57-24 control over a securities account or commodity account if the
57-25 secured party has control over all security entitlements or
57-26 commodity contracts carried in the securities account or commodity
57-27 account.
58-1 (6) "Investment property" means:
58-2 (A) a security, whether certificated or
58-3 uncertificated;
58-4 (B) a security entitlement;
58-5 (C) a securities account;
58-6 (D) a commodity contract; or
58-7 (E) a commodity account.
58-8 (b) Attachment or perfection of a security interest in a
58-9 securities account is also attachment or perfection of a security
58-10 interest in all security entitlements carried in the securities
58-11 account. Attachment or perfection of a security interest in a
58-12 commodity account is also attachment or perfection of a security
58-13 interest in all commodity contracts carried in the commodity
58-14 account.
58-15 (c) A description of collateral in a security agreement or
58-16 financing statement is sufficient to create or perfect a security
58-17 interest in a certificated security, uncertificated security,
58-18 security entitlement, securities account, commodity contract, or
58-19 commodity account whether it describes the collateral by those
58-20 terms, or as investment property, or by description of the
58-21 underlying security, financial asset, or commodity contract. A
58-22 description of investment property collateral in a security
58-23 agreement or financing statement is sufficient if it identifies the
58-24 collateral by specific listing, by category, by quantity, by a
58-25 computational or allocational formula or procedure, or by any other
58-26 method, if the identity of the collateral is objectively
58-27 determinable.
59-1 (d) Perfection of a security interest in investment property
59-2 is governed by the following rules:
59-3 (1) A security interest in investment property may be
59-4 perfected by control.
59-5 (2) Except as otherwise provided in Subdivisions (3)
59-6 and (4), a security interest in investment property may be
59-7 perfected by filing.
59-8 (3) If the debtor is a broker or securities
59-9 intermediary, a security interest in investment property is
59-10 perfected when it attaches. The filing of a financing statement
59-11 with respect to a security interest in investment property granted
59-12 by a broker or securities intermediary has no effect for purposes
59-13 of perfection or priority with respect to that security interest.
59-14 (4) If a debtor is a commodity intermediary, a
59-15 security interest in a commodity contract or a commodity account is
59-16 perfected when it attaches. The filing of a financing statement
59-17 with respect to a security interest in a commodity contract or a
59-18 commodity account granted by a commodity intermediary has no effect
59-19 for purposes of perfection or priority with respect to that
59-20 security interest.
59-21 (e) Priority between conflicting security interests in the
59-22 same investment property is governed by the following rules:
59-23 (1) A security interest of a secured party who has
59-24 control over investment property has priority over a security
59-25 interest of a secured party who does not have control over the
59-26 investment property.
59-27 (2) Except as otherwise provided in Subdivisions (3)
60-1 and (4), conflicting security interests of secured parties each of
60-2 whom has control rank equally.
60-3 (3) Except as otherwise agreed on by the securities
60-4 intermediary, a security interest in a security entitlement or a
60-5 securities account granted to the debtor's own securities
60-6 intermediary has priority over any security interest granted by the
60-7 debtor to another secured party.
60-8 (4) Except as otherwise agreed on by the commodity
60-9 intermediary, a security interest in a commodity contract or a
60-10 commodity account granted to the debtor's own commodity
60-11 intermediary has priority over any security interest granted by the
60-12 debtor to another secured party.
60-13 (5) Conflicting security interests granted by a
60-14 broker, a securities intermediary, or a commodity intermediary that
60-15 are perfected without control rank equally.
60-16 (6) In all other cases, priority between conflicting
60-17 security interests in investment property is governed by Sections
60-18 9.312(e)-(g). Section 9.312(d) does not apply to investment
60-19 property.
60-20 (f) If a security certificate in registered form is
60-21 delivered to a secured party pursuant to agreement, a written
60-22 security agreement is not required for attachment or enforceability
60-23 of the security interest, delivery suffices for perfection of the
60-24 security interest, and the security interest has priority over a
60-25 conflicting security interest perfected by means other than
60-26 control, even if a necessary indorsement is lacking.
60-27 Sec. 9.116. SECURITY INTEREST ARISING IN PURCHASE OR
61-1 DELIVERY OF FINANCIAL ASSET. (a) If a person buys a financial
61-2 asset through a securities intermediary in a transaction in which
61-3 the buyer is obligated to pay the purchase price to the securities
61-4 intermediary at the time of the purchase, and the securities
61-5 intermediary credits the financial asset to the buyer's securities
61-6 account before the buyer pays the securities intermediary, the
61-7 securities intermediary has a security interest in the buyer's
61-8 security entitlement securing the buyer's obligation to pay. A
61-9 security agreement is not required for attachment or enforceability
61-10 of the security interest, and the security interest is
61-11 automatically perfected.
61-12 (b) If a certificated security or other financial asset
61-13 represented by a writing that in the ordinary course of business is
61-14 transferred by delivery with any necessary indorsement or
61-15 assignment is delivered pursuant to an agreement between persons in
61-16 the business of dealing with such securities or financial assets
61-17 and the agreement calls for delivery versus payment, the person
61-18 delivering the certificate or other financial asset has a security
61-19 interest in the certificated security or other financial asset
61-20 securing the seller's right to receive payment. A security
61-21 agreement is not required for attachment or enforceability of the
61-22 security interest, and the security interest is automatically
61-23 perfected.
61-24 SECTION 6. Section 9.203(a), Business & Commerce Code, is
61-25 amended to read as follows:
61-26 (a) Subject to the provisions of Section 4.208 on the
61-27 security interest of a collecting bank, Sections 9.115 and 9.116
62-1 <Section 8.321> on security interests in investment property
62-2 <securities>, and Section 9.113 on a security interest arising
62-3 under the chapter on Sales, a security interest is not enforceable
62-4 against the debtor or third parties with respect to the collateral
62-5 and does not attach unless:
62-6 (1) the collateral is in the possession of the secured
62-7 party pursuant to agreement, the collateral is investment property
62-8 and the secured party has control pursuant to agreement, or the
62-9 debtor has signed a security agreement which contains a description
62-10 of the collateral and in addition, when the security interest
62-11 covers crops growing or to be grown or timber to be cut, a
62-12 description of the land concerned;
62-13 (2) value has been given; and
62-14 (3) the debtor has rights in the collateral.
62-15 SECTION 7. Section 9.301(a), Business & Commerce Code, is
62-16 amended to read as follows:
62-17 (a) Except as otherwise provided in Subsection (b), an
62-18 unperfected security interest is subordinate to the rights of:
62-19 (1) persons entitled to priority under Section 9.312;
62-20 (2) a person who becomes a lien creditor before the
62-21 security interest is perfected;
62-22 (3) in the case of goods, instruments, documents, and
62-23 chattel paper, a person who is not a secured party and who is a
62-24 transferee in bulk or other buyer not in ordinary course of
62-25 business, or is a buyer of farm products in ordinary course of
62-26 business, to the extent that he gives value and receives delivery
62-27 of the collateral without knowledge of the security interest and
63-1 before it is perfected;
63-2 (4) in the case of accounts, <and> general
63-3 intangibles, and investment property, a person who is not a secured
63-4 party and who is a transferee to the extent that he gives value
63-5 without knowledge of the security interest and before it is
63-6 perfected.
63-7 SECTION 8. Section 9.302(a), Business & Commerce Code, is
63-8 amended to read as follows:
63-9 (a) A financing statement must be filed to perfect all
63-10 security interests except the following:
63-11 (1) a security interest in collateral in possession of
63-12 the secured party under Section 9.305;
63-13 (2) a security interest temporarily perfected in
63-14 instruments, certificated securities, or documents without delivery
63-15 under Section 9.304 or in proceeds for a 10 day period under
63-16 Section 9.306;
63-17 (3) a security interest created by an assignment of a
63-18 beneficial interest in a trust or a decedent's estate;
63-19 (4) a purchase money security interest in consumer
63-20 goods; but notation on a certificate of title is required for goods
63-21 covered by a statute referred to in Subsection (c)(2); and fixture
63-22 filing is required for priority over conflicting interests in
63-23 fixtures to the extent provided in Section 9.313;
63-24 (5) an assignment of accounts which does not alone or
63-25 in conjunction with other assignments to the same assignee transfer
63-26 a significant part of the outstanding accounts of the assignor;
63-27 (6) a security interest of a collecting bank (Section
64-1 4.208), <a security interest in securities (Section 8.321),> a
64-2 security interest arising under the Chapter on Sales (see Section
64-3 9.113), or a security interest covered in Subsection (c) of this
64-4 Section; <or>
64-5 (7) an assignment for the benefit of all the creditors
64-6 of the transferor, and subsequent transfers by the assignee
64-7 thereunder; <and>
64-8 (8) a security interest in oil or gas production or
64-9 their proceeds under Section 9.319 of this code; or
64-10 (9) a security interest in investment property that is
64-11 perfected without filing under Section 9.115 or 9.116.
64-12 SECTION 9. Section 9.303(a), Business & Commerce Code, is
64-13 amended to read as follows:
64-14 (a) A security interest is perfected when it has attached
64-15 and when all of the applicable steps required for perfection have
64-16 been taken. Such steps are specified in Sections 9.115, 9.302,
64-17 9.304, 9.305 and 9.306. If such steps are taken before the
64-18 security interest attaches, it is perfected at the time when it
64-19 attaches.
64-20 SECTION 10. Sections 9.304(a), (d), and (e), Business &
64-21 Commerce Code, are amended to read as follows:
64-22 (a) A security interest in chattel paper or negotiable
64-23 documents may be perfected by filing. A security interest in money
64-24 or instruments (other than <certificated securities or> instruments
64-25 which constitute part of chattel paper) can be perfected only by
64-26 the secured party's taking possession, except as provided in
64-27 Subsections (d) and (e) of this section and Subsections (b) and (c)
65-1 of Section 9.306 on proceeds.
65-2 (d) A security interest in instruments, <(other than>
65-3 certificated securities,<)> or negotiable documents is perfected
65-4 without filing or the taking of possession for a period of 21 days
65-5 from the time it attaches to the extent that it arises for new
65-6 value given under a written security agreement.
65-7 (e) A security interest remains perfected for a period of 21
65-8 days without filing where a secured party having a perfected
65-9 security interest in an instrument, <(other than> a certificated
65-10 security<)>, a negotiable document, or goods in possession of a
65-11 bailee other than one who has issued a negotiable document
65-12 therefor:
65-13 (1) makes available to the debtor the goods or
65-14 documents representing the goods for the purpose of ultimate sale
65-15 or exchange or for the purpose of loading, unloading, storing,
65-16 shipping, transshipping, manufacturing, processing or otherwise
65-17 dealing with them in a manner preliminary to their sale or
65-18 exchange, but priority between conflicting security interests in
65-19 the goods is subject to Subsection (c) of Section 9.312; or
65-20 (2) delivers the instrument or certificated security
65-21 to the debtor for the purpose of ultimate sale or exchange or of
65-22 presentation, collection, renewal or registration of transfer.
65-23 SECTION 11. Section 9.305, Business & Commerce Code, is
65-24 amended to read as follows:
65-25 Sec. 9.305. When Possession by Secured Party Perfects
65-26 Security Interest Without Filing. A security interest in letters
65-27 of credit and advices of credit (Subsection (b)(1) of Section
66-1 5.116), goods, instruments <(other than certificated securities)>,
66-2 money, negotiable documents or chattel paper may be perfected by
66-3 the secured party's taking possession of the collateral. If such
66-4 collateral other than goods covered by a negotiable document is
66-5 held by a bailee, the secured party is deemed to have possession
66-6 from the time the bailee receives notification of the secured
66-7 party's interest. A security interest is perfected by possession
66-8 from the time possession is taken without relation back and
66-9 continues only so long as possession is retained, unless otherwise
66-10 specified in this chapter. The security interest may be otherwise
66-11 perfected as provided in this chapter before or after the period of
66-12 possession by the secured party.
66-13 SECTION 12. Sections 9.306(a) and (c), Business & Commerce
66-14 Code, are amended to read as follows:
66-15 (a) "Proceeds" includes whatever is received upon the sale,
66-16 exchange, collection or other disposition of collateral or
66-17 proceeds. Insurance payable by reason of loss or damage to the
66-18 collateral is proceeds, except to the extent that it is payable to
66-19 a person other than a party to the security agreement. Any
66-20 payments or distributions made with respect to investment property
66-21 collateral are proceeds. Money, checks, deposit accounts and the
66-22 like are "cash proceeds". All other proceeds are "non-cash
66-23 proceeds".
66-24 (c) The security interest in proceeds is a continuously
66-25 perfected security interest if the interest in the original
66-26 collateral was perfected but it ceases to be a perfected security
66-27 interest and becomes unperfected ten days after receipt of the
67-1 proceeds by the debtor unless:
67-2 (1) a filed financing statement covers the original
67-3 collateral and the proceeds are collateral in which a security
67-4 interest may be perfected by filing in the office or offices where
67-5 the financing statement has been filed and, if the proceeds are
67-6 acquired with cash proceeds, the description of collateral in the
67-7 financing statement indicates the types of property constituting
67-8 the proceeds; <or>
67-9 (2) a filed financing statement covers the original
67-10 collateral and the proceeds are identifiable cash proceeds; <or>
67-11 (3) the original collateral was investment property
67-12 and the proceeds are identifiable cash proceeds; or
67-13 (4) the security interest in the proceeds is perfected
67-14 before the expiration of the ten day period. Except as provided in
67-15 this section, a security interest in proceeds can be perfected only
67-16 by the methods or under the circumstances permitted in this chapter
67-17 for original collateral of the same type.
67-18 SECTION 13. Section 9.309, Business & Commerce Code, is
67-19 amended to read as follows:
67-20 Sec. 9.309. Protection of Purchasers of Instruments,
67-21 Documents, and Securities. Nothing in this chapter limits the
67-22 rights of a holder in due course of a negotiable instrument
67-23 (Section 3.302) or a holder to whom a negotiable document of title
67-24 has been duly negotiated (Section 7.501) or a protected <bona fide>
67-25 purchaser of a security (Section 8.303 <8.302>) and such holders or
67-26 purchasers take priority over an earlier security interest even
67-27 though perfected. Filing under this chapter does not constitute
68-1 notice of the security interest to such holders or purchasers.
68-2 SECTION 14. Sections 9.312(a) and (g), Business & Commerce
68-3 Code, are amended to read as follows:
68-4 (a) The rules of priority stated in other sections of this
68-5 subchapter and in the following sections shall govern when
68-6 applicable: Section 4.210 <4.208> with respect to the security
68-7 interests of collecting banks in items being collected,
68-8 accompanying documents and proceeds; Section 9.103 on security
68-9 interests related to other jurisdictions; Section 9.114 on
68-10 consignments; Section 9.115 on security interests in investment
68-11 property.
68-12 (g) If future advances are made while a security interest is
68-13 perfected by filing, the taking of possession, or under Section
68-14 9.115 or 9.116 on investment property <8.321 on securities>, the
68-15 security interest has the same priority for the purposes of
68-16 Subsection (e) or Section 9.115(e) with respect to the future
68-17 advances as it does with respect to the first advance. If a
68-18 commitment is made before or while the security interest is so
68-19 perfected, the security interest has the same priority with respect
68-20 to advances made pursuant thereto. In other cases a perfected
68-21 security interest has priority from the date the advance is made.
68-22 SECTION 15. Section 1.105(b), Business & Commerce Code, is
68-23 amended to read as follows:
68-24 (b) Where one of the following provisions of this title
68-25 specifies the applicable law, that provision governs and a contrary
68-26 agreement is effective only to the extent permitted by the law
68-27 (including the conflict of laws rules) so specified:
69-1 Rights of creditors against sold goods. Section 2.402.
69-2 Applicability of the chapter on Leases. Sections 2A.105 and
69-3 2A.106.
69-4 Applicability of the chapter on Bank Deposits and
69-5 Collections. Section 4.102.
69-6 Governing law in the chapter on Funds Transfers. Section
69-7 4A.507.
69-8 Applicability of the chapter on Investment Securities.
69-9 Section 8.110 <8.106>.
69-10 Perfection provisions of the chapter on Secured Transactions.
69-11 Section 9.103.
69-12 SECTION 16. Section 1.206(b), Business & Commerce Code, is
69-13 amended to read as follows:
69-14 (b) Subsection (a) of this section does not apply to
69-15 contracts for the sale of goods (Section 2.201) nor of securities
69-16 (Section 8.113 <8.319>) nor to security agreements (Section 9.203).
69-17 SECTION 17. Section 5.114(b), Business & Commerce Code, is
69-18 amended to read as follows:
69-19 (b) Unless otherwise agreed when documents appear on their
69-20 face to comply with the terms of a credit but a required document
69-21 does not in fact conform to the warranties made on negotiation or
69-22 transfer of a document of title (Section 7.507) or of a
69-23 certificated security (Section 8.108 <8.306>) or is forged or
69-24 fraudulent or there is fraud in the transaction:
69-25 (1) the issuer must honor the draft or demand for
69-26 payment if honor is demanded by a negotiating bank or other holder
69-27 of the draft or demand which has taken the draft or demand under
70-1 the credit and under circumstances which would make it a holder in
70-2 due course (Section 3.302) and in an appropriate case would make it
70-3 a person to whom a document of title has been duly negotiated
70-4 (Section 7.502) or a bona fide purchaser of a certificated security
70-5 (Section 8.302); and
70-6 (2) in all other cases as against its customer, an
70-7 issuer acting in good faith may honor the draft or demand for
70-8 payment despite notification from the customer of fraud, forgery or
70-9 other defect not apparent on the face of the documents but a court
70-10 of appropriate jurisdiction may enjoin such honor.
70-11 SECTION 18. (a) If H.B. No. 1728 or S.B. No. 1406, Acts of
70-12 the 74th Legislature, Regular Session, 1995, is enacted and takes
70-13 effect, Section 4.104(a), Business & Commerce Code, is amended to
70-14 read as follows:
70-15 (a) In this chapter, unless the context otherwise requires:
70-16 (1) "Account" means any deposit or credit account with
70-17 a bank, including a demand, time, savings, passbook, share draft,
70-18 or like account, other than an account evidenced by a certificate
70-19 of deposit. <and includes a checking, time, interest or savings
70-20 account;>
70-21 (2) "Afternoon" means the period of a day between noon
70-22 and midnight.<;>
70-23 (3) "Banking day" means the <that> part of a <any> day
70-24 on which a bank is open to the public for carrying on substantially
70-25 all of its banking functions.<;>
70-26 (4) "Clearing house" means an <any> association of
70-27 banks or other payors regularly clearing items.<;>
71-1 (5) "Customer" means a <any> person having an account
71-2 with a bank or for whom a bank has agreed to collect items,
71-3 including <and includes> a bank that maintains <carrying> an
71-4 account at <with> another bank.<;>
71-5 (6) "Documentary draft" means a draft to be presented
71-6 for acceptance or payment if specified documents, certificated
71-7 securities (Section 8.102) or instructions for uncertificated
71-8 securities (Section 8.102), or other certificates, statements, or
71-9 the like are to be received by the drawee or other payor before
71-10 acceptance or payment of the draft. <any negotiable or
71-11 non-negotiable draft with accompanying documents, securities or
71-12 other papers to be delivered against honor of the draft;>
71-13 (7) "Draft" means a draft as defined in Section 3.104
71-14 or an item, other than an instrument, that is an order.
71-15 (8) "Drawee" means a person ordered in a draft to make
71-16 payment.
71-17 (9) <(7)> "Item" means an instrument or a promise or
71-18 order to pay money handled by a bank for collection or payment.
71-19 The term does not include a payment order governed by Chapter 4A or
71-20 a credit or debit card slip. <any instrument for the payment of
71-21 money even though it is not negotiable but does not include money;>
71-22 (10) <(8)> "Midnight deadline" with respect to a bank
71-23 is midnight on its next banking day following the banking day on
71-24 which it receives the relevant item or notice or from which the
71-25 time for taking action commences to run, whichever is later.<;>
71-26 <(9) "Properly payable" includes the availability of
71-27 funds for payment at the time of decision to pay or dishonor;>
72-1 (11) <(10)> "Settle" means to pay in cash, by
72-2 clearing-house <clearing house> settlement, in a charge or credit
72-3 or by remittance, or otherwise as agreed <instructed>. A
72-4 settlement may be either provisional or final.<;>
72-5 (12) <(11)> "Suspends payments" with respect to a bank
72-6 means that it has been closed by order of the supervisory
72-7 authorities, that a public officer has been appointed to take it
72-8 over, or that it ceases or refuses to make payments in the ordinary
72-9 course of business.
72-10 (b) If neither of the bills designated by Subsection (a) of
72-11 this section takes effect, this section has no effect.
72-12 SECTION 19. Chapter 33, Business & Commerce Code, is
72-13 repealed.
72-14 SECTION 20. This Act takes effect September 1, 1995.
72-15 SECTION 21. (a) This Act does not affect an action or
72-16 proceeding commenced before this Act takes effect.
72-17 (b) If a security interest in a security is perfected under
72-18 Chapter 8, Business & Commerce Code, on the date this Act takes
72-19 effect, and the action by which the security interest was perfected
72-20 would suffice to perfect a security interest under Chapter 8,
72-21 Business & Commerce Code, as revised by this Act, no further action
72-22 is required to continue perfection. If a security interest in a
72-23 security is perfected under Chapter 8, Business & Commerce Code, on
72-24 the date this Act takes effect but the action by which the security
72-25 interest was perfected would not suffice to perfect a security
72-26 interest under Chapter 8, Business & Commerce Code, as revised by
72-27 this Act, the security interest remains perfected until January 1,
73-1 1996, and continues perfected on and after that date if appropriate
73-2 action to perfect under Chapter 8, Business & Commerce Code, as
73-3 revised by this Act is taken before January 1, 1996. If a security
73-4 interest is perfected under Chapter 8, Business & Commerce Code, on
73-5 the date this Act takes effect and the security interest can be
73-6 perfected by filing under Chapter 8, Business & Commerce Code, as
73-7 revised by this Act, a financing statement signed by the secured
73-8 party instead of the debtor may be filed before January 1, 1996, to
73-9 continue perfection or filed on or after that date to perfect.
73-10 SECTION 22. The importance of this legislation and the
73-11 crowded condition of the calendars in both houses create an
73-12 emergency and an imperative public necessity that the
73-13 constitutional rule requiring bills to be read on three several
73-14 days in each house be suspended, and this rule is hereby suspended.