1-1 By: Brady (Senate Sponsor - Henderson) H.B. No. 3200
1-2 (In the Senate - Received from the House May 15, 1995;
1-3 May 18, 1995, read first time and referred to Committee on Economic
1-4 Development; May 24, 1995, reported favorably by the following
1-5 vote: Yeas 8, Nays 0; May 24, 1995, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to regulation of investment securities; revising Chapter 8
1-9 of the Business & Commerce Code.
1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-11 SECTION 1. Chapter 8, Business & Commerce Code, is revised
1-12 to read as follows:
1-13 CHAPTER 8. INVESTMENT SECURITIES
1-14 SUBCHAPTER A. SHORT TITLE AND GENERAL MATTERS
1-15 Sec. 8.101. SHORT TITLE. This chapter may be cited as
1-16 Uniform Commercial Code--Investment Securities.
1-17 Sec. 8.102. DEFINITIONS. (a) In this chapter:
1-18 (1) "Adverse claim" means a claim that a claimant has
1-19 a property interest in a financial asset and that it is a violation
1-20 of the rights of the claimant for another person to hold, transfer,
1-21 or deal with the financial asset.
1-22 (2) "Bearer form," as applied to a certificated
1-23 security, means a form in which the security is payable to the
1-24 bearer of the security certificate according to its terms but not
1-25 by reason of an indorsement.
1-26 (3) "Broker" means a person defined as a broker or
1-27 dealer under the federal securities laws, but without excluding a
1-28 bank acting in that capacity.
1-29 (4) "Certificated security" means a security that is
1-30 represented by a certificate.
1-31 (5) "Clearing corporation" means:
1-32 (A) a person that is registered as a "clearing
1-33 agency" under the federal securities laws;
1-34 (B) a federal reserve bank; or
1-35 (C) any other person that provides clearance or
1-36 settlement services with respect to financial assets that would
1-37 require it to register as a clearing agency under the federal
1-38 securities laws but for an exclusion or exemption from the
1-39 registration requirement, if its activities as a clearing
1-40 corporation, including promulgation of rules, are subject to
1-41 regulation by a federal or state governmental authority.
1-42 (6) "Communicate" means to:
1-43 (A) send a signed writing; or
1-44 (B) transmit information by any mechanism agreed
1-45 on by the persons transmitting and receiving the information.
1-46 (7) "Entitlement holder" means a person identified in
1-47 the records of a securities intermediary as the person having a
1-48 security entitlement against the securities intermediary. If a
1-49 person acquires a security entitlement by virtue of Section
1-50 8.501(b)(2) or (3), that person is the entitlement holder.
1-51 (8) "Entitlement order" means a notification
1-52 communicated to a securities intermediary directing transfer or
1-53 redemption of a financial asset to which the entitlement holder has
1-54 a security entitlement.
1-55 (9) "Financial asset," except as otherwise provided in
1-56 Section 8.103, means:
1-57 (A) a security;
1-58 (B) an obligation of a person or a share,
1-59 participation, or other interest in a person or in property or an
1-60 enterprise of a person that is, or is of a type, dealt in or traded
1-61 on financial markets or that is recognized in any area in which it
1-62 is issued or dealt in as a medium for investment; or
1-63 (C) any property that is held by a securities
1-64 intermediary for another person in a securities account if the
1-65 securities intermediary has expressly agreed with the other person
1-66 that the property is to be treated as a financial asset under this
1-67 chapter.
1-68 As context requires, the term means either the interest
2-1 itself or the means by which a person's claim to it is evidenced,
2-2 including a certificated or uncertificated security, a security
2-3 certificate, or a security entitlement.
2-4 (10) "Good faith," for purposes of the obligation of
2-5 good faith in the performance or enforcement of contracts or duties
2-6 within this chapter, means honesty in fact and the observance of
2-7 reasonable commercial standards of fair dealing.
2-8 (11) "Indorsement" means a signature that alone or
2-9 accompanied by other words is made on a security certificate in
2-10 registered form or on a separate document for the purpose of
2-11 assigning, transferring, or redeeming the security or granting a
2-12 power to assign, transfer, or redeem it.
2-13 (12) "Instruction" means a notification communicated
2-14 to the issuer of an uncertificated security that directs that the
2-15 transfer of the security be registered or that the security be
2-16 redeemed.
2-17 (13) "Registered form," as applied to a certificated
2-18 security, means a form in which:
2-19 (A) the security certificate specifies a person
2-20 entitled to the security; and
2-21 (B) a transfer of the security may be registered
2-22 on books maintained for that purpose by or on behalf of the issuer,
2-23 or the security certificate so states.
2-24 (14) "Securities intermediary" means:
2-25 (A) a clearing corporation; or
2-26 (B) a person, including a bank or broker, that
2-27 in the ordinary course of its business maintains securities
2-28 accounts for others and is acting in that capacity.
2-29 (15) "Security," except as otherwise provided in
2-30 Section 8.103, means an obligation of an issuer or a share,
2-31 participation, or other interest in an issuer or in property or an
2-32 enterprise of an issuer:
2-33 (A) that is represented by a security
2-34 certificate in bearer or registered form, or the transfer of which
2-35 may be registered on books maintained for that purpose by or on
2-36 behalf of the issuer;
2-37 (B) that is one of a class or series or by its
2-38 terms is divisible into a class or series of shares,
2-39 participations, interests, or obligations; and
2-40 (C) that:
2-41 (i) is, or is of a type, dealt in or
2-42 traded on securities exchanges or securities markets; or
2-43 (ii) is a medium for investment and by its
2-44 terms expressly provides that it is a security governed by this
2-45 chapter.
2-46 (16) "Security certificate" means a certificate
2-47 representing a security.
2-48 (17) "Security entitlement" means the rights and
2-49 property interest of an entitlement holder with respect to a
2-50 financial asset specified in Subchapter E.
2-51 (18) "Uncertificated security" means a security that
2-52 is not represented by a certificate.
2-53 (b) Other definitions applying to this chapter and the
2-54 sections in which they appear are:
2-55 Appropriate person Section 8.107
2-56 Control Section 8.106
2-57 Delivery Section 8.301
2-58 Investment company security Section 8.103
2-59 Issuer Section 8.201
2-60 Overissue Section 8.210
2-61 Protected purchaser Section 8.303
2-62 Securities account Section 8.501
2-63 (c) In addition, Chapter 1 contains general definitions and
2-64 principles of construction and interpretation applicable throughout
2-65 this chapter.
2-66 (d) The characterization of a person, business, or
2-67 transaction for purposes of this chapter does not determine the
2-68 characterization of the person, business, or transaction for
2-69 purposes of any other law, regulation, or rule.
2-70 Sec. 8.103. RULES FOR DETERMINING WHETHER CERTAIN
3-1 OBLIGATIONS AND INTERESTS ARE SECURITIES OR FINANCIAL ASSETS. (a)
3-2 A share or similar equity interest issued by a corporation,
3-3 business trust, joint stock company, or similar entity is a
3-4 security.
3-5 (b) An investment company security is a security.
3-6 "Investment company security" means a share or similar equity
3-7 interest issued by an entity that is registered as an investment
3-8 company under the federal investment company laws, an interest in a
3-9 unit investment trust that is so registered, or a face-amount
3-10 certificate issued by a face-amount certificate company that is so
3-11 registered. "Investment company security" does not include an
3-12 insurance policy or endowment policy or annuity contract issued by
3-13 an insurance company.
3-14 (c) An interest in a partnership or limited liability
3-15 company is not a security unless it is dealt in or traded on
3-16 securities exchanges or in securities markets, its terms expressly
3-17 provide that it is a security governed by this chapter, or it is an
3-18 investment company security. However, an interest in a partnership
3-19 or limited liability company is a financial asset if it is held in
3-20 a securities account.
3-21 (d) A writing that is a security certificate is governed by
3-22 this chapter and not by Chapter 3, even though it also meets the
3-23 requirements of that chapter. However, a negotiable instrument
3-24 governed by Chapter 3 is a financial asset if it is held in a
3-25 securities account.
3-26 (e) An option or similar obligation issued by a clearing
3-27 corporation to its participants is not a security, but is a
3-28 financial asset.
3-29 (f) A commodity contract, as defined in Section 9.115, is
3-30 not a security or a financial asset.
3-31 Sec. 8.104. ACQUISITION OF SECURITY OR FINANCIAL ASSET OR
3-32 INTEREST THEREIN. (a) A person acquires a security or an interest
3-33 therein under this chapter if:
3-34 (1) the person is a purchaser to whom a security is
3-35 delivered pursuant to Section 8.301; or
3-36 (2) the person acquires a security entitlement to the
3-37 security pursuant to Section 8.501.
3-38 (b) A person acquires a financial asset, other than a
3-39 security, or an interest therein, under this chapter, if the person
3-40 acquires a security entitlement to the financial asset.
3-41 (c) A person who acquires a security entitlement to a
3-42 security or other financial asset has the rights specified in
3-43 Subchapter E, but is a purchaser of any security, security
3-44 entitlement, or other financial asset held by the securities
3-45 intermediary only to the extent provided in Section 8.503.
3-46 (d) Unless the context shows that a different meaning is
3-47 intended, a person who is required by other law, regulation, rule,
3-48 or agreement to transfer, deliver, present, surrender, exchange, or
3-49 otherwise put in the possession of another person a security or
3-50 financial asset satisfies that requirement by causing the other
3-51 person to acquire an interest in the security or financial asset
3-52 pursuant to Subsection (a) or (b).
3-53 Sec. 8.105. NOTICE OF ADVERSE CLAIM. (a) A person has
3-54 notice of an adverse claim if:
3-55 (1) the person knows of the adverse claim;
3-56 (2) the person is aware of facts sufficient to
3-57 indicate that there is a significant probability that the adverse
3-58 claim exists and deliberately avoids information that would
3-59 establish the existence of the adverse claim; or
3-60 (3) the person has a duty, imposed by statute or
3-61 regulation, to investigate whether an adverse claim exists, and the
3-62 investigation so required would establish the existence of the
3-63 adverse claim.
3-64 (b) Having knowledge that a financial asset or interest
3-65 therein is or has been transferred by a representative imposes no
3-66 duty of inquiry into the rightfulness of a transaction and is not
3-67 notice of an adverse claim. However, a person who knows that a
3-68 representative has transferred a financial asset or interest
3-69 therein in a transaction that is, or whose proceeds are being used,
3-70 for the individual benefit of the representative or otherwise in
4-1 breach of duty has notice of an adverse claim.
4-2 (c) An act or event that creates a right to immediate
4-3 performance of the principal obligation represented by a security
4-4 certificate or sets a date on or after which the certificate is to
4-5 be presented or surrendered for redemption or exchange does not
4-6 itself constitute notice of an adverse claim except in the case of
4-7 a transfer more than:
4-8 (1) one year after a date set for presentment or
4-9 surrender for redemption or exchange; or
4-10 (2) six months after a date set for payment of money
4-11 against presentation or surrender of the certificate, if money was
4-12 available for payment on that date.
4-13 (d) A purchaser of a certificated security has notice of an
4-14 adverse claim if the security certificate:
4-15 (1) whether in bearer or registered form, has been
4-16 indorsed "for collection" or "for surrender" or for some other
4-17 purpose not involving transfer; or
4-18 (2) is in bearer form and has on it an unambiguous
4-19 statement that it is the property of a person other than the
4-20 transferor, but the mere writing of a name on the certificate is
4-21 not such a statement.
4-22 (e) Filing of a financing statement under Chapter 9 is not
4-23 notice of an adverse claim to a financial asset.
4-24 Sec. 8.106. CONTROL. (a) A purchaser has control of a
4-25 certificated security in bearer form if the certificated security
4-26 is delivered to the purchaser.
4-27 (b) A purchaser has control of a certificated security in
4-28 registered form if the certificated security is delivered to the
4-29 purchaser and:
4-30 (1) the certificate is indorsed to the purchaser or in
4-31 blank by an effective indorsement; or
4-32 (2) the certificate is registered in the name of the
4-33 purchaser, on original issue or registration of transfer by the
4-34 issuer.
4-35 (c) A purchaser has control of an uncertificated security
4-36 if:
4-37 (1) the uncertificated security is delivered to the
4-38 purchaser; or
4-39 (2) the issuer has agreed that it will comply with
4-40 instructions originated by the purchaser without further consent by
4-41 the registered owner.
4-42 (d) A purchaser has control of a security entitlement if:
4-43 (1) the purchaser becomes the entitlement holder; or
4-44 (2) the securities intermediary has agreed that it
4-45 will comply with entitlement orders originated by the purchaser
4-46 without further consent by the entitlement holder.
4-47 (e) If an interest in a security entitlement is granted by
4-48 the entitlement holder to the entitlement holder's own securities
4-49 intermediary, the securities intermediary has control.
4-50 (f) A purchaser who has satisfied the requirements of
4-51 Subsection (c)(2) or (d)(2) has control even if the registered
4-52 owner in the case of Subsection (c)(2) or the entitlement holder in
4-53 the case of Subsection (d)(2) retains the right to make
4-54 substitutions for the uncertificated security or security
4-55 entitlement, to originate instructions or entitlement orders to the
4-56 issuer or securities intermediary, or otherwise to deal with the
4-57 uncertificated security or security entitlement.
4-58 (g) An issuer or a securities intermediary may not enter
4-59 into an agreement of the kind described in Subsection (c)(2) or
4-60 (d)(2) without the consent of the registered owner or entitlement
4-61 holder, but an issuer or a securities intermediary is not required
4-62 to enter into such an agreement even though the registered owner or
4-63 entitlement holder so directs. An issuer or securities
4-64 intermediary that has entered into such an agreement is not
4-65 required to confirm the existence of the agreement to another party
4-66 unless requested to do so by the registered owner or entitlement
4-67 holder.
4-68 Sec. 8.107. WHETHER INDORSEMENT, INSTRUCTION, OR ENTITLEMENT
4-69 ORDER IS EFFECTIVE. (a) "Appropriate person" means:
4-70 (1) with respect to an indorsement, the person
5-1 specified by a security certificate or by an effective special
5-2 indorsement to be entitled to the security;
5-3 (2) with respect to an instruction, the registered
5-4 owner of an uncertificated security;
5-5 (3) with respect to an entitlement order, the
5-6 entitlement holder;
5-7 (4) if the person designated in Subdivision (1), (2),
5-8 or (3) is deceased, the designated person's successor taking under
5-9 other law or the designated person's personal representative acting
5-10 for the estate of the decedent; or
5-11 (5) if the person designated in Subdivision (1), (2),
5-12 or (3) lacks capacity, the designated person's guardian,
5-13 conservator, or other similar representative who has power under
5-14 other law to transfer the security or financial asset.
5-15 (b) An indorsement, instruction, or entitlement order is
5-16 effective if:
5-17 (1) it is made by the appropriate person;
5-18 (2) it is made by a person who has power under the law
5-19 of agency to transfer the security or financial asset on behalf of
5-20 the appropriate person, including, in the case of an instruction or
5-21 entitlement order, a person who has control under Section
5-22 8.106(c)(2) or (d)(2); or
5-23 (3) the appropriate person has ratified it or is
5-24 otherwise precluded from asserting its ineffectiveness.
5-25 (c) An indorsement, instruction, or entitlement order made
5-26 by a representative is effective even if:
5-27 (1) the representative has failed to comply with a
5-28 controlling instrument or with the law of the state having
5-29 jurisdiction of the representative relationship, including any law
5-30 requiring the representative to obtain court approval of the
5-31 transaction; or
5-32 (2) the representative's action in making the
5-33 indorsement, instruction, or entitlement order or using the
5-34 proceeds of the transaction is otherwise a breach of duty.
5-35 (d) If a security is registered in the name of or specially
5-36 indorsed to a person described as a representative, or if a
5-37 securities account is maintained in the name of a person described
5-38 as a representative, an indorsement, instruction, or entitlement
5-39 order made by the person is effective even though the person is no
5-40 longer serving in the described capacity.
5-41 (e) Effectiveness of an indorsement, instruction, or
5-42 entitlement order is determined as of the date the indorsement,
5-43 instruction, or entitlement order is made, and an indorsement,
5-44 instruction, or entitlement order does not become ineffective by
5-45 reason of any later change of circumstances.
5-46 Sec. 8.108. WARRANTIES IN DIRECT HOLDING. (a) A person who
5-47 transfers a certificated security to a purchaser for value warrants
5-48 to the purchaser, and an indorser, if the transfer is by
5-49 indorsement, warrants to any subsequent purchaser, that:
5-50 (1) the certificate is genuine and has not been
5-51 materially altered;
5-52 (2) the transferor or indorser does not know of any
5-53 fact that might impair the validity of the security;
5-54 (3) there is no adverse claim to the security;
5-55 (4) the transfer does not violate any restriction on
5-56 transfer;
5-57 (5) if the transfer is by indorsement, the indorsement
5-58 is made by an appropriate person, or if the indorsement is by an
5-59 agent, the agent has actual authority to act on behalf of the
5-60 appropriate person; and
5-61 (6) the transfer is otherwise effective and rightful.
5-62 (b) A person who originates an instruction for registration
5-63 of transfer of an uncertificated security to a purchaser for value
5-64 warrants to the purchaser that:
5-65 (1) the instruction is made by an appropriate person,
5-66 or if the instruction is by an agent, the agent has actual
5-67 authority to act on behalf of the appropriate person;
5-68 (2) the security is valid;
5-69 (3) there is no adverse claim to the security; and
5-70 (4) at the time the instruction is presented to the
6-1 issuer:
6-2 (A) the purchaser will be entitled to the
6-3 registration of transfer;
6-4 (B) the transfer will be registered by the
6-5 issuer free from all liens, security interests, restrictions, and
6-6 claims other than those specified in the instruction;
6-7 (C) the transfer will not violate any
6-8 restriction on transfer; and
6-9 (D) the requested transfer will otherwise be
6-10 effective and rightful.
6-11 (c) A person who transfers an uncertificated security to a
6-12 purchaser for value and does not originate an instruction in
6-13 connection with the transfer warrants that:
6-14 (1) the uncertificated security is valid;
6-15 (2) there is no adverse claim to the security;
6-16 (3) the transfer does not violate any restriction on
6-17 transfer; and
6-18 (4) the transfer is otherwise effective and rightful.
6-19 (d) A person who indorses a security certificate warrants to
6-20 the issuer that:
6-21 (1) there is no adverse claim to the security; and
6-22 (2) the indorsement is effective.
6-23 (e) A person who originates an instruction for registration
6-24 of transfer of an uncertificated security warrants to the issuer
6-25 that:
6-26 (1) the instruction is effective; and
6-27 (2) at the time the instruction is presented to the
6-28 issuer the purchaser will be entitled to the registration of
6-29 transfer.
6-30 (f) A person who presents a certificated security for
6-31 registration of transfer or for payment or exchange warrants to the
6-32 issuer that the person is entitled to the registration, payment, or
6-33 exchange, but a purchaser for value and without notice of adverse
6-34 claims to whom transfer is registered warrants only that the person
6-35 has no knowledge of any unauthorized signature in a necessary
6-36 indorsement.
6-37 (g) If a person acts as agent of another in delivering a
6-38 certificated security to a purchaser, the identity of the principal
6-39 was known to the person to whom the certificate was delivered, and
6-40 the certificate delivered by the agent was received by the agent
6-41 from the principal or received by the agent from another person at
6-42 the direction of the principal, the person delivering the security
6-43 certificate warrants only that the delivering person has authority
6-44 to act for the principal and does not know of any adverse claim to
6-45 the certificated security.
6-46 (h) A secured party who redelivers a security certificate
6-47 received, or after payment and on order of the debtor delivers the
6-48 security certificate to another person, makes only the warranties
6-49 of an agent under Subsection (g).
6-50 (i) Except as otherwise provided in Subsection (g), a broker
6-51 acting for a customer makes to the issuer and a purchaser the
6-52 warranties provided in Subsections (a)-(f). A broker that delivers
6-53 a security certificate to its customer, or causes its customer to
6-54 be registered as the owner of an uncertificated security, makes to
6-55 the customer the warranties provided in Subsection (a) or (b), and
6-56 has the rights and privileges of a purchaser under this section.
6-57 The warranties of and in favor of the broker acting as an agent are
6-58 in addition to applicable warranties given by and in favor of the
6-59 customer.
6-60 Sec. 8.109. WARRANTIES IN INDIRECT HOLDING. (a) A person
6-61 who originates an entitlement order to a securities intermediary
6-62 warrants to the securities intermediary that:
6-63 (1) the entitlement order is made by an appropriate
6-64 person, or if the entitlement order is by an agent, the agent has
6-65 actual authority to act on behalf of the appropriate person; and
6-66 (2) there is no adverse claim to the security
6-67 entitlement.
6-68 (b) A person who delivers a security certificate to a
6-69 securities intermediary for credit to a securities account or
6-70 originates an instruction with respect to an uncertificated
7-1 security directing that the uncertificated security be credited to
7-2 a securities account makes to the securities intermediary the
7-3 warranties specified in Section 8.108(a) or (b).
7-4 (c) If a securities intermediary delivers a security
7-5 certificate to its entitlement holder or causes its entitlement
7-6 holder to be registered as the owner of an uncertificated security,
7-7 the securities intermediary makes to the entitlement holder the
7-8 warranties specified in Section 8.108(a) or (b).
7-9 Sec. 8.110. APPLICABILITY; CHOICE OF LAW. (a) The local
7-10 law of the issuer's jurisdiction, as specified in Subsection (d),
7-11 governs:
7-12 (1) the validity of a security;
7-13 (2) the rights and duties of the issuer with respect
7-14 to registration of transfer;
7-15 (3) the effectiveness of registration of transfer by
7-16 the issuer;
7-17 (4) whether the issuer owes any duties to an adverse
7-18 claimant to a security; and
7-19 (5) whether an adverse claim can be asserted against a
7-20 person to whom transfer of a certificated or uncertificated
7-21 security is registered or a person who obtains control of an
7-22 uncertificated security.
7-23 (b) The local law of the securities intermediary's
7-24 jurisdiction, as specified in Subsection (e), governs:
7-25 (1) acquisition of a security entitlement from the
7-26 securities intermediary;
7-27 (2) the rights and duties of the securities
7-28 intermediary and entitlement holder arising out of a security
7-29 entitlement;
7-30 (3) whether the securities intermediary owes any
7-31 duties to an adverse claimant to a security entitlement; and
7-32 (4) whether an adverse claim can be asserted against a
7-33 person who acquires a security entitlement from the securities
7-34 intermediary or a person who purchases a security entitlement or
7-35 interest therein from an entitlement holder.
7-36 (c) The local law of the jurisdiction in which a security
7-37 certificate is located at the time of delivery governs whether an
7-38 adverse claim can be asserted against a person to whom the security
7-39 certificate is delivered.
7-40 (d) "Issuer's jurisdiction" means the jurisdiction under
7-41 which the issuer of the security is organized or, if permitted by
7-42 the law of that jurisdiction, the law of another jurisdiction
7-43 specified by the issuer. An issuer organized under the law of this
7-44 state may specify the law of another jurisdiction as the law
7-45 governing the matters specified in Subsections (a)(2)-(5).
7-46 (e) The following rules determine a securities
7-47 intermediary's jurisdiction for purposes of this section:
7-48 (1) If an agreement between the securities
7-49 intermediary and its entitlement holder specifies that it is
7-50 governed by the law of a particular jurisdiction, that jurisdiction
7-51 is the securities intermediary's jurisdiction.
7-52 (2) If an agreement between the securities
7-53 intermediary and its entitlement holder does not specify the
7-54 governing law as provided in Subdivision (1), but expressly
7-55 specifies that the securities account is maintained at an office in
7-56 a particular jurisdiction, that jurisdiction is the securities
7-57 intermediary's jurisdiction.
7-58 (3) If an agreement between the securities
7-59 intermediary and its entitlement holder does not specify a
7-60 jurisdiction as provided in Subdivision (1) or (2), the securities
7-61 intermediary's jurisdiction is the jurisdiction in which is located
7-62 the office identified in an account statement as the office serving
7-63 the entitlement holder's account.
7-64 (4) If an agreement between the securities
7-65 intermediary and its entitlement holder does not specify a
7-66 jurisdiction as provided in Subdivision (1) or (2) and an account
7-67 statement does not identify an office serving the entitlement
7-68 holder's account as provided in Subdivision (3), the securities
7-69 intermediary's jurisdiction is the jurisdiction in which is located
7-70 the chief executive office of the securities intermediary.
8-1 (f) A securities intermediary's jurisdiction is not
8-2 determined by:
8-3 (1) the physical location of certificates representing
8-4 financial assets;
8-5 (2) the jurisdiction in which is organized the issuer
8-6 of the financial asset with respect to which an entitlement holder
8-7 has a security entitlement; or
8-8 (3) the location of facilities for data processing or
8-9 other recordkeeping concerning the account.
8-10 Sec. 8.111. CLEARING CORPORATION RULES. A rule adopted by a
8-11 clearing corporation governing rights and obligations among the
8-12 clearing corporation and its participants in the clearing
8-13 corporation is effective even if the rule conflicts with this
8-14 chapter and affects another party who does not consent to the rule.
8-15 Sec. 8.112. CREDITOR'S LEGAL PROCESS. (a) The interest of
8-16 a debtor in a certificated security may be reached by a creditor
8-17 only by actual seizure of the security certificate by the officer
8-18 making the attachment or levy, except as otherwise provided in
8-19 Subsection (d). However, a certificated security for which the
8-20 certificate has been surrendered to the issuer may be reached by a
8-21 creditor by legal process on the issuer.
8-22 (b) The interest of a debtor in an uncertificated security
8-23 may be reached by a creditor only by legal process on the issuer at
8-24 its chief executive office in the United States, except as
8-25 otherwise provided in Subsection (d).
8-26 (c) The interest of a debtor in a security entitlement may
8-27 be reached by a creditor only by legal process on the securities
8-28 intermediary with whom the debtor's securities account is
8-29 maintained, except as otherwise provided in Subsection (d).
8-30 (d) The interest of a debtor in a certificated security for
8-31 which the certificate is in the possession of a secured party, or
8-32 in an uncertificated security registered in the name of a secured
8-33 party, or in a security entitlement maintained in the name of a
8-34 secured party may be reached by a creditor by legal process on the
8-35 secured party.
8-36 (e) A creditor whose debtor is the owner of a certificated
8-37 security, uncertificated security, or security entitlement is
8-38 entitled to aid from a court of competent jurisdiction, by
8-39 injunction or otherwise, in reaching the certificated security,
8-40 uncertificated security, or security entitlement or in satisfying
8-41 the claim by means allowed at law or in equity in regard to
8-42 property that cannot readily be reached by other legal process.
8-43 Sec. 8.113. STATUTE OF FRAUDS INAPPLICABLE. A contract or
8-44 modification of a contract for the sale or purchase of a security
8-45 is enforceable whether or not there is a writing signed or record
8-46 authenticated by a party against whom enforcement is sought, even
8-47 if the contract or modification is not capable of performance
8-48 within one year of its making.
8-49 Sec. 8.114. EVIDENTIARY RULES CONCERNING CERTIFICATED
8-50 SECURITIES. The following rules apply in an action on a
8-51 certificated security against the issuer:
8-52 (1) Unless specifically denied in the pleadings, each
8-53 signature on a security certificate or in a necessary indorsement
8-54 is admitted.
8-55 (2) If the effectiveness of a signature is put in
8-56 issue, the burden of establishing effectiveness is on the party
8-57 claiming under the signature, but the signature is presumed to be
8-58 genuine or authorized.
8-59 (3) If signatures on a security certificate are
8-60 admitted or established, production of the certificate entitles a
8-61 holder to recover on it unless the defendant establishes a defense
8-62 or a defect going to the validity of the security.
8-63 (4) If it is shown that a defense or defect exists,
8-64 the plaintiff has the burden of establishing that the plaintiff, or
8-65 some person under whom the plaintiff claims, is a person against
8-66 whom the defense or defect cannot be asserted.
8-67 Sec. 8.115. SECURITIES INTERMEDIARY AND OTHERS NOT LIABLE TO
8-68 ADVERSE CLAIMANT. A securities intermediary that has transferred a
8-69 financial asset pursuant to an effective entitlement order, or a
8-70 broker or other agent or bailee that has dealt with a financial
9-1 asset at the direction of its customer or principal, is not liable
9-2 to a person having an adverse claim to the financial asset, unless
9-3 the securities intermediary, or broker or other agent or bailee:
9-4 (1) took the action after it had been served with an
9-5 injunction, restraining order, or other legal process enjoining it
9-6 from doing so issued by a court of competent jurisdiction and had a
9-7 reasonable opportunity to act on the injunction, restraining order,
9-8 or other legal process;
9-9 (2) acted in collusion with the wrongdoer in violating
9-10 the rights of the adverse claimant; or
9-11 (3) in the case of a security certificate that has
9-12 been stolen, acted with notice of the adverse claim.
9-13 Sec. 8.116. SECURITIES INTERMEDIARY AS PURCHASER FOR VALUE.
9-14 A securities intermediary that receives a financial asset and
9-15 establishes a security entitlement to the financial asset in favor
9-16 of an entitlement holder is a purchaser for value of the financial
9-17 asset. A securities intermediary that acquires a security
9-18 entitlement to a financial asset from another securities
9-19 intermediary acquires the security entitlement for value if the
9-20 securities intermediary acquiring the security entitlement
9-21 establishes a security entitlement to the financial asset in favor
9-22 of an entitlement holder.
9-23 SUBCHAPTER B. ISSUE AND ISSUER
9-24 Sec. 8.201. ISSUER. (a) With respect to an obligation on
9-25 or a defense to a security, "issuer" includes a person that:
9-26 (1) places or authorizes the placing of its name on a
9-27 security certificate, other than as authenticating trustee,
9-28 registrar, transfer agent, or the like, to evidence a share,
9-29 participation, or other interest in its property or in an
9-30 enterprise or to evidence its duty to perform an obligation
9-31 represented by the certificate;
9-32 (2) creates a share, participation, or other interest
9-33 in its property or in an enterprise, or undertakes an obligation,
9-34 that is an uncertificated security;
9-35 (3) directly or indirectly creates a fractional
9-36 interest in its rights or property, if the fractional interest is
9-37 represented by a security certificate; or
9-38 (4) becomes responsible for, or in place of, another
9-39 person described as an issuer in this section.
9-40 (b) With respect to an obligation on or defense to a
9-41 security, a guarantor is an issuer to the extent of its guaranty,
9-42 whether or not its obligation is noted on a security certificate.
9-43 (c) With respect to a registration of a transfer, "issuer"
9-44 means a person on whose behalf transfer books are maintained.
9-45 Sec. 8.202. ISSUER'S RESPONSIBILITY AND DEFENSES; NOTICE OF
9-46 DEFECT OR DEFENSE. (a) Even against a purchaser for value and
9-47 without notice, the terms of a certificated security include terms
9-48 stated on the certificate and terms made part of the security by
9-49 reference on the certificate to another instrument, indenture, or
9-50 document or to a constitution, statute, ordinance, rule,
9-51 regulation, order, or the like to the extent the terms referred to
9-52 do not conflict with terms stated on the certificate. A reference
9-53 under this subsection does not of itself charge a purchaser for
9-54 value with notice of a defect going to the validity of the
9-55 security, even if the certificate expressly states that a person
9-56 accepting it admits notice. The terms of an uncertificated
9-57 security include those stated in any instrument, indenture, or
9-58 document or in a constitution, statute, ordinance, rule,
9-59 regulation, order, or the like pursuant to which the security is
9-60 issued.
9-61 (b) The following rules apply if an issuer asserts that a
9-62 security is not valid:
9-63 (1) A security other than one issued by a government
9-64 or governmental subdivision, agency, or instrumentality, even
9-65 though issued with a defect going to its validity, is valid in the
9-66 hands of a purchaser for value and without notice of the particular
9-67 defect unless the defect involves a violation of a constitutional
9-68 provision. In that case, the security is valid in the hands of a
9-69 purchaser for value and without notice of the defect, other than a
9-70 purchaser who takes by original issue.
10-1 (2) Subdivision (1) applies to an issuer that is a
10-2 government or governmental subdivision, agency, or instrumentality
10-3 only if:
10-4 (A) there has been substantial compliance with
10-5 the legal requirements governing the issue; or
10-6 (B) the issuer has received a substantial
10-7 consideration for the issue as a whole or for the particular
10-8 security and a stated purpose of the issue is one for which the
10-9 issuer has power to borrow money or issue the security.
10-10 (c) Except as otherwise provided in Section 8.205, lack of
10-11 genuineness of a certificated security is a complete defense, even
10-12 against a purchaser for value and without notice.
10-13 (d) All other defenses of the issuer of a security,
10-14 including nondelivery and conditional delivery of a certificated
10-15 security, are ineffective against a purchaser for value who has
10-16 taken the certificated security without notice of the particular
10-17 defense.
10-18 (e) This section does not affect the right of a party to
10-19 cancel a contract for a security "when, as and if issued" or "when
10-20 distributed" in the event of a material change in the character of
10-21 the security that is the subject of the contract or in the plan or
10-22 arrangement pursuant to which the security is to be issued or
10-23 distributed.
10-24 (f) If a security is held by a securities intermediary
10-25 against whom an entitlement holder has a security entitlement with
10-26 respect to the security, the issuer may not assert any defense that
10-27 the issuer could not assert if the entitlement holder held the
10-28 security directly.
10-29 Sec. 8.203. STALENESS AS NOTICE OF DEFECT OR DEFENSE. After
10-30 an act or event, other than a call that has been revoked, creating
10-31 a right to immediate performance of the principal obligation
10-32 represented by a certificated security or setting a date on or
10-33 after which the security is to be presented or surrendered for
10-34 redemption or exchange, a purchaser is charged with notice of any
10-35 defect in its issue or defense of the issuer if the act or event:
10-36 (1) requires the payment of money, the delivery of a
10-37 certificated security, the registration of transfer of an
10-38 uncertificated security, or any of them on presentation or
10-39 surrender of the security certificate, the money or security is
10-40 available on the date set for payment or exchange, and the
10-41 purchaser takes the security more than one year after that date; or
10-42 (2) is not covered by Subdivision (1) and the
10-43 purchaser takes the security more than two years after the date set
10-44 for surrender or presentation or the date on which performance
10-45 became due.
10-46 Sec. 8.204. EFFECT OF ISSUER'S RESTRICTION ON TRANSFER. A
10-47 restriction on transfer of a security imposed by the issuer, even
10-48 if otherwise lawful, is ineffective against a person without
10-49 knowledge of the restriction unless:
10-50 (1) the security is certificated and the restriction
10-51 is noted conspicuously on the security certificate; or
10-52 (2) the security is uncertificated and the registered
10-53 owner has been notified of the restriction.
10-54 Sec. 8.205. EFFECT OF UNAUTHORIZED SIGNATURE ON SECURITY
10-55 CERTIFICATE. An unauthorized signature placed on a security
10-56 certificate before or in the course of issue is ineffective, but
10-57 the signature is effective in favor of a purchaser for value of the
10-58 certificated security if the purchaser is without notice of the
10-59 lack of authority and the signing has been done by:
10-60 (1) an authenticating trustee, registrar, transfer
10-61 agent, or other person entrusted by the issuer with the signing of
10-62 the security certificate or of similar security certificates or
10-63 with the immediate preparation for signing of any of them; or
10-64 (2) an employee of the issuer, or of any of the
10-65 persons listed in Subdivision (1), entrusted with responsible
10-66 handling of the security certificate.
10-67 Sec. 8.206. COMPLETION OR ALTERATION OF SECURITY
10-68 CERTIFICATE. (a) If a security certificate contains the
10-69 signatures necessary to its issue or transfer but is incomplete in
10-70 any other respect:
11-1 (1) any person may complete it by filling in the
11-2 blanks as authorized; and
11-3 (2) even if the blanks are incorrectly filled in, the
11-4 security certificate as completed is enforceable by a purchaser who
11-5 took it for value and without notice of the incorrectness.
11-6 (b) A complete security certificate that has been improperly
11-7 altered, even if fraudulently, remains enforceable, but only
11-8 according to its original terms.
11-9 Sec. 8.207. RIGHTS AND DUTIES OF ISSUER WITH RESPECT TO
11-10 REGISTERED OWNERS. (a) Before due presentment for registration of
11-11 transfer of a certificated security in registered form or of an
11-12 instruction requesting registration of transfer of an
11-13 uncertificated security, the issuer or indenture trustee may treat
11-14 the registered owner as the person exclusively entitled to vote,
11-15 receive notifications, and otherwise exercise all the rights and
11-16 powers of an owner.
11-17 (b) This chapter does not affect the liability of the
11-18 registered owner of a security for a call, assessment, or the like.
11-19 Sec. 8.208. EFFECT OF SIGNATURE OF AUTHENTICATING TRUSTEE,
11-20 REGISTRAR, OR TRANSFER AGENT. (a) A person signing a security
11-21 certificate as authenticating trustee, registrar, transfer agent,
11-22 or the like warrants to a purchaser for value of the certificated
11-23 security, if the purchaser is without notice of a particular
11-24 defect, that:
11-25 (1) the certificate is genuine;
11-26 (2) the person's own participation in the issue of the
11-27 security is within the person's capacity and within the scope of
11-28 the authority received by the person from the issuer; and
11-29 (3) the person has reasonable grounds to believe that
11-30 the certificated security is in the form and within the amount the
11-31 issuer is authorized to issue.
11-32 (b) Unless otherwise agreed, a person signing under
11-33 Subsection (a) does not assume responsibility for the validity of
11-34 the security in other respects.
11-35 Sec. 8.209. ISSUER'S LIEN. A lien in favor of an issuer on
11-36 a certificated security is valid against a purchaser only if the
11-37 right of the issuer to the lien is noted conspicuously on the
11-38 security certificate.
11-39 Sec. 8.210. OVERISSUE. (a) In this section, "overissue"
11-40 means the issue of securities in excess of the amount the issuer
11-41 has corporate power to issue, but an overissue does not occur if
11-42 appropriate action has cured the overissue.
11-43 (b) Except as otherwise provided in Subsections (c) and (d),
11-44 the provisions of this chapter that validate a security or compel
11-45 its issue or reissue do not apply to the extent that validation,
11-46 issue, or reissue would result in overissue.
11-47 (c) If an identical security not constituting an overissue
11-48 is reasonably available for purchase, a person entitled to issue or
11-49 validation may compel the issuer to purchase the security and
11-50 deliver it if certificated or register its transfer if
11-51 uncertificated, against surrender of any security certificate the
11-52 person holds.
11-53 (d) If a security is not reasonably available for purchase,
11-54 a person entitled to issue or validation may recover from the
11-55 issuer the price the person or the last purchaser for value paid
11-56 for it with interest from the date of the person's demand.
11-57 SUBCHAPTER C. TRANSFER OF CERTIFICATED AND
11-58 UNCERTIFICATED SECURITIES
11-59 Sec. 8.301. DELIVERY. (a) Delivery of a certificated
11-60 security to a purchaser occurs when:
11-61 (1) the purchaser acquires possession of the security
11-62 certificate;
11-63 (2) another person, other than a securities
11-64 intermediary, either acquires possession of the security
11-65 certificate on behalf of the purchaser or, having previously
11-66 acquired possession of the certificate, acknowledges that it holds
11-67 for the purchaser; or
11-68 (3) a securities intermediary acting on behalf of the
11-69 purchaser acquires possession of the security certificate, only if
11-70 the certificate is in registered form and has been specially
12-1 indorsed to the purchaser by an effective indorsement.
12-2 (b) Delivery of an uncertificated security to a purchaser
12-3 occurs when:
12-4 (1) the issuer registers the purchaser as the
12-5 registered owner, on original issue or registration of transfer; or
12-6 (2) another person, other than a securities
12-7 intermediary, either becomes the registered owner of the
12-8 uncertificated security on behalf of the purchaser or, having
12-9 previously become the registered owner, acknowledges that it holds
12-10 for the purchaser.
12-11 Sec. 8.302. RIGHTS OF PURCHASER. (a) Except as otherwise
12-12 provided in Subsections (b) and (c), on delivery of a certificated
12-13 or uncertificated security to a purchaser, the purchaser acquires
12-14 all rights in the security that the transferor had or had power to
12-15 transfer.
12-16 (b) A purchaser of a limited interest acquires rights only
12-17 to the extent of the interest purchased.
12-18 (c) A purchaser of a certificated security who as a previous
12-19 holder had notice of an adverse claim does not improve its position
12-20 by taking from a protected purchaser.
12-21 Sec. 8.303. PROTECTED PURCHASER. (a) "Protected purchaser"
12-22 means a purchaser of a certificated or uncertificated security, or
12-23 of an interest therein, who:
12-24 (1) gives value;
12-25 (2) does not have notice of any adverse claim to the
12-26 security; and
12-27 (3) obtains control of the certificated or
12-28 uncertificated security.
12-29 (b) In addition to acquiring the rights of a purchaser, a
12-30 protected purchaser also acquires its interest in the security free
12-31 of any adverse claim.
12-32 Sec. 8.304. INDORSEMENT. (a) An indorsement may be in
12-33 blank or special. An indorsement in blank includes an indorsement
12-34 to bearer. A special indorsement specifies to whom a security is
12-35 to be transferred or who has power to transfer it. A holder may
12-36 convert a blank indorsement to a special indorsement.
12-37 (b) An indorsement purporting to be only of part of a
12-38 security certificate representing units intended by the issuer to
12-39 be separately transferable is effective to the extent of the
12-40 indorsement.
12-41 (c) An indorsement, whether special or in blank, does not
12-42 constitute a transfer until delivery of the certificate on which it
12-43 appears or, if the indorsement is on a separate document, until
12-44 delivery of both the document and the certificate.
12-45 (d) If a security certificate in registered form has been
12-46 delivered to a purchaser without a necessary indorsement, the
12-47 purchaser may become a protected purchaser only when the
12-48 indorsement is supplied. However, against a transferor, a transfer
12-49 is complete on delivery and the purchaser has a specifically
12-50 enforceable right to have any necessary indorsement supplied.
12-51 (e) An indorsement of a security certificate in bearer form
12-52 may give notice of an adverse claim to the certificate, but it does
12-53 not otherwise affect a right to registration that the holder
12-54 possesses.
12-55 (f) Unless otherwise agreed, a person making an indorsement
12-56 assumes only the obligations provided in Section 8.108 and not an
12-57 obligation that the security will be honored by the issuer.
12-58 Sec. 8.305. INSTRUCTION. (a) If an instruction has been
12-59 originated by an appropriate person but is incomplete in any other
12-60 respect, any person may complete it as authorized and the issuer
12-61 may rely on it as completed, even though it has been completed
12-62 incorrectly.
12-63 (b) Unless otherwise agreed, a person initiating an
12-64 instruction assumes only the obligations imposed by Section 8.108
12-65 and not an obligation that the security will be honored by the
12-66 issuer.
12-67 Sec. 8.306. EFFECT OF GUARANTEEING SIGNATURE, INDORSEMENT,
12-68 OR INSTRUCTION. (a) A person who guarantees a signature of an
12-69 indorser of a security certificate warrants that at the time of
12-70 signing:
13-1 (1) the signature was genuine;
13-2 (2) the signer was an appropriate person to indorse
13-3 or, if the signature is by an agent, the agent had actual authority
13-4 to act on behalf of the appropriate person; and
13-5 (3) the signer had legal capacity to sign.
13-6 (b) A person who guarantees a signature of the originator of
13-7 an instruction warrants that at the time of signing:
13-8 (1) the signature was genuine;
13-9 (2) the signer was an appropriate person to originate
13-10 the instruction or, if the signature is by an agent, the agent had
13-11 actual authority to act on behalf of the appropriate person, if the
13-12 person specified in the instruction as the registered owner was, in
13-13 fact, the registered owner, as to which fact the signature
13-14 guarantor does not make a warranty; and
13-15 (3) the signer had legal capacity to sign.
13-16 (c) A person who specially guarantees the signature of an
13-17 originator of an instruction makes the warranties of a signature
13-18 guarantor under Subsection (b) and also warrants that at the time
13-19 the instruction is presented to the issuer:
13-20 (1) the person specified in the instruction as the
13-21 registered owner of the uncertificated security will be the
13-22 registered owner; and
13-23 (2) the transfer of the uncertificated security
13-24 requested in the instruction will be registered by the issuer free
13-25 from all liens, security interests, restrictions, and claims other
13-26 than those specified in the instruction.
13-27 (d) A guarantor under Subsections (a) and (b) or a special
13-28 guarantor under Subsection (c) does not otherwise warrant the
13-29 rightfulness of the transfer.
13-30 (e) A person who guarantees an indorsement of a security
13-31 certificate makes the warranties of a signature guarantor under
13-32 Subsection (a) and also warrants the rightfulness of the transfer
13-33 in all respects.
13-34 (f) A person who guarantees an instruction requesting the
13-35 transfer of an uncertificated security makes the warranties of a
13-36 special signature guarantor under Subsection (c) and also warrants
13-37 the rightfulness of the transfer in all respects.
13-38 (g) An issuer may not require a special guaranty of
13-39 signature, a guaranty of indorsement, or a guaranty of instruction
13-40 as a condition to registration of transfer.
13-41 (h) The warranties under this section are made to a person
13-42 taking or dealing with the security in reliance on the guaranty,
13-43 and the guarantor is liable to the person for loss resulting from
13-44 their breach. An indorser or originator of an instruction whose
13-45 signature, indorsement, or instruction has been guaranteed is
13-46 liable to a guarantor for any loss suffered by the guarantor as a
13-47 result of breach of the warranties of the guarantor.
13-48 Sec. 8.307. PURCHASER'S RIGHT TO REQUISITES FOR REGISTRATION
13-49 OF TRANSFER. Unless otherwise agreed, the transferor of a security
13-50 on due demand shall supply the purchaser with proof of authority to
13-51 transfer or with any other requisite necessary to obtain
13-52 registration of the transfer of the security, but if the transfer
13-53 is not for value, a transferor need not comply unless the purchaser
13-54 pays the necessary expenses. If the transferor fails within a
13-55 reasonable time to comply with the demand, the purchaser may reject
13-56 or rescind the transfer.
13-57 SUBCHAPTER D. REGISTRATION
13-58 Sec. 8.401. DUTY OF ISSUER TO REGISTER TRANSFER. (a) If a
13-59 certificated security in registered form is presented to an issuer
13-60 with a request to register transfer or an instruction is presented
13-61 to an issuer with a request to register transfer of an
13-62 uncertificated security, the issuer shall register the transfer as
13-63 requested if:
13-64 (1) under the terms of the security the person seeking
13-65 registration of transfer is eligible to have the security
13-66 registered in its name;
13-67 (2) the indorsement or instruction is made by the
13-68 appropriate person or by an agent who has actual authority to act
13-69 on behalf of the appropriate person;
13-70 (3) reasonable assurance is given that the indorsement
14-1 or instruction is genuine and authorized (Section 8.402);
14-2 (4) any applicable law relating to the collection of
14-3 taxes has been complied with;
14-4 (5) the transfer does not violate any restriction on
14-5 transfer imposed by the issuer in accordance with Section 8.204;
14-6 (6) a demand that the issuer not register transfer has
14-7 not become effective under Section 8.403, or the issuer has
14-8 complied with Section 8.403(b) but no legal process or indemnity
14-9 bond is obtained as provided in Section 8.403(d); and
14-10 (7) the transfer is in fact rightful or is to a
14-11 protected purchaser.
14-12 (b) If an issuer is under a duty to register a transfer of a
14-13 security, the issuer is liable to a person presenting a
14-14 certificated security or an instruction for registration or to the
14-15 person's principal for loss resulting from unreasonable delay in
14-16 registration or failure or refusal to register the transfer.
14-17 Sec. 8.402. ASSURANCE THAT INDORSEMENT OR INSTRUCTION IS
14-18 EFFECTIVE. (a) An issuer may require the following assurance that
14-19 each necessary indorsement or each instruction is genuine and
14-20 authorized:
14-21 (1) in all cases, a guaranty of the signature of the
14-22 person making an indorsement or originating an instruction,
14-23 including, in the case of an instruction, reasonable assurance of
14-24 identity;
14-25 (2) if the indorsement is made or the instruction is
14-26 originated by an agent, appropriate assurance of actual authority
14-27 to sign;
14-28 (3) if the indorsement is made or the instruction is
14-29 originated by a fiduciary pursuant to Section 8.107(a)(4) or (5),
14-30 appropriate evidence of appointment or incumbency;
14-31 (4) if there is more than one fiduciary, reasonable
14-32 assurance that all who are required to sign have done so; and
14-33 (5) if the indorsement is made or the instruction is
14-34 originated by a person not covered by another provision of this
14-35 subsection, assurance appropriate to the case corresponding as
14-36 nearly as may be to the provisions of this subsection.
14-37 (b) An issuer may elect to require reasonable assurance
14-38 beyond that specified in this section.
14-39 (c) In this section:
14-40 (1) "Appropriate evidence of appointment or
14-41 incumbency" means:
14-42 (A) in the case of a fiduciary appointed or
14-43 qualified by a court, a certificate issued by or under the
14-44 direction or supervision of the court or an officer thereof and
14-45 dated within 60 days before the date of presentation for transfer;
14-46 or
14-47 (B) in any other case, a copy of a document
14-48 showing the appointment or a certificate issued by or on behalf of
14-49 a person reasonably believed by an issuer to be responsible or, in
14-50 the absence of that document or certificate, other evidence the
14-51 issuer reasonably considers appropriate.
14-52 (2) "Guaranty of the signature" means a guaranty
14-53 signed by or on behalf of a person reasonably believed by the
14-54 issuer to be responsible. An issuer may adopt standards with
14-55 respect to responsibility if they are not manifestly unreasonable.
14-56 Sec. 8.403. DEMAND THAT ISSUER NOT REGISTER TRANSFER. (a)
14-57 A person who is an appropriate person to make an indorsement or
14-58 originate an instruction may demand that the issuer not register
14-59 transfer of a security by communicating to the issuer a
14-60 notification that identifies the registered owner and the issue of
14-61 which the security is a part and provides an address for
14-62 communications directed to the person making the demand. The
14-63 demand is effective only if it is received by the issuer at a time
14-64 and in a manner affording the issuer reasonable opportunity to act
14-65 on it.
14-66 (b) If a certificated security in registered form is
14-67 presented to an issuer with a request to register transfer or an
14-68 instruction is presented to an issuer with a request to register
14-69 transfer of an uncertificated security after a demand that the
14-70 issuer not register transfer has become effective, the issuer shall
15-1 promptly communicate to (i) the person who initiated the demand at
15-2 the address provided in the demand and (ii) the person who
15-3 presented the security for registration of transfer or initiated
15-4 the instruction requesting registration of transfer a notification
15-5 stating that:
15-6 (1) the certificated security has been presented for
15-7 registration of transfer or the instruction for registration of
15-8 transfer of the uncertificated security has been received;
15-9 (2) a demand that the issuer not register transfer had
15-10 previously been received; and
15-11 (3) the issuer will withhold registration of transfer
15-12 for a period of time stated in the notification in order to provide
15-13 the person who initiated the demand an opportunity to obtain legal
15-14 process or an indemnity bond.
15-15 (c) The period described in Subsection (b)(3) may not exceed
15-16 30 days after the date of communication of the notification. A
15-17 shorter period may be specified by the issuer if it is not
15-18 manifestly unreasonable.
15-19 (d) An issuer is not liable to a person who initiated a
15-20 demand that the issuer not register transfer for any loss the
15-21 person suffers as a result of registration of a transfer pursuant
15-22 to an effective indorsement or instruction if the person who
15-23 initiated the demand does not, within the time stated in the
15-24 issuer's communication, either:
15-25 (1) obtain an appropriate injunction, restraining
15-26 order, or other process from a court of competent jurisdiction
15-27 enjoining the issuer from registering the transfer; or
15-28 (2) file with the issuer an indemnity bond, sufficient
15-29 in the issuer's judgment to protect the issuer and any transfer
15-30 agent, registrar, or other agent of the issuer involved from any
15-31 loss it or they may suffer by refusing to register the transfer.
15-32 (e) This section does not relieve an issuer from liability
15-33 for registering transfer pursuant to an indorsement or instruction
15-34 that was not effective.
15-35 Sec. 8.404. WRONGFUL REGISTRATION. (a) Except as otherwise
15-36 provided in Section 8.406, an issuer is liable for wrongful
15-37 registration of transfer if the issuer has registered a transfer of
15-38 a security to a person not entitled to it, and the transfer was
15-39 registered:
15-40 (1) pursuant to an ineffective indorsement or
15-41 instruction;
15-42 (2) after a demand that the issuer not register
15-43 transfer became effective under Section 8.403(a) and the issuer did
15-44 not comply with Section 8.403(b);
15-45 (3) after the issuer had been served with an
15-46 appropriate injunction, restraining order, or other process from a
15-47 court of competent jurisdiction enjoining it from registering the
15-48 transfer, and the issuer had a reasonable opportunity to act on the
15-49 injunction, restraining order, or other legal process; or
15-50 (4) by an issuer acting in collusion with the
15-51 wrongdoer.
15-52 (b) An issuer that is liable for wrongful registration of
15-53 transfer under Subsection (a) on demand shall provide the person
15-54 entitled to the security with a like certificated or uncertificated
15-55 security and any payments or distributions that the person did not
15-56 receive as a result of the wrongful registration. If an overissue
15-57 would result, the issuer's liability to provide the person with a
15-58 like security is governed by Section 8.210.
15-59 (c) Except as otherwise provided in Subsection (a) or in a
15-60 law relating to the collection of taxes, an issuer is not liable to
15-61 an owner or other person suffering loss as a result of the
15-62 registration of a transfer of a security if registration was made
15-63 pursuant to an effective indorsement or instruction.
15-64 Sec. 8.405. REPLACEMENT OF LOST, DESTROYED, OR WRONGFULLY
15-65 TAKEN SECURITY CERTIFICATE. (a) If an owner of a certificated
15-66 security, whether in registered or bearer form, claims that the
15-67 certificate has been lost, destroyed, or wrongfully taken, the
15-68 issuer shall issue a new certificate if the owner:
15-69 (1) so requests before the issuer has notice that the
15-70 certificate has been acquired by a protected purchaser;
16-1 (2) files with the issuer a sufficient indemnity bond;
16-2 and
16-3 (3) satisfies other reasonable requirements imposed by
16-4 the issuer.
16-5 (b) If, after the issue of a new security certificate, a
16-6 protected purchaser of the original certificate presents it for
16-7 registration of transfer, the issuer shall register the transfer
16-8 unless an overissue would result. In that case, the issuer's
16-9 liability is governed by Section 8.210. In addition to any rights
16-10 on the indemnity bond, an issuer may recover the new certificate
16-11 from a person to whom it was issued or any person taking under that
16-12 person, except a protected purchaser.
16-13 Sec. 8.406. OBLIGATION TO NOTIFY ISSUER OF LOST, DESTROYED,
16-14 OR WRONGFULLY TAKEN SECURITY CERTIFICATE. If a security
16-15 certificate has been lost, apparently destroyed, or wrongfully
16-16 taken, and the owner fails to notify the issuer of that fact within
16-17 a reasonable time after the owner has notice of it and the issuer
16-18 registers a transfer of the security before receiving notification,
16-19 the owner may not assert against the issuer a claim for registering
16-20 the transfer under Section 8.404 or a claim to a new security
16-21 certificate under Section 8.405.
16-22 Sec. 8.407. AUTHENTICATING TRUSTEE, TRANSFER AGENT, AND
16-23 REGISTRAR. A person acting as authenticating trustee, transfer
16-24 agent, registrar, or other agent for an issuer in the registration
16-25 of a transfer of its securities, in the issue of new security
16-26 certificates or uncertificated securities, or in the cancellation
16-27 of surrendered security certificates has the same obligation to the
16-28 holder or owner of a certificated or uncertificated security with
16-29 regard to the particular functions performed as the issuer has in
16-30 regard to those functions.
16-31 SUBCHAPTER E. SECURITY ENTITLEMENTS
16-32 Sec. 8.501. SECURITIES ACCOUNT; ACQUISITION OF SECURITY
16-33 ENTITLEMENT FROM SECURITIES INTERMEDIARY. (a) "Securities
16-34 account" means an account to which a financial asset is or may be
16-35 credited in accordance with an agreement under which the person
16-36 maintaining the account undertakes to treat the person for whom the
16-37 account is maintained as entitled to exercise the rights that
16-38 comprise the financial asset.
16-39 (b) Except as otherwise provided in Subsections (d) and (e),
16-40 a person acquires a security entitlement if a securities
16-41 intermediary:
16-42 (1) indicates by book entry that a financial asset has
16-43 been credited to the person's securities account;
16-44 (2) receives a financial asset from the person or
16-45 acquires a financial asset for the person and, in either case,
16-46 accepts it for credit to the person's securities account; or
16-47 (3) becomes obligated under other law, regulation, or
16-48 rule to credit a financial asset to the person's securities
16-49 account.
16-50 (c) If a condition of Subsection (b) has been met, a person
16-51 has a security entitlement even though the securities intermediary
16-52 does not itself hold the financial asset.
16-53 (d) If a securities intermediary holds a financial asset for
16-54 another person, and the financial asset is registered in the name
16-55 of, payable to the order of, or specially indorsed to the other
16-56 person and has not been indorsed to the securities intermediary or
16-57 in blank, the other person is treated as holding the financial
16-58 asset directly rather than as having a security entitlement with
16-59 respect to the financial asset.
16-60 (e) Issuance of a security is not establishment of a
16-61 security entitlement.
16-62 Sec. 8.502. ASSERTION OF ADVERSE CLAIM AGAINST ENTITLEMENT
16-63 HOLDER. An action based on an adverse claim to a financial asset,
16-64 whether framed in conversion, replevin, constructive trust,
16-65 equitable lien, or other theory, may not be asserted against a
16-66 person who acquires a security entitlement under Section 8.501 for
16-67 value and without notice of the adverse claim.
16-68 Sec. 8.503. PROPERTY INTEREST OF ENTITLEMENT HOLDER IN
16-69 FINANCIAL ASSET HELD BY SECURITIES INTERMEDIARY. (a) To the
16-70 extent necessary for a securities intermediary to satisfy all
17-1 security entitlements with respect to a particular financial asset,
17-2 all interests in that financial asset held by the securities
17-3 intermediary are held by the securities intermediary for the
17-4 entitlement holders, are not property of the securities
17-5 intermediary, and are not subject to claims of creditors of the
17-6 securities intermediary, except as otherwise provided in Section
17-7 8.511.
17-8 (b) An entitlement holder's property interest with respect
17-9 to a particular financial asset under Subsection (a) is a pro rata
17-10 property interest in all interests in that financial asset held by
17-11 the securities intermediary, without regard to the time the
17-12 entitlement holder acquired the security entitlement or the time
17-13 the securities intermediary acquired the interest in that financial
17-14 asset.
17-15 (c) An entitlement holder's property interest with respect
17-16 to a particular financial asset under Subsection (a) may be
17-17 enforced against the securities intermediary only by exercise of
17-18 the entitlement holder's rights under Sections 8.505-8.508.
17-19 (d) An entitlement holder's property interest with respect
17-20 to a particular financial asset under Subsection (a) may be
17-21 enforced against a purchaser of the financial asset or interest
17-22 therein only if:
17-23 (1) insolvency proceedings have been initiated by or
17-24 against the securities intermediary;
17-25 (2) the securities intermediary does not have
17-26 sufficient interests in the financial asset to satisfy the security
17-27 entitlements of all of its entitlement holders to that financial
17-28 asset;
17-29 (3) the securities intermediary violated its
17-30 obligations under Section 8.504 by transferring the financial asset
17-31 or interest therein to the purchaser; and
17-32 (4) the purchaser is not protected under Subsection
17-33 (f).
17-34 (e) The trustee or other liquidator, acting on behalf of all
17-35 entitlement holders having security entitlements with respect to a
17-36 particular financial asset, may recover the financial asset, or
17-37 interest therein, from the purchaser. If the trustee or other
17-38 liquidator elects not to pursue that right, an entitlement holder
17-39 whose security entitlement remains unsatisfied has the right to
17-40 recover its interest in the financial asset from the purchaser.
17-41 (f) An action based on the entitlement holder's property
17-42 interest with respect to a particular financial asset under
17-43 Subsection (a), whether framed in conversion, replevin,
17-44 constructive trust, equitable lien, or other theory, may not be
17-45 asserted against any purchaser of a financial asset or interest
17-46 therein who gives value, obtains control, and does not act in
17-47 collusion with the securities intermediary in violating the
17-48 securities intermediary's obligations under Section 8.504.
17-49 Sec. 8.504. DUTY OF SECURITIES INTERMEDIARY TO MAINTAIN
17-50 FINANCIAL ASSET. (a) A securities intermediary shall promptly
17-51 obtain and thereafter maintain a financial asset in a quantity
17-52 corresponding to the aggregate of all security entitlements it has
17-53 established in favor of its entitlement holders with respect to
17-54 that financial asset. The securities intermediary may maintain
17-55 those financial assets directly or through one or more other
17-56 securities intermediaries.
17-57 (b) Except to the extent otherwise agreed on by its
17-58 entitlement holder, a securities intermediary may not grant any
17-59 security interests in a financial asset it is obligated to maintain
17-60 pursuant to Subsection (a).
17-61 (c) A securities intermediary satisfies the duty in
17-62 Subsection (a) if:
17-63 (1) the securities intermediary acts with respect to
17-64 the duty as agreed on by the entitlement holder and the securities
17-65 intermediary; or
17-66 (2) in the absence of agreement, the securities
17-67 intermediary exercises due care in accordance with reasonable
17-68 commercial standards to obtain and maintain the financial asset.
17-69 (d) This section does not apply to a clearing corporation
17-70 that is itself the obligor of an option or similar obligation to
18-1 which its entitlement holders have security entitlements.
18-2 Sec. 8.505. DUTY OF SECURITIES INTERMEDIARY WITH RESPECT TO
18-3 PAYMENTS AND DISTRIBUTIONS. (a) A securities intermediary shall
18-4 take action to obtain a payment or distribution made by the issuer
18-5 of a financial asset. A securities intermediary satisfies the duty
18-6 if:
18-7 (1) the securities intermediary acts with respect to
18-8 the duty as agreed on by the entitlement holder and the securities
18-9 intermediary; or
18-10 (2) in the absence of agreement, the securities
18-11 intermediary exercises due care in accordance with reasonable
18-12 commercial standards to attempt to obtain the payment or
18-13 distribution.
18-14 (b) A securities intermediary is obligated to its
18-15 entitlement holder for a payment or distribution made by the issuer
18-16 of a financial asset if the payment or distribution is received by
18-17 the securities intermediary.
18-18 Sec. 8.506. DUTY OF SECURITIES INTERMEDIARY TO EXERCISE
18-19 RIGHTS AS DIRECTED BY ENTITLEMENT HOLDER. A securities
18-20 intermediary shall exercise rights with respect to a financial
18-21 asset if directed to do so by an entitlement holder. A securities
18-22 intermediary satisfies the duty if:
18-23 (1) the securities intermediary acts with respect to
18-24 the duty as agreed on by the entitlement holder and the securities
18-25 intermediary; or
18-26 (2) in the absence of agreement, the securities
18-27 intermediary either places the entitlement holder in a position to
18-28 exercise the rights directly or exercises due care in accordance
18-29 with reasonable commercial standards to follow the direction of the
18-30 entitlement holder.
18-31 Sec. 8.507. DUTY OF SECURITIES INTERMEDIARY TO COMPLY WITH
18-32 ENTITLEMENT ORDER. (a) A securities intermediary shall comply
18-33 with an entitlement order if the entitlement order is originated by
18-34 the appropriate person, the securities intermediary has had
18-35 reasonable opportunity to assure itself that the entitlement order
18-36 is genuine and authorized, and the securities intermediary has had
18-37 reasonable opportunity to comply with the entitlement order. A
18-38 securities intermediary satisfies the duty if:
18-39 (1) the securities intermediary acts with respect to
18-40 the duty as agreed on by the entitlement holder and the securities
18-41 intermediary; or
18-42 (2) in the absence of agreement, the securities
18-43 intermediary exercises due care in accordance with reasonable
18-44 commercial standards to comply with the entitlement order.
18-45 (b) If a securities intermediary transfers a financial asset
18-46 pursuant to an ineffective entitlement order, the securities
18-47 intermediary shall reestablish a security entitlement in favor of
18-48 the person entitled to it and pay or credit any payments or
18-49 distributions that the person did not receive as a result of the
18-50 wrongful transfer. If the securities intermediary does not
18-51 reestablish a security entitlement, the securities intermediary is
18-52 liable to the entitlement holder for damages.
18-53 Sec. 8.508. DUTY OF SECURITIES INTERMEDIARY TO CHANGE
18-54 ENTITLEMENT HOLDER'S POSITION TO OTHER FORM OF SECURITY HOLDING. A
18-55 securities intermediary shall act at the direction of an
18-56 entitlement holder to change a security entitlement into another
18-57 available form of holding for which the entitlement holder is
18-58 eligible or to cause the financial asset to be transferred to a
18-59 securities account of the entitlement holder with another
18-60 securities intermediary. A securities intermediary satisfies the
18-61 duty if:
18-62 (1) the securities intermediary acts as agreed on by
18-63 the entitlement holder and the securities intermediary; or
18-64 (2) in the absence of agreement, the securities
18-65 intermediary exercises due care in accordance with reasonable
18-66 commercial standards to follow the direction of the entitlement
18-67 holder.
18-68 Sec. 8.509. SPECIFICATION OF DUTIES OF SECURITIES
18-69 INTERMEDIARY BY OTHER STATUTE OR REGULATION; MANNER OF PERFORMANCE
18-70 OF DUTIES OF SECURITIES INTERMEDIARY AND EXERCISE OF RIGHTS OF
19-1 ENTITLEMENT HOLDER. (a) If the substance of a duty imposed on a
19-2 securities intermediary by Sections 8.504-8.508 is the subject of
19-3 another statute, regulation, or rule, compliance with that statute,
19-4 regulation, or rule satisfies the duty.
19-5 (b) To the extent that specific standards for the
19-6 performance of the duties of a securities intermediary or the
19-7 exercise of the rights of an entitlement holder are not specified
19-8 by another statute, regulation, or rule or by agreement between the
19-9 securities intermediary and the entitlement holder, the securities
19-10 intermediary shall perform its duties and the entitlement holder
19-11 shall exercise its rights in a commercially reasonable manner.
19-12 (c) The obligation of a securities intermediary to perform
19-13 the duties imposed by Sections 8.504-8.508 is subject to:
19-14 (1) rights of the securities intermediary arising out
19-15 of a security interest under a security agreement with the
19-16 entitlement holder or otherwise; and
19-17 (2) rights of the securities intermediary under
19-18 another law, regulation, rule, or agreement to withhold performance
19-19 of its duties as a result of unfulfilled obligations of the
19-20 entitlement holder to the securities intermediary.
19-21 (d) Sections 8.504-8.508 do not require a securities
19-22 intermediary to take any action that is prohibited by another
19-23 statute, regulation, or rule.
19-24 Sec. 8.510. RIGHTS OF PURCHASER OF SECURITY ENTITLEMENT FROM
19-25 ENTITLEMENT HOLDER. (a) An action based on an adverse claim to a
19-26 financial asset or security entitlement, whether framed in
19-27 conversion, replevin, constructive trust, equitable lien, or other
19-28 theory, may not be asserted against a person who purchases a
19-29 security entitlement, or an interest therein, from an entitlement
19-30 holder if the purchaser gives value, does not have notice of the
19-31 adverse claim, and obtains control.
19-32 (b) If an adverse claim could not have been asserted against
19-33 an entitlement holder under Section 8.502, the adverse claim cannot
19-34 be asserted against a person who purchases from the entitlement
19-35 holder a security entitlement or an interest therein.
19-36 (c) In a case not covered by the priority rules in Chapter
19-37 9, a purchaser for value of a security entitlement, or an interest
19-38 therein, who obtains control has priority over a purchaser of a
19-39 security entitlement, or an interest therein, who does not obtain
19-40 control. Purchasers who have control rank equally, except that a
19-41 securities intermediary as purchaser has priority over a
19-42 conflicting purchaser who has control unless otherwise agreed on by
19-43 the securities intermediary.
19-44 Sec. 8.511. PRIORITY AMONG SECURITY INTERESTS AND
19-45 ENTITLEMENT HOLDERS. (a) Except as otherwise provided in
19-46 Subsections (b) and (c), if a securities intermediary does not have
19-47 sufficient interests in a particular financial asset to satisfy
19-48 both its obligations to entitlement holders who have security
19-49 entitlements to that financial asset and its obligation to a
19-50 creditor of the securities intermediary who has a security interest
19-51 in that financial asset, the claims of entitlement holders, other
19-52 than the creditor, have priority over the claim of the creditor.
19-53 (b) A claim of a creditor of a securities intermediary who
19-54 has a security interest in a financial asset held by a securities
19-55 intermediary has priority over claims of the securities
19-56 intermediary's entitlement holders who have security entitlements
19-57 with respect to that financial asset if the creditor has control
19-58 over the financial asset.
19-59 (c) If a clearing corporation does not have sufficient
19-60 financial assets to satisfy both its obligations to entitlement
19-61 holders who have security entitlements with respect to a financial
19-62 asset and its obligation to a creditor of the clearing corporation
19-63 who has a security interest in that financial asset, the claim of
19-64 the creditor has priority over the claims of entitlement holders.
19-65 SECTION 2. Section 9.103(f), Business & Commerce Code, is
19-66 amended to read as follows:
19-67 (f) Investment property <Uncertificated securities>.
19-68 (1) This subsection applies to investment property.
19-69 (2) Except as otherwise provided in Subdivision (6),
19-70 during the time that a security certificate is located in a
20-1 jurisdiction, perfection of a security interest, the effect of
20-2 perfection or non-perfection, and the priority of a security
20-3 interest in the certificated security represented thereby are
20-4 governed by the local law of that jurisdiction.
20-5 (3) Except as otherwise provided in Subdivision (6),
20-6 perfection of a security interest, the effect of perfection or
20-7 non-perfection, and the priority of a security interest in an
20-8 uncertificated security are governed by the local law of the
20-9 issuer's jurisdiction as specified in Section 8.110(d).
20-10 (4) Except as otherwise provided in Subdivision (6),
20-11 perfection of a security interest, the effect of perfection or
20-12 non-perfection, and the priority of a security interest in a
20-13 security entitlement or securities account are governed by the
20-14 local law of the securities intermediary's jurisdiction as
20-15 specified in Section 8.110(e).
20-16 (5) Except as otherwise provided in Subdivision (6),
20-17 perfection of a security interest, the effect of perfection or
20-18 non-perfection, and the priority of a security interest in a
20-19 commodity contract or commodity account are governed by the local
20-20 law of the commodity intermediary's jurisdiction. The following
20-21 rules determine a commodity intermediary's jurisdiction for
20-22 purposes of this subdivision:
20-23 (A) If an agreement between the commodity
20-24 intermediary and the commodity customer specifies that it is
20-25 governed by the law of a particular jurisdiction, that jurisdiction
20-26 is the commodity intermediary's jurisdiction.
20-27 (B) If an agreement between the commodity
20-28 intermediary and the commodity customer does not specify the
20-29 governing law as provided in Paragraph (A), but expressly specifies
20-30 that the commodity account is maintained at an office in a
20-31 particular jurisdiction, that jurisdiction is the commodity
20-32 intermediary's jurisdiction.
20-33 (C) If an agreement between the commodity
20-34 intermediary and the commodity customer does not specify a
20-35 jurisdiction as provided in Paragraph (A) or (B), the commodity
20-36 intermediary's jurisdiction is the jurisdiction in which is located
20-37 the office identified in an account statement as the office serving
20-38 the commodity customer's account.
20-39 (D) If an agreement between the commodity
20-40 intermediary and the commodity customer does not specify a
20-41 jurisdiction as provided in Paragraph (A) or (B) and an account
20-42 statement does not identify an office serving the commodity
20-43 customer's account as provided in Paragraph (C), the commodity
20-44 intermediary's jurisdiction is the jurisdiction in which is located
20-45 the chief executive office of the commodity intermediary.
20-46 (6) Perfection of a security interest by filing,
20-47 automatic perfection of a security interest in investment property
20-48 granted by a broker or securities intermediary, and automatic
20-49 perfection of a security interest in a commodity contract or
20-50 commodity account granted by a commodity intermediary are governed
20-51 by the local law of the jurisdiction in which the debtor is
20-52 located. <The law (including the conflict of laws rules) of the
20-53 jurisdiction of organization of the issuer governs the perfection
20-54 and the effect of perfection or non-perfection of a security
20-55 interest in uncertificated securities.>
20-56 SECTION 3. Section 9.105, Business & Commerce Code, is
20-57 amended to read as follows:
20-58 Sec. 9.105. Definitions and Index of Definitions. (a) In
20-59 this chapter, unless the context otherwise requires:
20-60 (1) "Account debtor" means the person who is obligated
20-61 on an account, chattel paper or general intangible.<;>
20-62 (2) "Chattel paper" means a writing or writings which
20-63 evidence both a monetary obligation and a security interest in or a
20-64 lease of specific goods, but a charter or other contract involving
20-65 the use or hire of a vessel is not chattel paper. When a
20-66 transaction is evidenced both by such a security agreement or a
20-67 lease and by an instrument or a series of instruments, the group of
20-68 writings taken together constitutes chattel paper.<;>
20-69 (3) "Collateral" means the property subject to a
20-70 security interest, and includes accounts and chattel paper which
21-1 have been sold.<;>
21-2 (4) "Debtor" means the person who owes payment or
21-3 other performance of the obligation secured, whether or not he owns
21-4 or has rights in the collateral, and includes the seller of
21-5 accounts or chattel paper. Where the debtor and the owner of the
21-6 collateral are not the same person, the term "debtor" means the
21-7 owner of the collateral in any provision of the chapter dealing
21-8 with the collateral, the obligor in any provision dealing with the
21-9 obligation, and may include both where the context so requires.<;>
21-10 (5) "Deposit account" means a demand, time, savings,
21-11 passbook or like account maintained with a bank, savings and loan
21-12 association, credit union or like organization, other than an
21-13 account evidenced by a certificate of deposit.<;>
21-14 (6) "Document" means document of title as defined in
21-15 the general definitions of Chapter 1 (Section 1.201), and a receipt
21-16 of the kind described in Subsection (b) of Section 7.201.<;>
21-17 (7) "Encumbrance" includes real estate mortgages and
21-18 other liens on real estate and all other rights in real estate that
21-19 are not ownership interests.<;>
21-20 (8) "Goods" includes all things which are movable at
21-21 the time the security interest attaches or which are fixtures
21-22 (Section 9.313), but does not include money, documents,
21-23 instruments, investment property, accounts, chattel paper, general
21-24 intangibles, or minerals or the like (including oil and gas) before
21-25 extraction. "Goods" also includes standing timber which is to be
21-26 cut and removed under a conveyance or contract for sale, the unborn
21-27 young of animals, and growing crops.<;>
21-28 (9) "Instrument" means a negotiable instrument
21-29 (defined in Section 3.104)<, or a certificated security (defined in
21-30 Section 8.102)> or any other writing which evidences a right to the
21-31 payment of money and is not itself a security agreement or lease
21-32 and is of a type which is in ordinary course of business
21-33 transferred by delivery with any necessary indorsement or
21-34 assignment, but the term does not include investment property.<;>
21-35 (10) "Mortgage" means a consensual interest created by
21-36 a real estate mortgage, a trust deed on real estate, or the
21-37 like.<;>
21-38 (11) An advance is made "pursuant to commitment" if
21-39 the secured party has bound himself to make it, whether or not a
21-40 subsequent event of default or other event not within his control
21-41 has relieved or may relieve him from his obligation.<;>
21-42 (12) "Security agreement" means an agreement which
21-43 creates or provides for a security interest.<;>
21-44 (13) "Secured party" means a lender, seller or other
21-45 person in whose favor there is a security interest, including a
21-46 person to whom accounts or chattel paper have been sold. When the
21-47 holders of obligations issued under an indenture of trust,
21-48 equipment trust agreement or the like are represented by a trustee
21-49 or other person, the representative is the secured party.
21-50 (b) Other definitions applying to this chapter and the
21-51 sections in which they appear are:
21-52 "Account". Section 9.106.
21-53 "Attach". Section 9.203.
21-54 "Commodity contract". Section 9.115.
21-55 "Commodity customer". Section 9.115.
21-56 "Commodity intermediary". Section 9.115.
21-57 "Construction mortgage". Section 9.313(a).
21-58 "Consumer goods". Section 9.109(1).
21-59 "Control". Section 9.115.
21-60 "Equipment". Section 9.109(2).
21-61 "Farm products". Section 9.109(3).
21-62 "Fixture". Section 9.313.
21-63 "Fixture filing". Section 9.313.
21-64 "General intangibles". Section 9.106.
21-65 "Inventory". Section 9.109(4).
21-66 "Investment property". Section 9.115.
21-67 "Lien creditor". Section 9.301(c).
21-68 "Proceeds". Section 9.306(a).
21-69 "Purchase money security interest". Section 9.107.
21-70 "United States". Section 9.103.
22-1 (c) The following definitions in other chapters apply to
22-2 this chapter:
22-3 "Broker". Section 8.102.
22-4 "Certificated security". Section 8.102.
22-5 "Check". Section 3.104.
22-6 "Clearing corporation". Section 8.102.
22-7 "Contract for sale". Section 2.106.
22-8 "Control". Section 8.106.
22-9 "Delivery". Section 8.301.
22-10 "Entitlement holder". Section 8.102.
22-11 "Financial asset". Section 8.102.
22-12 "Holder in due course". Section 3.302.
22-13 "Note". Section 3.104.
22-14 "Sale". Section 2.106.
22-15 "Securities intermediary". Section 8.102.
22-16 "Security". Section 8.102.
22-17 "Security certificate". Section 8.102.
22-18 "Security entitlement". Section 8.102.
22-19 "Uncertificated security". Section 8.102.
22-20 (d) In addition, Chapter 1 contains general definitions and
22-21 principles of construction and interpretation applicable throughout
22-22 this chapter.
22-23 SECTION 4. Section 9.106, Business & Commerce Code, is
22-24 amended to read as follows:
22-25 Sec. 9.106. Definitions: "Account"; "General Intangibles".
22-26 "Account" means any right to payment for goods sold or leased or
22-27 for services rendered which is not evidenced by an instrument or
22-28 chattel paper, whether or not it has been earned by performance.
22-29 "General intangibles" means any personal property (including things
22-30 in action) other than goods, accounts, chattel paper, documents,
22-31 instruments, investment property, and money. All rights to payment
22-32 earned or unearned under a charter or other contract involving the
22-33 use or hire of a vessel and all rights incident to the charter or
22-34 contract are accounts.
22-35 SECTION 5. Subchapter A, Chapter 9, Business & Commerce
22-36 Code, is amended by adding Sections 9.115 and 9.116 to read as
22-37 follows:
22-38 Sec. 9.115. INVESTMENT PROPERTY. (a) In this chapter:
22-39 (1) "Commodity account" means an account maintained by
22-40 a commodity intermediary in which a commodity contract is carried
22-41 for a commodity customer.
22-42 (2) "Commodity contract" means a commodity futures
22-43 contract, an option on a commodity futures contract, a commodity
22-44 option, or other contract that, in each case, is:
22-45 (A) traded on or subject to the rules of a board
22-46 of trade that has been designated as a contract market for such a
22-47 contract pursuant to the federal commodities laws; or
22-48 (B) traded on a foreign commodity board of
22-49 trade, exchange, or market, and is carried on the books of a
22-50 commodity intermediary for a commodity customer.
22-51 (3) "Commodity customer" means a person for whom a
22-52 commodity intermediary carries a commodity contract on its books.
22-53 (4) "Commodity intermediary" means:
22-54 (A) a person who is registered as a futures
22-55 commission merchant under the federal commodities laws; or
22-56 (B) a person who in the ordinary course of its
22-57 business provides clearance or settlement services for a board of
22-58 trade that has been designated as a contract market pursuant to the
22-59 federal commodities laws.
22-60 (5) "Control," with respect to a certificated
22-61 security, uncertificated security, or security entitlement, has the
22-62 meaning specified in Section 8.106. A secured party has control
22-63 over a commodity contract if, by agreement among the commodity
22-64 customer, the commodity intermediary, and the secured party, the
22-65 commodity intermediary has agreed that it will apply any value
22-66 distributed on account of the commodity contract as directed by the
22-67 secured party without further consent by the commodity customer.
22-68 If a commodity customer grants a security interest in a commodity
22-69 contract to its own commodity intermediary, the commodity
22-70 intermediary as secured party has control. A secured party has
23-1 control over a securities account or commodity account if the
23-2 secured party has control over all security entitlements or
23-3 commodity contracts carried in the securities account or commodity
23-4 account.
23-5 (6) "Investment property" means:
23-6 (A) a security, whether certificated or
23-7 uncertificated;
23-8 (B) a security entitlement;
23-9 (C) a securities account;
23-10 (D) a commodity contract; or
23-11 (E) a commodity account.
23-12 (b) Attachment or perfection of a security interest in a
23-13 securities account is also attachment or perfection of a security
23-14 interest in all security entitlements carried in the securities
23-15 account. Attachment or perfection of a security interest in a
23-16 commodity account is also attachment or perfection of a security
23-17 interest in all commodity contracts carried in the commodity
23-18 account.
23-19 (c) A description of collateral in a security agreement or
23-20 financing statement is sufficient to create or perfect a security
23-21 interest in a certificated security, uncertificated security,
23-22 security entitlement, securities account, commodity contract, or
23-23 commodity account whether it describes the collateral by those
23-24 terms, or as investment property, or by description of the
23-25 underlying security, financial asset, or commodity contract. A
23-26 description of investment property collateral in a security
23-27 agreement or financing statement is sufficient if it identifies the
23-28 collateral by specific listing, by category, by quantity, by a
23-29 computational or allocational formula or procedure, or by any other
23-30 method, if the identity of the collateral is objectively
23-31 determinable.
23-32 (d) Perfection of a security interest in investment property
23-33 is governed by the following rules:
23-34 (1) A security interest in investment property may be
23-35 perfected by control.
23-36 (2) Except as otherwise provided in Subdivisions (3)
23-37 and (4), a security interest in investment property may be
23-38 perfected by filing.
23-39 (3) If the debtor is a broker or securities
23-40 intermediary, a security interest in investment property is
23-41 perfected when it attaches. The filing of a financing statement
23-42 with respect to a security interest in investment property granted
23-43 by a broker or securities intermediary has no effect for purposes
23-44 of perfection or priority with respect to that security interest.
23-45 (4) If a debtor is a commodity intermediary, a
23-46 security interest in a commodity contract or a commodity account is
23-47 perfected when it attaches. The filing of a financing statement
23-48 with respect to a security interest in a commodity contract or a
23-49 commodity account granted by a commodity intermediary has no effect
23-50 for purposes of perfection or priority with respect to that
23-51 security interest.
23-52 (e) Priority between conflicting security interests in the
23-53 same investment property is governed by the following rules:
23-54 (1) A security interest of a secured party who has
23-55 control over investment property has priority over a security
23-56 interest of a secured party who does not have control over the
23-57 investment property.
23-58 (2) Except as otherwise provided in Subdivisions (3)
23-59 and (4), conflicting security interests of secured parties each of
23-60 whom has control rank equally.
23-61 (3) Except as otherwise agreed on by the securities
23-62 intermediary, a security interest in a security entitlement or a
23-63 securities account granted to the debtor's own securities
23-64 intermediary has priority over any security interest granted by the
23-65 debtor to another secured party.
23-66 (4) Except as otherwise agreed on by the commodity
23-67 intermediary, a security interest in a commodity contract or a
23-68 commodity account granted to the debtor's own commodity
23-69 intermediary has priority over any security interest granted by the
23-70 debtor to another secured party.
24-1 (5) Conflicting security interests granted by a
24-2 broker, a securities intermediary, or a commodity intermediary that
24-3 are perfected without control rank equally.
24-4 (6) In all other cases, priority between conflicting
24-5 security interests in investment property is governed by Sections
24-6 9.312(e)-(g). Section 9.312(d) does not apply to investment
24-7 property.
24-8 (f) If a security certificate in registered form is
24-9 delivered to a secured party pursuant to agreement, a written
24-10 security agreement is not required for attachment or enforceability
24-11 of the security interest, delivery suffices for perfection of the
24-12 security interest, and the security interest has priority over a
24-13 conflicting security interest perfected by means other than
24-14 control, even if a necessary indorsement is lacking.
24-15 Sec. 9.116. SECURITY INTEREST ARISING IN PURCHASE OR
24-16 DELIVERY OF FINANCIAL ASSET. (a) If a person buys a financial
24-17 asset through a securities intermediary in a transaction in which
24-18 the buyer is obligated to pay the purchase price to the securities
24-19 intermediary at the time of the purchase, and the securities
24-20 intermediary credits the financial asset to the buyer's securities
24-21 account before the buyer pays the securities intermediary, the
24-22 securities intermediary has a security interest in the buyer's
24-23 security entitlement securing the buyer's obligation to pay. A
24-24 security agreement is not required for attachment or enforceability
24-25 of the security interest, and the security interest is
24-26 automatically perfected.
24-27 (b) If a certificated security or other financial asset
24-28 represented by a writing that in the ordinary course of business is
24-29 transferred by delivery with any necessary indorsement or
24-30 assignment is delivered pursuant to an agreement between persons in
24-31 the business of dealing with such securities or financial assets
24-32 and the agreement calls for delivery versus payment, the person
24-33 delivering the certificate or other financial asset has a security
24-34 interest in the certificated security or other financial asset
24-35 securing the seller's right to receive payment. A security
24-36 agreement is not required for attachment or enforceability of the
24-37 security interest, and the security interest is automatically
24-38 perfected.
24-39 SECTION 6. Section 9.203(a), Business & Commerce Code, is
24-40 amended to read as follows:
24-41 (a) Subject to the provisions of Section 4.208 on the
24-42 security interest of a collecting bank, Sections 9.115 and 9.116
24-43 <Section 8.321> on security interests in investment property
24-44 <securities>, and Section 9.113 on a security interest arising
24-45 under the chapter on Sales, a security interest is not enforceable
24-46 against the debtor or third parties with respect to the collateral
24-47 and does not attach unless:
24-48 (1) the collateral is in the possession of the secured
24-49 party pursuant to agreement, the collateral is investment property
24-50 and the secured party has control pursuant to agreement, or the
24-51 debtor has signed a security agreement which contains a description
24-52 of the collateral and in addition, when the security interest
24-53 covers crops growing or to be grown or timber to be cut, a
24-54 description of the land concerned;
24-55 (2) value has been given; and
24-56 (3) the debtor has rights in the collateral.
24-57 SECTION 7. Section 9.301(a), Business & Commerce Code, is
24-58 amended to read as follows:
24-59 (a) Except as otherwise provided in Subsection (b), an
24-60 unperfected security interest is subordinate to the rights of:
24-61 (1) persons entitled to priority under Section 9.312;
24-62 (2) a person who becomes a lien creditor before the
24-63 security interest is perfected;
24-64 (3) in the case of goods, instruments, documents, and
24-65 chattel paper, a person who is not a secured party and who is a
24-66 transferee in bulk or other buyer not in ordinary course of
24-67 business, or is a buyer of farm products in ordinary course of
24-68 business, to the extent that he gives value and receives delivery
24-69 of the collateral without knowledge of the security interest and
24-70 before it is perfected;
25-1 (4) in the case of accounts, <and> general
25-2 intangibles, and investment property, a person who is not a secured
25-3 party and who is a transferee to the extent that he gives value
25-4 without knowledge of the security interest and before it is
25-5 perfected.
25-6 SECTION 8. Section 9.302(a), Business & Commerce Code, is
25-7 amended to read as follows:
25-8 (a) A financing statement must be filed to perfect all
25-9 security interests except the following:
25-10 (1) a security interest in collateral in possession of
25-11 the secured party under Section 9.305;
25-12 (2) a security interest temporarily perfected in
25-13 instruments, certificated securities, or documents without delivery
25-14 under Section 9.304 or in proceeds for a 10 day period under
25-15 Section 9.306;
25-16 (3) a security interest created by an assignment of a
25-17 beneficial interest in a trust or a decedent's estate;
25-18 (4) a purchase money security interest in consumer
25-19 goods; but notation on a certificate of title is required for goods
25-20 covered by a statute referred to in Subsection (c)(2); and fixture
25-21 filing is required for priority over conflicting interests in
25-22 fixtures to the extent provided in Section 9.313;
25-23 (5) an assignment of accounts which does not alone or
25-24 in conjunction with other assignments to the same assignee transfer
25-25 a significant part of the outstanding accounts of the assignor;
25-26 (6) a security interest of a collecting bank (Section
25-27 4.208), <a security interest in securities (Section 8.321),> a
25-28 security interest arising under the Chapter on Sales (see Section
25-29 9.113), or a security interest covered in Subsection (c) of this
25-30 Section; <or>
25-31 (7) an assignment for the benefit of all the creditors
25-32 of the transferor, and subsequent transfers by the assignee
25-33 thereunder; <and>
25-34 (8) a security interest in oil or gas production or
25-35 their proceeds under Section 9.319 of this code; or
25-36 (9) a security interest in investment property that is
25-37 perfected without filing under Section 9.115 or 9.116.
25-38 SECTION 9. Section 9.303(a), Business & Commerce Code, is
25-39 amended to read as follows:
25-40 (a) A security interest is perfected when it has attached
25-41 and when all of the applicable steps required for perfection have
25-42 been taken. Such steps are specified in Sections 9.115, 9.302,
25-43 9.304, 9.305 and 9.306. If such steps are taken before the
25-44 security interest attaches, it is perfected at the time when it
25-45 attaches.
25-46 SECTION 10. Sections 9.304(a), (d), and (e), Business &
25-47 Commerce Code, are amended to read as follows:
25-48 (a) A security interest in chattel paper or negotiable
25-49 documents may be perfected by filing. A security interest in money
25-50 or instruments (other than <certificated securities or> instruments
25-51 which constitute part of chattel paper) can be perfected only by
25-52 the secured party's taking possession, except as provided in
25-53 Subsections (d) and (e) of this section and Subsections (b) and (c)
25-54 of Section 9.306 on proceeds.
25-55 (d) A security interest in instruments, <(other than>
25-56 certificated securities,<)> or negotiable documents is perfected
25-57 without filing or the taking of possession for a period of 21 days
25-58 from the time it attaches to the extent that it arises for new
25-59 value given under a written security agreement.
25-60 (e) A security interest remains perfected for a period of 21
25-61 days without filing where a secured party having a perfected
25-62 security interest in an instrument, <(other than> a certificated
25-63 security<)>, a negotiable document, or goods in possession of a
25-64 bailee other than one who has issued a negotiable document
25-65 therefor:
25-66 (1) makes available to the debtor the goods or
25-67 documents representing the goods for the purpose of ultimate sale
25-68 or exchange or for the purpose of loading, unloading, storing,
25-69 shipping, transshipping, manufacturing, processing or otherwise
25-70 dealing with them in a manner preliminary to their sale or
26-1 exchange, but priority between conflicting security interests in
26-2 the goods is subject to Subsection (c) of Section 9.312; or
26-3 (2) delivers the instrument or certificated security
26-4 to the debtor for the purpose of ultimate sale or exchange or of
26-5 presentation, collection, renewal or registration of transfer.
26-6 SECTION 11. Section 9.305, Business & Commerce Code, is
26-7 amended to read as follows:
26-8 Sec. 9.305. When Possession by Secured Party Perfects
26-9 Security Interest Without Filing. A security interest in letters
26-10 of credit and advices of credit (Subsection (b)(1) of Section
26-11 5.116), goods, instruments <(other than certificated securities)>,
26-12 money, negotiable documents or chattel paper may be perfected by
26-13 the secured party's taking possession of the collateral. If such
26-14 collateral other than goods covered by a negotiable document is
26-15 held by a bailee, the secured party is deemed to have possession
26-16 from the time the bailee receives notification of the secured
26-17 party's interest. A security interest is perfected by possession
26-18 from the time possession is taken without relation back and
26-19 continues only so long as possession is retained, unless otherwise
26-20 specified in this chapter. The security interest may be otherwise
26-21 perfected as provided in this chapter before or after the period of
26-22 possession by the secured party.
26-23 SECTION 12. Sections 9.306(a) and (c), Business & Commerce
26-24 Code, are amended to read as follows:
26-25 (a) "Proceeds" includes whatever is received upon the sale,
26-26 exchange, collection or other disposition of collateral or
26-27 proceeds. Insurance payable by reason of loss or damage to the
26-28 collateral is proceeds, except to the extent that it is payable to
26-29 a person other than a party to the security agreement. Any
26-30 payments or distributions made with respect to investment property
26-31 collateral are proceeds. Money, checks, deposit accounts and the
26-32 like are "cash proceeds". All other proceeds are "non-cash
26-33 proceeds".
26-34 (c) The security interest in proceeds is a continuously
26-35 perfected security interest if the interest in the original
26-36 collateral was perfected but it ceases to be a perfected security
26-37 interest and becomes unperfected ten days after receipt of the
26-38 proceeds by the debtor unless:
26-39 (1) a filed financing statement covers the original
26-40 collateral and the proceeds are collateral in which a security
26-41 interest may be perfected by filing in the office or offices where
26-42 the financing statement has been filed and, if the proceeds are
26-43 acquired with cash proceeds, the description of collateral in the
26-44 financing statement indicates the types of property constituting
26-45 the proceeds; <or>
26-46 (2) a filed financing statement covers the original
26-47 collateral and the proceeds are identifiable cash proceeds; <or>
26-48 (3) the original collateral was investment property
26-49 and the proceeds are identifiable cash proceeds; or
26-50 (4) the security interest in the proceeds is perfected
26-51 before the expiration of the ten day period. Except as provided in
26-52 this section, a security interest in proceeds can be perfected only
26-53 by the methods or under the circumstances permitted in this chapter
26-54 for original collateral of the same type.
26-55 SECTION 13. Section 9.309, Business & Commerce Code, is
26-56 amended to read as follows:
26-57 Sec. 9.309. Protection of Purchasers of Instruments,
26-58 Documents, and Securities. Nothing in this chapter limits the
26-59 rights of a holder in due course of a negotiable instrument
26-60 (Section 3.302) or a holder to whom a negotiable document of title
26-61 has been duly negotiated (Section 7.501) or a protected <bona fide>
26-62 purchaser of a security (Section 8.303 <8.302>) and such holders or
26-63 purchasers take priority over an earlier security interest even
26-64 though perfected. Filing under this chapter does not constitute
26-65 notice of the security interest to such holders or purchasers.
26-66 SECTION 14. Sections 9.312(a) and (g), Business & Commerce
26-67 Code, are amended to read as follows:
26-68 (a) The rules of priority stated in other sections of this
26-69 subchapter and in the following sections shall govern when
26-70 applicable: Section 4.210 <4.208> with respect to the security
27-1 interests of collecting banks in items being collected,
27-2 accompanying documents and proceeds; Section 9.103 on security
27-3 interests related to other jurisdictions; Section 9.114 on
27-4 consignments; Section 9.115 on security interests in investment
27-5 property.
27-6 (g) If future advances are made while a security interest is
27-7 perfected by filing, the taking of possession, or under Section
27-8 9.115 or 9.116 on investment property <8.321 on securities>, the
27-9 security interest has the same priority for the purposes of
27-10 Subsection (e) or Section 9.115(e) with respect to the future
27-11 advances as it does with respect to the first advance. If a
27-12 commitment is made before or while the security interest is so
27-13 perfected, the security interest has the same priority with respect
27-14 to advances made pursuant thereto. In other cases a perfected
27-15 security interest has priority from the date the advance is made.
27-16 SECTION 15. Section 1.105(b), Business & Commerce Code, is
27-17 amended to read as follows:
27-18 (b) Where one of the following provisions of this title
27-19 specifies the applicable law, that provision governs and a contrary
27-20 agreement is effective only to the extent permitted by the law
27-21 (including the conflict of laws rules) so specified:
27-22 Rights of creditors against sold goods. Section 2.402.
27-23 Applicability of the chapter on Leases. Sections 2A.105 and
27-24 2A.106.
27-25 Applicability of the chapter on Bank Deposits and
27-26 Collections. Section 4.102.
27-27 Governing law in the chapter on Funds Transfers. Section
27-28 4A.507.
27-29 Applicability of the chapter on Investment Securities.
27-30 Section 8.110 <8.106>.
27-31 Perfection provisions of the chapter on Secured Transactions.
27-32 Section 9.103.
27-33 SECTION 16. Section 1.206(b), Business & Commerce Code, is
27-34 amended to read as follows:
27-35 (b) Subsection (a) of this section does not apply to
27-36 contracts for the sale of goods (Section 2.201) nor of securities
27-37 (Section 8.113 <8.319>) nor to security agreements (Section 9.203).
27-38 SECTION 17. Section 5.114(b), Business & Commerce Code, is
27-39 amended to read as follows:
27-40 (b) Unless otherwise agreed when documents appear on their
27-41 face to comply with the terms of a credit but a required document
27-42 does not in fact conform to the warranties made on negotiation or
27-43 transfer of a document of title (Section 7.507) or of a
27-44 certificated security (Section 8.108 <8.306>) or is forged or
27-45 fraudulent or there is fraud in the transaction:
27-46 (1) the issuer must honor the draft or demand for
27-47 payment if honor is demanded by a negotiating bank or other holder
27-48 of the draft or demand which has taken the draft or demand under
27-49 the credit and under circumstances which would make it a holder in
27-50 due course (Section 3.302) and in an appropriate case would make it
27-51 a person to whom a document of title has been duly negotiated
27-52 (Section 7.502) or a bona fide purchaser of a certificated security
27-53 (Section 8.302); and
27-54 (2) in all other cases as against its customer, an
27-55 issuer acting in good faith may honor the draft or demand for
27-56 payment despite notification from the customer of fraud, forgery or
27-57 other defect not apparent on the face of the documents but a court
27-58 of appropriate jurisdiction may enjoin such honor.
27-59 SECTION 18. (a) If H.B. No. 1728 or S.B. No. 1406, Acts of
27-60 the 74th Legislature, Regular Session, 1995, is enacted and takes
27-61 effect, Section 4.104(a), Business & Commerce Code, is amended to
27-62 read as follows:
27-63 (a) In this chapter, unless the context otherwise requires:
27-64 (1) "Account" means any deposit or credit account with
27-65 a bank, including a demand, time, savings, passbook, share draft,
27-66 or like account, other than an account evidenced by a certificate
27-67 of deposit. <and includes a checking, time, interest or savings
27-68 account;>
27-69 (2) "Afternoon" means the period of a day between noon
27-70 and midnight.<;>
28-1 (3) "Banking day" means the <that> part of a <any> day
28-2 on which a bank is open to the public for carrying on substantially
28-3 all of its banking functions.<;>
28-4 (4) "Clearing house" means an <any> association of
28-5 banks or other payors regularly clearing items.<;>
28-6 (5) "Customer" means a <any> person having an account
28-7 with a bank or for whom a bank has agreed to collect items,
28-8 including <and includes> a bank that maintains <carrying> an
28-9 account at <with> another bank.<;>
28-10 (6) "Documentary draft" means a draft to be presented
28-11 for acceptance or payment if specified documents, certificated
28-12 securities (Section 8.102) or instructions for uncertificated
28-13 securities (Section 8.102), or other certificates, statements, or
28-14 the like are to be received by the drawee or other payor before
28-15 acceptance or payment of the draft. <any negotiable or
28-16 non-negotiable draft with accompanying documents, securities or
28-17 other papers to be delivered against honor of the draft;>
28-18 (7) "Draft" means a draft as defined in Section 3.104
28-19 or an item, other than an instrument, that is an order.
28-20 (8) "Drawee" means a person ordered in a draft to make
28-21 payment.
28-22 (9) <(7)> "Item" means an instrument or a promise or
28-23 order to pay money handled by a bank for collection or payment.
28-24 The term does not include a payment order governed by Chapter 4A or
28-25 a credit or debit card slip. <any instrument for the payment of
28-26 money even though it is not negotiable but does not include money;>
28-27 (10) <(8)> "Midnight deadline" with respect to a bank
28-28 is midnight on its next banking day following the banking day on
28-29 which it receives the relevant item or notice or from which the
28-30 time for taking action commences to run, whichever is later.<;>
28-31 <(9) "Properly payable" includes the availability of
28-32 funds for payment at the time of decision to pay or dishonor;>
28-33 (11) <(10)> "Settle" means to pay in cash, by
28-34 clearing-house <clearing house> settlement, in a charge or credit
28-35 or by remittance, or otherwise as agreed <instructed>. A
28-36 settlement may be either provisional or final.<;>
28-37 (12) <(11)> "Suspends payments" with respect to a bank
28-38 means that it has been closed by order of the supervisory
28-39 authorities, that a public officer has been appointed to take it
28-40 over, or that it ceases or refuses to make payments in the ordinary
28-41 course of business.
28-42 (b) If neither of the bills designated by Subsection (a) of
28-43 this section takes effect, this section has no effect.
28-44 SECTION 19. Chapter 33, Business & Commerce Code, is
28-45 repealed.
28-46 SECTION 20. This Act takes effect September 1, 1995.
28-47 SECTION 21. (a) This Act does not affect an action or
28-48 proceeding commenced before this Act takes effect.
28-49 (b) If a security interest in a security is perfected under
28-50 Chapter 8, Business & Commerce Code, on the date this Act takes
28-51 effect, and the action by which the security interest was perfected
28-52 would suffice to perfect a security interest under Chapter 8,
28-53 Business & Commerce Code, as revised by this Act, no further action
28-54 is required to continue perfection. If a security interest in a
28-55 security is perfected under Chapter 8, Business & Commerce Code, on
28-56 the date this Act takes effect but the action by which the security
28-57 interest was perfected would not suffice to perfect a security
28-58 interest under Chapter 8, Business & Commerce Code, as revised by
28-59 this Act, the security interest remains perfected until January 1,
28-60 1996, and continues perfected on and after that date if appropriate
28-61 action to perfect under Chapter 8, Business & Commerce Code, as
28-62 revised by this Act is taken before January 1, 1996. If a security
28-63 interest is perfected under Chapter 8, Business & Commerce Code, on
28-64 the date this Act takes effect and the security interest can be
28-65 perfected by filing under Chapter 8, Business & Commerce Code, as
28-66 revised by this Act, a financing statement signed by the secured
28-67 party instead of the debtor may be filed before January 1, 1996, to
28-68 continue perfection or filed on or after that date to perfect.
28-69 SECTION 22. The importance of this legislation and the
28-70 crowded condition of the calendars in both houses create an
29-1 emergency and an imperative public necessity that the
29-2 constitutional rule requiring bills to be read on three several
29-3 days in each house be suspended, and this rule is hereby suspended.
29-4 * * * * *