Complete Home & Office Legal Guide/Complete Home and Office Legal Guide (Chestnut) (1993).ISO/stat/ucc/ucc8_2.asc

Text File | 1993-08-01 | 45.3 KB | 1,037 lines

/* The conclusion of article 8 of the UCC on investment
securities follows. */

     8-311. Effect of Unauthorized Indorsement or Instruction.

     Unless the owner or pledgee has ratified an unauthorized
indorsement or instruction or is otherwise precluded from
asserting its ineffectiveness:

     (a)  he may assert its ineffectiveness against the issuer or
any purchaser, other than a purchaser for value and without
notice of adverse claims, who has in good faith received a new,
reissued, or re-registered certificated security on registration
of transfer or received an initial transaction statement
confirming the registration of transfer, pledge, or release of an
equivalent uncertificated security to him; and

     (b)  an issuer who registers the transfer of a certificated
security upon the unauthorized indorsement or who registers the
transfer, pledge, or release of an uncertificated security upon
the unauthorized instruction is subject to liability for improper
registration (Section 8-404).

     8-312. Effect of Guaranteeing Signature, Indorsement or
Instruction.

     (1)  Any person guaranteeing a signature of an indorser of a
certificated security warrants that at the time of signing:

     (a)  the signature was genuine;

     (b)  the signer was an appropriate person to indorse
(Section 8-308); and

     (c)  the signer had legal capacity to sign.

     (2)  Any person guaranteeing a signature of the originator
of an instruction warrants that at the time of signing:

     (a)  the signature was genuine;

     (b)  the signer was an appropriate person to originate the
instruction (Section 8-308) if the person specified in the
instruction as the registered owner or registered pledgee of the
uncertificated security was, in fact, the registered owner or
registered pledgee of the security, as to which fact the
signature guarantor makes no warranty

     (c)  the signer had legal capacity to sign; and

     (d)  the taxpayer identification number, if any, appearing
on the instruction as that of the registered owner or registered
pledgee was the taxpayer identification number of the signer or
of the owner or pledgee for whom the signer was acting.

     (3)  Any person specially guaranteeing the signature of the
originator of an instruction makes not only the warranties of a
signature guarantor (subsection (2)) but also warrants that at the
time the instruction is presented to the issuer:

     (a)  the person specified in the instruction as the
registered owner or registered pledgee of the uncertificated
security will he the registered owner or registered pledgee; and

     (b)  the transfer, pledge, or release of the uncertificated
security requested in the instruction will be registered by the
issuer free from all liens, security interests, restrictions, and
claims other than those specified in the instruction.

     (4)  The guarantor under subsections (1) and (2) or the
special guarantor under subsection (3) does not otherwise warrant
the rightfulness of the particular transfer, pledge, or release.

     (5)  Any person guaranteeing an indorsement of a
certificated security makes not only the warranties of a
signature guarantor under subsection (1) but also warrants the
rightfulness of the particular transfer in all respects.

     (6) Any person guaranteeing an instruction requesting the
transfer, pledge, or release of an uncertificated security makes
not only the warranties of a special signature guarantor under
subsection (3) but also warrants the rightfulness of the
particular transfer, pledge, or release in all respects.

     (7)  No issuer may require a special guarantee of signature
(subsection (3)), a guarantee of indorsement (subsection (5)),
or a guarantee of instruction (subsection (6)) as a condition to
registration of transfer, pledge, or release.

     (8)  The foregoing warranties are made to any person taking
or dealing with the security in reliance on the guarantee, and
the guarantor is liable to the person for any loss resulting from
breach of the warranties.

     8-313. When Transfer to Purchaser Occurs; Financial
Intermediary as Bona Fide Purchaser; "Financial Intermediary".

     (1)  Transfer of a security or a limited interest (including
a security interest) therein to a purchaser occurs only:

     (a)  at the time he or a person designated by him acquires
possession of a certificated security;

     (b)  at the time the transfer, pledge, or release of an
uncertificated security is registered to him or a person
designated by him;

     (c)  at the time his financial intermediary acquires
possession of a certificated security specially indorsed to or
issued in the name of the purchaser;

     (d)  at the time a financial intermediary, not a clearing
corporation, sends him confirmation of the purchase and also by
book entry or otherwise identifies as belonging to the purchaser

     (i)  a specific certificated security in the financial
intermediary's possession;

     (ii) a quantity of securities that constitute or are part of
a fungible bulk of certificated securities in the financial
intermediary's possession or of uncertificated securities
registered in the name of the financial intermediary; or

     (iii) a quantity of securities that constitute or are part
of a fungible bulk of securities shown on the account of the
financial Intermediary on the books of another financial
intermediary;

     (e)  with respect to an identified certificated security to
be delivered while still in the possession of a third person, not
a financial intermediary, at the time that person acknowledges
that he holds for the purchaser;

     (f)  with respect to a specific uncertificated security the
pledge or transfer of which has been registered to a third
person, not a financial intermediary, at the time that person
acknowledges that he holds for the purchaser;

     (g)  at the time appropriate entries to the account of the
purchaser or a person designated by him on the books of a
clearing corporation are made under Section 8-320;

     (h)  with respect to the transfer of a security interest
where the debtor has signed a security agreement containing a
description of the security, at the time a written notification,
which, in the case of the creation of the security interest, is
signed by the debtor (which may be a copy of the security
agreement) or which, in the case of the release or assignment of
the security Interest created pursuant to this paragraph, is
signed by the secured party, is received by

     (i)  a financial intermediary on whose books the interest of
the transferor in the security appears;

     (ii) a third person, not a financial intermediary, in
possession of the security, if it is certificated;

     (iii) a third person, not a financial intermediary, who is
the registered owner of the security, if it is uncertificated and
nut subject to a registered pledge; or

     (iv) a third person, not a financial intermediary, who is
the registered pledgee of the security, if it s uncertificated
and subject to a registered pledge;

     (i)  with respect to the transfer of a security interest
where the transferor has signed a security agreement containing a
description of the security, at the time new value is given by
the secured party; or

     (j)  with respect to the transfer of a security interest
where the secured party is a financial intermediary and the
security has already been transferred to the financial
intermediary under paragraphs (a), (b), (c), (d), or
(g), at the time the transferor has signed a security agreement
containing a description of the security and value is given by
the secured party.

     (2)  The purchaser is the owner of a security held for him
by a financial intermediary, but cannot be a bona fide purchaser
of a security so held except in the circumstances specified in
paragraphs (c), (d)(i), and (g) of subsection (1). If a security
so held is part of a fungible bulk, as in the circumstances
specified in paragraphs (d)(ii) and (d)(iii) of subsection (1),
the purchaser is the owner of a proportionate property interest
in the fungible bulk.

     (3)  Notice of an adverse claim received by the financial
intermediary or by the purchaser after the financial intermediary
takes delivery of a certificated security as a holder for value
or after the transfer, pledge, or release of an uncertificated
security has been registered free of the claim to a financial
intermediary who has given value is not effective either as to
the financial intermediary or as to the purchaser. However, as
between the financial intermediary and the purchaser the
purchaser may demand transfer of an equivalent security as to
which no notice of adverse claim has been received.

     (4)  A "financial intermediary" is a bank, broker, clearing
corporation, or other person (or the nominee of any of them)
which in the ordinary course of its business maintains security
accounts for its customers and is acting in that capacity. A
financial intermediary may have a security interest in securities
held in account for its customer.

     8-314. Duty to Transfer, When Completed

     (1)  Unless otherwise agreed, if a sale of a security is
made on an exchange or otherwise through brokers:

     (a)  the selling customer fulfills his duty to transfer at
the time he:

     (i)  places a certificated security in the possession of the
selling broker or a person designated by the broker;

     (ii) causes an uncertificated security to be registered in
the name of the selling broker or a person designated by the
broker;

     (iii) if requested, causes an acknowledgment to be made to
the selling broker that a certificated or uncertificated security
is held for the broker; or

     (iv) places in the possession of the selling broker or of a
person designated by the broker a transfer instruction for an
uncertificated security, providing the issuer does not refuse to
register the requested transfer if the instruction is presented
to the issuer for registration within 30 days thereafter; and

     (b)  the selling broker, including a correspondent broker
acting for a selling customer, fulfills his duty to transfer at
the time he:

     (i)  places a certificated security in the possession of the
buying broker or a person designated by the buying broker;

     (ii) causes an uncertificated security to be registered in
the name of the buying broker or a person designated by the
buying broker;

     (iii) places in the possession of the buying broker or of a
person designated by the buying broker a transfer instruction for
an uncertificated security, providing the issuer does not refuse
to register the requested transfer if the instruction is
presented to the issuer for registration within 30 days
thereafter; or

     (iv) effects clearance of the sale in accordance with the
rules of the exchange on which the transaction took place.

     (2)  Except as provided in this section or unless otherwise
agreed, a transferor's duty to transfer a security under a
contract of purchase is not fulfilled until he:

     (a)  places a certificated security in form to be negotiated
by the purchaser in the possession of the purchaser or of a
person designated by the purchaser;

     causes an uncertificated security to be registered in the
name of the purchaser or a person designated by the purchaser; or

     (c)  if the purchaser requests, causes an acknowledgment to
be made to the purchaser that a certificated or uncertificated
security is held for the purchaser.

     (3)  Unless made on an exchange, a sale to a broker
purchasing for his own account is within subsection (2) and not
within subsection (1).

     8-315. Action Against Transferee Based Upon Wrongful
Transfer.

     (1)  Any person against whom the transfer of a security is
wrongful for any reason, including his incapacity, as against
anyone except a bona fide purchaser, may:

     (a)  reclaim possession of the certificated security
wrongfully transferred;

     (b)  obtain possession of any new certificated security
representing all or part of the same rights;

     (c)  compel the origination of an instruction to transfer to
him or a person designated by him an uncertificated security
constituting all or part of the same rights; or

     (d)  have damages.

     (2)  If the transfer is wrongful because of an unauthorized
indorsement of a certificated security, the owner may also
reclaim or obtain possession of the security or a new
certificated security, even from a bona fide purchaser, if the
ineffectiveness of the purported indorsement can be assented
against him under the provisions of this Article on unauthorized
indorsements (Section 8-311).

     (3)  The right to obtain or reclaim possession of a
certificated security or to compel the origination of a transfer
instruction may be specifically enforced and the transfer of a
certificated or uncertificated security enjoined and a
certificated security impounded pending the litigation.

     8-316. Purchaser's Right to Requisites for Registration of
Transfer, Pledge, Release on Books.

     Unless otherwise agreed, the transferor of a certificated
security or the transferor, pledgor, or pledgee of an
uncertificated security on due demand must supply his purchaser
with any proof of his authority to transfer, pledge, or release
or with any other requisite necessary to obtain registration of
the transfer, pledge, or release of the security; but if the
transfer, pledge, or release is not for value, a transferor,
pledgor, or pledgee need not do so unless the purchaser furnishes
the necessary expenses. Failure within a reasonable time to
comply with a demand made gives the purchaser the right to reject
or rescind the transfer, pledge, or release.

     8-317. Creditors' Rights.

     (1)  Subject to the exceptions in subsections (3) and (4),
no attachment or levy upon a certificated security or any share
or other interest represented thereby which is outstanding is
valid until the security is actually seized by the officer making
the attachment or levy, but a certificated security which has
been surrendered to the issuer may be reached by a creditor by
legal process at the issuer's chief executive office in the
United States.

     (2)  An uncentificated security registered in the name of
the debtor may not be reached by a creditor except by legal
process at the issuer's chief executive office in the United
States.

     (3)  The interest of a debtor in a certificated security
that is in the possession of a secured party not a financial
intermediary or in an uncertificated security registered in the
name of a secured party not a financial intermediary (or in the
name of a nominee of the secured party) may be reached by a
creditor by legal process upon the secured party.

     (4)  The interest of a debtor in a certificated security
that is in the possession of or registered in the name of a
financial intermediary or in an uncertificated security
registered in the name of a financial intermediary may be reached
by a creditor by legal process upon the financial intermediary on
whose books the interest of the debtor appears.

     (5)  Unless otherwise provided by law, a creditor's lien
upon the interest of a debtor in a security obtained pursuant to
subsection (3) or (4) is not a restraint on the transfer of the
security, free of the lien, to a third party for new value; but
in the event of a transfer, the lien applies to the proceeds of
the transfer in the hands of the secured party or financial
intermediary, subject to any claims having priority.

     (6)  A creditor whose debtor is the owner of a security is
entitled to aid from courts of appropriate jurisdiction, by
injunction or otherwise, in reaching the security or in
satisfying the claim by means allowed at law or in equity in
regard to property that cannot readily be reached by ordinary
legal process.

/* This sub-section stresses the need for physical possession of
the stock certificate itself. */

     8-318. No Conversion by Good Faith Conduct.

     An agent or bailee who in good faith (including observance
of reasonable commercial standards if he is in the business of
buying, selling, or otherwise dealing with securities) has
received certificated securities and sold, pledged, or delivered
them or has sold or caused the transfer or pledge of
uncertificated securities over which he had control according to
the instructions of his principal, is not liable for conversion
or for participation in breach of fiduciary duty although the
principal had no right so to deal with the securities.

     8-319. Statute of Frauds.

     A contract for the sale of securities is nor enforceable by
way of action or defense unless:

     (a)  there is some writing signed by the party against whom
enforcement is sought or by his authorized agent or broker,
sufficient to indicate that a contract has been made for sale of
a stated quantity of described securities at a defined or stated
price;

     (b)  delivery of a certificated security or transfer
instruction has been accepted, or transfer of an uncertificated
security has been registered and the transferee has failed to
send written objection to the issuer within 10 days after receipt
of the initial transaction statement confirming the registration,
or payment has been made, but the contract is enforceable under
this provision only to the extent of the delivery, registration,
or payment;

     (c)  within a reasonable time a writing in confirmation of
the sale or purchase and sufficient against the sender under
paragraph (a) has been received by the party against whom
enforcement is sought and he has failed to send written objection
to its contents within 10 days after its receipt; or

/* Unlike other portions of the UCC, the obligation to object is
placed on both a merchant and non-merchant to object to notice of
a securities transaction */.

     (d)  the party against whom enforcement is sought admits in
his pleading, testimony, or otherwise in court that a contract
was made for the sale of a stated quantity of described
securities at a defined or stated price.

     8-320. Transfer or Pledge Within Central Depository System.

    (1)  In addition to other methods, a transfer, pledge, or
release of a security or any interest therein may be effected by
the making of appropriate entries on the books of a clearing
corporation reducing the account of the transferor, pledgor, or
pledgee and increasing the account of the transferee, pledgee, or
pledgor by the amount of the obligation or the number of shares
or rights transferred, pledged, or released, if the security is
shown on the account of a transferor, pledgor, or pledgee on the
books of the clearing corporation; is subject to the control of
the clearing corporation; and

     (a)  if certificated,

     (i)  is in the custody of the clearing corporation, another
clearing corporation, a custodian bank, or a nominee of any of
them; and

     (ii) is in bearer form or indorsed in blank by an
appropriate person or registered in the name of the clearing
corporation, a custodian bank, or a nominee of any of them; or

     (b)  if uncertificated, is registered in the name of the
clearing corporation, another clearing corporation, a custodian
bank, or a nominee of any of them.

     (2)  Under this section entries may be made with respect to
like securities or interests therein as a part of a fungible bulk
and may refer merely to a quantity of a particular security
without reference to the name of the registered owner,
certificate or bond number, or the like, and, in appropriate
cases, may be on a net basis taking into account other transfers,
pledges, or releases of the same security.

     (3)  A transfer under this section is effective (Section 8-
313) and the purchaser acquires the rights of the transferor
(Section 8-301). A pledge or release under this section is the
transfer of a limited interest. If a pledge or the creation of a
security interest is intended, the security interest is perfected
at the time when both value is given by the pledgee and the
appropriate entries are made (Section 8-321). A transferee or
pledgee under this section may be a bona fide purchaser (Section
8-302).

     (4)  A transfer or pledge under this section is not a
registration of transfer under Part 4.

     (5)  That entries made on the books of the clearing
corporation as provided in subsection (1) are not appropriate
does not affect the validity or effect of the entries or the
liabilities or obligations of the clearing corporation to any
person adversely affected thereby.

     8-321. Enforceability, Attachment, Perfection and
Termination of Security Interests.

     (1)  A security interest in a security is enforceable and
can attach only if it is transferred to the secured party or a
person designated by him pursuant to a provision of section 8-
313(1).

     (2)  A security interest so transferred pursuant to
agreement by a transferor who has rights in the security to a
transferee who has given value is a perfected security interest,
but a security interest that has been transferred solely under
paragraph (i) of Section 8-313(1) becomes unperfected after 21
days unless, within that time, the requirements for transfer
under any other provision of Section 8-313(1) are satisfied.

     (3)  A security interest in a security is subject to the
provisions of Article 9, but:

     (a)  no filing is required to perfect the security interest;
and

     (b)  no written security agreement signed by the debtor is
necessary to make the security interest enforceable, except as
provided in paragraph (h), (i), or (j) of Section 8-313(1). The
secured party has the rights and duties provided under Section
9-207, to the extent they are applicable, whether or not the
security is certificated, and, if certificated, whether or not it
is in his possession.

     (4)  Unless otherwise agreed, a security interest in a
security is terminated by transfer to the debtor or a person
designated by him pursuant to a provision of Section 8- 313(1).
If a security is thus transferred, the security interest, if not
terminated, becomes unperfected unless the security is
certificated and is delivered to the debtor for the purpose of
ultimate sale or exchange or presentation, collection, renewal,
or registration of transfer. In that case, the security interest
becomes unperfected after 21 days unless, within that time, the
security (or securities for which it has been exchanged) is
transferred to the secured party or a person designated by him
pursuant to a provision of Section 8-313(1).

PART 4
REGISTRATION

     8-401. Duty of Issuer to Register Transfer, Pledge, or
Release.

     (1)  If a certificated security in registered form is
presented to the issuer with a request to register transfer or an
instruction is presented to the issuer with a request to register
transfer, pledge, or release, the issuer shall register the
transfer, pledge, or release as requested if:

     (a)  the security is indorsed or the instruction was
originated by the appropriate person or persons (Section 8-308);

     (b)  reasonable assurance is given that those indorsements
or instructions are genuine and effective (Section 8-402);

     (c)  the issuer has no duty as to adverse claims or has
discharged the duty (Section 8-403);

     (d)  any applicable law relating to the collection of taxes
has been complied with; and

     (e)  the transfer, pledge, or release is in fact rightful or
is to a bona fide purchaser.

     (2)  If an issuer is under a duty to register a transfer,
pledge, or release of a security, the issuer is also liable to
the person presenting a certificated security or an instruction
for registration or his principal for loss resulting from any
unreasonable delay in registration or from failure or refusal to
register the transfer, pledge, or release.

     8-402. Assurance That Indorsements and Instructions Are
Effective.

     (1)  The issuer may require the following assurance that
each necessary indorsement of a certificated security or each
instruction (Section 8-308) is genuine and effective:

     (a)  in all cases, a guarantee of the signature (Section 8-
312(1) or (2)) of the person indorsing a certificated security
or originating an instruction including, in the case of an
instruction, a warranty of the taxpayer identification number or,
in the absence thereof, other reasonable assurance of identity;

     (b)  if the indorsement is made or the instruction is
originated by an agent, appropriate assurance of authority to
sign;

     (c)  if the indorsement is made or the instruction is
originated by a fiduciary, appropriate evidence of appointment or
incumbency;

     (d)  if there is more than one fiduciary, reasonable
assurance that all who are required to sign have done so; and

     (e)  if the indorsement is made or the instruction is
originated by a person not covered by any of the foregoing,
assurance appropriate to the case corresponding as nearly as may
be to the foregoing.

     (2)  A "guarantee of the signature" in subsection (1) means
a guarantee signed by or on behalf of a person reasonably
believed by the issuer to be responsible. The issuer may adopt
standards with respect to responsibility if they are not
manifestly unreasonable.

     (3)  Appropriate evidence of appointment or incumbency" in
subsection (1) means:

     (a)  in the case of a fiduciary appointed or qualified by a
court, a certificate issued by or under the direction or
supervision of that court or an officer thereof and dated within
60 days before the date of presentation for transfer, pledge, or
release; or

     (b)  in any other case, a copy of a document showing the
appointment or a certificate issued by or on behalf of a person
reasonably believed by the issuer to be responsible or, in the
absence of that document or certificate, other evidence
reasonably deemed by the issuer to be appropriate. The issuer may
adopt standards with respect to the evidence if they are not
manifestly unreasonable. The issuer is not charged with notice of
the contents of any document obtained pursuant to this paragraph
(b) except to the extent that the contents relate directly to the
appointment or incumbency.

     (4)  The issuer may elect to require reasonable assurance
beyond that specified in this section, but if it does so and, for
a purpose other than that specified in subsection (3)(b), both
requires and obtains a copy of a will, trust, indenture, articles
of copartnership, by-laws, or other controlling instrument, it
is charged with notice of all matters contained therein affecting
the transfer, pledge, or release.

     8-403. Issuer's Duty as to Adverse Claims.

     (1)  An issuer to whom a certificated security is presented
for registration shall inquire into adverse claims if:

     (a)  a written notification of an adverse claim is received
at a time and in a manner affording the issuer a reasonable
opportunity to act on it prior to the issuance of a new,
reissued, or re-registered certificated security, and the
notification identifies the claimant, the registered owner, and
the issue of which the security is a part, and provides an
address for communications directed to the claimant; or

     (b)  the issuer is charged with notice of an adverse claim
from a controlling Instrument it has elected to require under
Section 8-402(4).

     (2)  The issuer may discharge any duty of inquiry by any
reasonable means including notifying an adverse claimant by
registered or certified mail at the address' furnished by him or,
if there be no such address, at his residence or regular place of
business that the certificated security has been presented for
registration of transfer by a named person, and that the transfer
will be registered unless within 30 days from the date of mailing
the notification, either:

     (a)  an appropriate restraining order, injunction, or other
process issues from a count of competent jurisdiction; or

     (b)  there is filed with the issuer an idemnity bond,
sufficient in the issuer's judgment to protect the issuer and any
transfer agent, registrar, or other agent of the issuer involved
from any loss it or they may suffer by complying with the adverse
claim.

     (3)  Unless an issuer is charged with notice of an adverse
claim from a controlling instrument which it has elected to
require under Section 8-402(4) or receives notification of an
adverse claim under subsection (1), if a certificated security
presented for registration is indorsed by the appropriate person
or persons the issuer is under no duty to inquire into adverse
claims. In particular:

     (a)  an issuer registering a certificated security in the
name of a person who is a fiduciary or who is described as a
fiduciary is not bound to inquire into the existence, extent, or
correct description of the fiduciary relationship; and thereafter
the issuer may assume without inquiry that the newly registered
owner continues to be the fiduciary until the issuer receives
written notice that the fiduciary is no longer acting as such
with respect to the particular security;

     (b)  an issuer registering transfer on an indorsement by a
fiduciary is not bound to inquire whether the transfer is made in
compliance with a controlling instrument or with the law of the
state having jurisdiction of the fiduciary relationship,
including any law requiring the fiduciary to obtain court
approval of the transfer; and

     (c)  the issuer is not charged with notice of the contents
of any court record or file or other recorded or unrecorded
document even though the document is in its possession and even
though the transfer is made on the indorsement of a fiduciary to
the fiduciary himself or to his nominee.

/* The point here is that even if a court order specifying that
someone is a fiduciary the issuer does not have to verify that a
a transaction is within the fiduciaries rights. This section
cannot be read literally, because a literal reading of this
section might mean that the issuer is not bound by the contents
of a court order directing it to do something. */

     (4)  An issuer is under no duty as to adverse claims with
respect to an uncertificated security except:

     (a)  claims embodied in a restraining order, injunction, or
other legal process served upon the issuer if the process was
served at a time and in a manner affording the issuer a
reasonable opportunity to act on it in accordance with the
requirements of subsection (5);

     (b)  claims of which the issuer has received a written
notification from the registered owner or the registered pledgee
if the notification was received at a time and in a manner
affording the issuer a reasonable opportunity to act on it in
accordance with the requirements of subsection (5);

     (c)  claims (including restrictions on transfer not imposed
by the issuer) to which the registration of transfer to the
present registered owner was subject and were so noted in the
initial transaction statement sent to him; and

     (d)  claims as to which an issuer is charged with notice
from a controlling mstrument it has elected to require under
Section 8-402(4).

     (5)  If the issuer of an uncertificated security is under a
duty as to an adverse claim, he discharges that duty by:

     (a)  including a notation of the claim in any statements
sent with respect to the security under Sections SAOS(3), (6),
and (7); and

     (b)  refusing to register the transfer or pledge of the
security unless the nature of the claim does not preclude
transfer or pledge subject thereto.

     (6)  If the transfer or pledge of the security is registered
subject to an adverse claim, a notation of the claim must be
included in the initial transaction statement and all subsequent
statements sent to the transferee and pledgee under Section 8-
408.

     (7)  Notwithstanding subsections (4) and (5), if an
uncertificated security was subject to a registered pledge at the
time the issuer first came under a duty as to a particular
adverse claim, the issuer has no duty as to that claim if
transfer of the security is requested by the registered pledgee
or an appropriate person acting for the registered pledgee
unless:

     (a)  the claim was embodied in legal process which expressly
provides otherwise

     (b)  the claim was asserted in a written notification from
the registered pledgee;

     (c)  the claim was one as to which the issuer was charged
with notice from a controlling instrument it required under
Section 8-402(4) in connection with the pledgee's request for
transfer; or

     (d)  the transfer requested is to the registered owner.

     8-404. Liability and Non-liability for Registration.

     (1)  Except as provided in any law relating to the
collection of taxes, the issuer is not liable to the owner,
pledgee, or any other person suffering loss as a result of the
registration of a transfer, pledge, or release of a security if:

     (a)  there were on or with a certificated security the
necessary indorsements or the issuer had received an instruction
originated by an appropriate person (Section 8-308); and

     (b)  the issuer had no duty as to adverse claims or has
discharged the duty (Section 8-403).

     (2)  If an issuer has registered a transfer of a
certificated security to a person not entitled to it, the issuer
on demand shall deliver a like security to the true owner unless:

     (a)  the registration was pursuant to subsection (1);

     (b)  the owner is precluded from asserting any claim for
registering the transfer under Section 8-405(1); or

     (c)  the delivery would result in overissue, in which case
the issuer's liability is governed by Section 8-104.

     (3)  If an issuer has improperly registered a transfer,
pledge, or release of an uncertificated security, the issuer on
demand from the injured party shall restore the records as to the
injured party to the condition that would have obtained if the
improper registration had not been made unless:

     (a)  the registration was pursuant to subsection (1); or

     (b)  the registration would result in overissue, in which
case the issuer's liability is governed by Section 8-104.

     8-40S.    Lost, Destroyed, and Stolen Certificated
Securities.

     (1)  If a certificated security has been lost, apparently
destroyed, or wrongfully taken, and the owner fails to notify the
issuer of that fact within a reasonable time after he has notice
of it and the issuer registers a transfer of the security before
receivIng notification, the owner is precluded from asserting
against the issuer any claim for registering the transfer under
Section 8-404 or any claim to a new security under this section.

     (2)  If the owner of a certificated security claims that the
security has been lost, destroyed, or wrongfully taken, the
issuer shall issue a new certificated security or, at the option
of the issuer, an equivalent uncentificated security in place of
the original security if the owner:

     (a)  so requests before the issuer has notice that the
security has been acquired by a bona fide purchaser;

     (b)  files with the issuer a sufficient indemnity bond; and

     (c)  satisfies any other reasonable requirements imposed by
the issuer.

     (3)  If, after the issue of a new certificated or
uncertificated security, a bona fide purchaser of the original
certificated security presents it for registration of transfer,
the issuer shall register the transfer unless registration would
result in overissue, in which event the issuer's liability is
governed by Section 8-104. In addition to any rights on the
indemnity bond, the issuer may recover the new certificated
security from the person to whom it was issued or any person
taking under him except a bona fide purchaser or may cancel the
Uncertificated security unless a bona fide purchaser or any
person taking under a bona fide purchaser is then the registered
owner or registered pledgee thereof.

     8-406. Duty of Authenticating Trustee, Transfer Agent, or
Registrar.

     (1)  if a person acts as authenticating trustee, transfer
agent, registrar, or other agent for an issuer in the
registration of transfers of its certificated securities or in
the registration of transfers, pledges, and releases of its
uncertificated securities, in the issue of new securities, or in
the cancellation of surrendered securities:

     (a)  he is under a duty to the issuer to exercise good faith
and due diligence in performing his functions; and

     (b)  with regard to the particular functions he performs, he
has the same obligation to the holder or owner of a certificated
security or to the owner or pledgee of an uncertificated security
and has the same rights and privileges as the issuer has in
regard to those functions.

     (2)  Notice to an authenticating trustee, transfer agent,
registrar or other agent is notice to the issuer with respect to
the functions performed by the agent.

     8-407. Exchangeability of Securities.

     (1)  No issuer is subject to the requirements of this
section unless it regularly maintains a system for issuing the
class of securities involved under which both certificated and
uncertificated securities are regularly issued to the category of
owners, which mcludes the person in whose name the new security
is to be registered.

     (2)  Upon surrender of a certificated security with all
necessary indorsements and presentation of a written request by
the person surrendering the security, the issuer, if he has no
duty as to adverse claims or has discharged the duty (Section
8403), shall issue to the person or a person designated by him an
equivalent uncertificated security subject to all liens,
restrictions, and claims that were noted on the certificated
security.

     (3)  Upon receipt of a transfer instruction originated by an
appropriate person who so requests, the issuer of an
uncertificated security shall cancel the uncertificated security
and issue an equivalent certificated security on which must be
noted conspicuously any liens and restrictions of the issuer and
any adverse claims (as to which the issuer has a duty under
Section 8-403(4)) to which the uncertificated security was
subject. The certificated security shall be registered in the
name of and delivered to:

     (a)  the registered owner, if the uncertificated security
was not subject to a registered pledge; or

     (b)  the registered pledgee, if the uncertificated security
was subject to a registered pledge.

     8-408. Statements of Uncertificated Securities.

     (1)  Within 2 business days after the transfer of an
uncertificated security has been registered, the issuer shall
send to the new registered owner and, if the security has been
transferred subject to a registered pledge, to the registered
pledgee a written statement containing:

     (a)  a description of the issue of which the uncertificated
security is a part;

     (b)  the number of shares or units transferred;

     (c)  the name and address and any taxpayer identification
number of the new registered owner and, if the security has been
transferred subject to a registered pledge, the name and address
and any taxpayer identification number of the registered pledgee;

     (d)  a notation of any liens and restrictions of the issuer
and any adverse claims (as to which the issuer has a duty under
Section 8-403(4)) to which the uncertificated security is or may
be subject at the time of registration or a statement that there
are none of those liens, restrictions, or adverse claims; and

     (e)  the date the transfer was registered.

     (2)  Within 2 business days after the pledge of an
uncertificated security has been registered, the issuer shall
send to the registered owner and the registered pledgee a written
statement containing:

     (a)  a description of the issue of which the uncertificated
security is a part;

     (b)  the number of shares or units pledged;

     (c)  the name and address and any taxpayer identification
number of the registered owner and the registered pledgee;

     (d)  a notation of any liens and restrictions of the issuer
and any adverse claims (as to which the issuer has a duty under
Section 8-403(4)) to which the uncertificared security is or may
be subject at the time of registration or a statement that there
are none of those liens, restrictions, or adverse claims; and

     (e)  the date the pledge was registered.

     (3)  Within 2 business days after the release from pledge of
an uncertificated security has been registered, the issuer shall
send to the registered owner and the pledgee whose interest was
released a written statement containing:

     (a)  a description of the issue of which the uncertificated
security is a plan;

     (b)  the number of shares or units released from pledge;

     (c)  the name and address and any taxpayer identification
number of the registered owner and the pledgee whose interest
was released;

     (d)  a notation of any liens and restrictions of the issuer
and any adverse claims (as to which the issuer has a duty under
Section 8-403(4)) to which the uncertificated security is or
may be subject at the time of registration or a statement that
there are none of those liens, restrictions, or adverse claims;
and

     (e)  the date the release was registered.

     (4)  An "initial transaction statement" is the statement
sent to:

     (a)  the new registered owner and, if applicable, to the
registered pledgee pursuant to subsection (1);

     (b)  the registered pledgee pursuant to subsection (2); or
     (c)  the registered owner pursuant to subsection (3).
Each initial transaction statement shall be signed by or on
behalf of the issuer and must be identified as "Initial
Transaction Statement".

     (5)  Within 2 business days after the transfer of an
uncertificated security has been registered, the issuer shall
send to the former registered owner and the former registered
pledgee, if any, a written statement containing:

     (a)  a description of the issue of which the uncertificated
security is a part;

     (b)  the number of shares or units transferred;

     (c)  the name and address and any taxpayer identification
number of the former registered owner and of any former
registered pledgee; and

     (d)  the date the transfer was registered.

     (6)  At periodic intervals no less frequent than annually
and at any time upon the reasonable written request of the
registered owner, the issuer shall send to the registered
owner of each uncertificated security a dated written statement
containing:

     (a)  a description of the issue of which the uncertificated
security is a part;

     (b)  the name and address and any taxpayer identification
number of the registered owner;

     (c)  the number of shares or units of the uncertificated
security registered in the name of the registered owner on the
date of the statement.

     (d)  the name and address and any taxpayer identification
number of any registered pledgee and the number of shares or
units subject to the pledge; and

     (e)  a notation of any liens and restrictions of the issuer
and any adverse claims (as to which the issuer has a duty under
Section 8-403(4)) to which the uncertificated security is or
may be subject or a statement that there are none of those liens,
restrictions, or adverse claims.

     (7)  At periodic intervals no less frequent than annually
and at any time upon the reasonable written request of the
registered pledgee, the issuer shall send to the registered
pledgee of each uncertificated security a dated written statement
containing:

     (a)  a description of the issue of which the uncertificated
security is a part;

     (b)  the name and address and any taxpayer identification
number of the registered owner;

     (c)  the name and address and any taxpayer identification
number of the registered pledgee;

     (d)  the number of shares or units subject to the pledge;
and

     (e)  a notation of any liens and restrictions of the issuer
and any adverse claims (as to which the issuer has a duty under
Section 8-403(4)) to which the uncertificated security is or may
be subject or a statement that there are none of those liens,
restrictions, or adverse claims.

     (8)  lf the issuer sends the statements described in
subsections (6) and (7) at periodic intervals no less frequent
than quarterly, the issuer is not obliged to send additional
statements upon request unless the owner or pledgee requesting
them pays to the issuer the reasonable cost of furnishing them.

     (9)  Each statement sent pursuant to this section must bear
a conspicuous legend reading substantially as follows: "This
statement is merely a record of the rights of the addressee as of
the time of its issuance. Delivery of this statement, of itself,
confers no rights on the recipient. This statement is neither a
negotiable instrument nor a security."

/* This section defines the duties for the increasing number of
shares which are represented solely by computer book entries. */