Chapter 408

408.509   Specification of duties of securities intermediary by other statute or regulation; manner of performance of duties of securities intermediary; and exercise of rights of entitlement holder.

408.510   Rights of purchaser of security entitlement from entitlement holder.

408.511   Priority among security interests and entitlement holders.

SUBCHAPTER VI

TRANSITIONAL PROVISIONS

408.603   Saving provision.

Ch. 408 Cross-reference Cross-reference: See definitions in s. 401.201.

subch. I of ch. 408 SUBCHAPTER I

GENERAL MATTERS

408.101 408.101 Short title. This chapter may be cited as uniform commercial code — investment securities.

408.101 History History: 1997 a. 297.

408.102 408.102 Definitions.

408.102(1) (1) In this chapter:

408.102(1)(a) (a) “Adverse claim” means a claim that a claimant has a property interest in a financial asset and that it is a violation of the rights of the claimant for another person to hold, transfer or deal with the financial asset.

408.102(1)(b) (b) “Bearer form”, as applied to a certificated security, means a form in which the security is payable to the bearer of the security certificate according to its terms but not by reason of an endorsement.

408.102(1)(c) (c) “Broker” means a person defined as a broker or dealer under the federal securities laws, but without excluding a bank acting in that capacity.

408.102(1)(d) (d) “Certificated security” means a security that is represented by a certificate.

408.102(1)(e) (e) “Clearing corporation” means:

408.102(1)(e)1. 1. A person that is registered as a “clearing agency” under the federal securities laws;

408.102(1)(e)2. 2. A federal reserve bank; or

408.102(1)(e)3. 3. Any other person that provides clearance or settlement services with respect to financial assets that would require it to register as a clearing agency under the federal securities laws but for an exclusion or exemption from the registration requirement, if its activities as a clearing corporation, including promulgation of rules, are subject to regulation by a federal or state governmental authority.

408.102(1)(f) (f) “Communicate” means to:

408.102(1)(f)1. 1. Send a signed writing; or

408.102(1)(f)2. 2. Transmit information by any mechanism agreed upon by the persons transmitting and receiving the information.

408.102(1)(fm) (fm) “Endorsement” means a signature that alone or accompanied by other words is made on a security certificate in registered form or on a separate document for the purpose of assigning, transferring or redeeming the security or granting a power to assign, transfer or redeem it.

408.102(1)(g) (g) “Entitlement holder” means a person identified in the records of a securities intermediary as the person having a security entitlement against the securities intermediary. If a person acquires a security entitlement by virtue of s. 408.501 (2) (b) or (c), that person is the entitlement holder.

408.102(1)(h) (h) “Entitlement order” means a notification communicated to a securities intermediary directing transfer or redemption of a financial asset to which the entitlement holder has a security entitlement.

408.102(1)(i) (i)

408.102(1)(i)1. 1. “Financial asset”, except as otherwise provided in s. 408.103, means:

408.102(1)(i)1.a. a. A security;

408.102(1)(i)1.b. b. An obligation of a person or a share, participation, or other interest in a person or in property or an enterprise of a person, which is, or is of a type, dealt in or traded on financial markets, or which is recognized in any area in which it is issued or dealt in as a medium for investment; or

408.102(1)(i)1.c. c. Any property that is held by a securities intermediary for another person in a securities account if the securities intermediary has expressly agreed with the other person that the property is to be treated as a financial asset under this chapter.

408.102(1)(i)2. 2. As context requires, “financial asset” means either the interest itself or the means by which a person’s claim to it is evidenced, including a certificated or uncertificated security, a security certificate or a security entitlement.

408.102(1)(j) (j) “Good faith”, for purposes of the obligation of good faith in the performance or enforcement of contracts or duties within this chapter, means honesty in fact and the observance of reasonable commercial standards of fair dealing.

408.102(1)(L) (L) “Instruction” means a notification communicated to the issuer of an uncertificated security which directs that the transfer of the security be registered or that the security be redeemed.

408.102(1)(m) (m) “Registered form”, as applied to a certificated security, means a form in which:

408.102(1)(m)1. 1. The security certificate specifies a person entitled to the security; and

408.102(1)(m)2. 2. A transfer of the security may be registered upon books maintained for that purpose by or on behalf of the issuer, or the security certificate so states.

408.102(1)(n) (n) “Securities intermediary” means:

408.102(1)(n)1. 1. A clearing corporation; or

408.102(1)(n)2. 2. A person, including a bank or broker, that in the ordinary course of its business maintains securities accounts for others and is acting in that capacity.

408.102(1)(o) (o) “Security”, except as otherwise provided in s. 408.103, means an obligation of an issuer or a share, participation or other interest in an issuer or in property or an enterprise of an issuer:

408.102(1)(o)1. 1. Which is represented by a security certificate in bearer or registered form, or the transfer of which may be registered upon books maintained for that purpose by or on behalf of the issuer;

408.102(1)(o)2. 2. Which is one of a class or series or by its terms is divisible into a class or series of shares, participations, interests or obligations; and

408.102(1)(o)3. 3. Which:

408.102(1)(o)3.a. a. Is, or is of a type, dealt in or traded on securities exchanges or securities markets; or

408.102(1)(o)3.b. b. Is a medium for investment and by its terms expressly provides that it is a security governed by this chapter.

408.102(1)(p) (p) “Security certificate” means a certificate representing a security.

408.102(1)(q) (q) “Security entitlement” means the rights and property interest of an entitlement holder with respect to a financial asset specified in subch. V.

408.102(1)(r) (r) “Uncertificated security” means a security that is not represented by a certificate.

408.102(2) (2) Other definitions applying to this chapter and the sections in which they appear are:

408.102(2)(a) (a) “Appropriate person” — s. 408.107 (1).

408.102(2)(b) (b) “Control” — s. 408.106.

408.102(2)(c) (c) “Delivery” — s. 408.301.

408.102(2)(d) (d) “Investment company security” — s. 408.103 (2).

408.102(2)(e) (e) “Issuer” — s. 408.201.

408.102(2)(f) (f) “Overissue” — s. 408.210 (1).

408.102(2)(g) (g) “Protected purchaser” — s. 408.303 (1).

408.102(2)(h) (h) “Securities account” — s. 408.501 (1).

408.102(3) (3) In addition, ch. 401 contains general definitions and principles of construction and interpretation applicable throughout this chapter.

408.102(4) (4) The characterization of a person, business or transaction for purposes of this chapter does not determine the characterization of the person, business or transaction for purposes of any other law, regulation or rule.

408.102 History History: 1997 a. 297.

408.103 408.103 Rules for determining whether certain obligations and interests are securities or financial assets.

408.103(1) (1) A share or similar equity interest issued by a corporation, business trust, joint stock company or similar entity is a security.

408.103(2) (2) An “investment company security” is a security. In this chapter, “investment company security” means a share or similar equity interest issued by an entity that is registered as an investment company under the federal investment company laws, an interest in a unit investment trust that is so registered, or a face-amount certificate issued by a face-amount certificate company that is so registered. “Investment company security” does not include an insurance policy or endowment policy or annuity contract issued by an insurance company.

408.103(3) (3) An interest in a partnership or limited liability company is not a security unless it is dealt in or traded on securities exchanges or in securities markets, its terms expressly provide that it is a security governed by this chapter or it is an investment company security. However, an interest in a partnership or limited liability company is a financial asset if it is held in a securities account.

408.103(4) (4) A writing that is a security certificate is governed by this chapter and not by ch. 403, even though it also meets the requirements of that chapter. However, a negotiable instrument governed by ch. 403 is a financial asset if it is held in a securities account.

408.103(5) (5) An option or similar obligation issued by a clearing corporation to its participants is not a security, but is a financial asset.

408.103(6) (6) A commodity contract, as defined in s. 409.102 (1) (dm), is not a security or a financial asset.

408.103(7) (7) A document of title, as defined in s. 401.201 (2) (i), is not a financial asset unless s. 408.102 (1) (i) 1. c. applies.

408.103 History History: 1997 a. 297; 2001 a. 10; 2009 a. 322; 2011 a. 257.

408.104 408.104 Acquisition of security or financial asset or interest therein.

408.104(1) (1) A person acquires a security or an interest therein, under this chapter, if:

408.104(1)(a) (a) The person is a purchaser to whom a security is delivered pursuant to s. 408.301; or

408.104(1)(b) (b) The person acquires a security entitlement to the security pursuant to s. 408.501.

408.104(2) (2) A person acquires a financial asset, other than a security, or an interest therein, under this chapter, if the person acquires a security entitlement to the financial asset.

408.104(3) (3) A person who acquires a security entitlement to a security or other financial asset has the rights specified in subch. V, but is a purchaser of any security, security entitlement or other financial asset held by the securities intermediary only to the extent provided in s. 408.503.

408.104(4) (4) Unless the context shows that a different meaning is intended, a person who is required by other law, regulation, rule or agreement to transfer, deliver, present, surrender, exchange or otherwise put in the possession of another person a security or financial asset satisfies that requirement by causing the other person to acquire an interest in the security or financial asset pursuant to sub. (1) or (2).

408.104 History History: 1997 a. 297.

408.105 408.105 Notice of adverse claim.

408.105(1) (1) A person has notice of an adverse claim if:

408.105(1)(a) (a) The person knows of the adverse claim;

408.105(1)(b) (b) The person is aware of facts sufficient to indicate that there is a significant probability that the adverse claim exists and deliberately avoids information that would establish the existence of the adverse claim; or

408.105(1)(c) (c) The person has a duty, imposed by statute or regulation, to investigate whether an adverse claim exists, and the investigation so required would establish the existence of the adverse claim.

408.105(2) (2) Having knowledge that a financial asset or interest therein is or has been transferred by a representative imposes no duty of inquiry into the rightfulness of a transaction and is not notice of an adverse claim. However, a person who knows that a representative has transferred a financial asset or interest therein in a transaction that is, or whose proceeds are being used, for the individual benefit of the representative or otherwise in breach of duty has notice of an adverse claim.

408.105(3) (3) An act or event that creates a right to immediate performance of the principal obligation represented by a security certificate or sets a date on or after which the certificate is to be presented or surrendered for redemption or exchange does not itself constitute notice of an adverse claim except in the case of a transfer more than:

408.105(3)(a) (a) One year after a date set for presentment or surrender for redemption or exchange; or

408.105(3)(b) (b) Six months after a date set for payment of money against presentation or surrender of the certificate, if money was available for payment on that date.