Chapter 408

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.

408.105(4) (4) A purchaser of a certificated security has notice of an adverse claim if the security certificate:

408.105(4)(a) (a) Whether in bearer or registered form, has been endorsed “for collection” or “for surrender” or for some other purpose not involving transfer; or

408.105(4)(b) (b) Is in bearer form and has on it an unambiguous statement that it is the property of a person other than the transferor, but the mere writing of a name on the certificate is not such a statement.

408.105(5) (5) Filing of a financing statement under ch. 409 is not notice of an adverse claim to a financial asset.

408.105 History History: 1997 a. 297.

408.106 408.106 Control.

408.106(1) (1) A purchaser has “control” of a certificated security in bearer form if the certificated security is delivered to the purchaser.

408.106(2) (2) A purchaser has “control” of a certificated security in registered form if the certificated security is delivered to the purchaser and:

408.106(2)(a) (a) The certificate is endorsed to the purchaser or in blank by an effective endorsement; or

408.106(2)(b) (b) The certificate is registered in the name of the purchaser, upon original issue or registration of transfer by the issuer.

408.106(3) (3) A purchaser has “control” of an uncertificated security if:

408.106(3)(a) (a) The uncertificated security is delivered to the purchaser; or

408.106(3)(b) (b) The issuer has agreed that it will comply with instructions originated by the purchaser without further consent by the registered owner.

408.106(4) (4) A purchaser has “control” of a security entitlement if:

408.106(4)(a) (a) The purchaser becomes the entitlement holder;

408.106(4)(b) (b) The securities intermediary has agreed that it will comply with entitlement orders originated by the purchaser without further consent by the entitlement holder; or

408.106(4)(c) (c) Another person has control of the security entitlement on behalf of the purchaser or, having previously acquired control of the security entitlement, acknowledges that it has control on behalf of the purchaser.

408.106(5) (5) If an interest in a security entitlement is granted by the entitlement holder to the entitlement holder’s own securities intermediary, the securities intermediary has control.

408.106(6) (6) A purchaser who has satisfied the requirements of sub. (3) or (4) has control even if the registered owner in the case of sub. (3) or the entitlement holder in the case of sub. (4) retains the right to make substitutions for the uncertificated security or security entitlement, to originate instructions or entitlement orders to the issuer or securities intermediary, or otherwise to deal with the uncertificated security or security entitlement.

408.106(7) (7) An issuer or a securities intermediary may not enter into an agreement of the kind described in sub. (3) (b) or (4) (b) without the consent of the registered owner or entitlement holder, but an issuer or a securities intermediary is not required to enter into such an agreement even though the registered owner or entitlement holder so directs. An issuer or securities intermediary that has entered into such an agreement is not required to confirm the existence of the agreement to another party unless requested to do so by the registered owner or entitlement holder.

408.106 History History: 1997 a. 297; 2001 a. 10.

408.107 408.107 Whether endorsement, instruction or entitlement order is effective.

408.107(1) (1) In this chapter, “appropriate person” means:

408.107(1)(a) (a) With respect to an endorsement, the person specified by a security certificate or by an effective special endorsement to be entitled to the security;

408.107(1)(b) (b) With respect to an instruction, the registered owner of an uncertificated security;

408.107(1)(c) (c) With respect to an entitlement order, the entitlement holder;

408.107(1)(d) (d) If the person designated in par. (a), (b) or (c) is deceased, the designated person’s successor taking under other law or the designated person’s personal representative acting for the estate of the decedent; or

408.107(1)(e) (e) If the person designated in par. (a), (b) or (c) lacks capacity, the designated person’s guardian, conservator or other similar representative who has power under other law to transfer the security or financial asset.

408.107(2) (2) An endorsement, instruction or entitlement order is effective if:

408.107(2)(a) (a) It is made by the appropriate person;

408.107(2)(b) (b) It is made by a person who has power under the law of agency to transfer the security or financial asset on behalf of the appropriate person, including, in the case of an instruction or entitlement order, a person who has control under s. 408.106 (3) (b) or (4) (b); or

408.107(2)(c) (c) The appropriate person has ratified it or is otherwise precluded from asserting its ineffectiveness.

408.107(3) (3) An endorsement, instruction or entitlement order made by a representative is effective even if:

408.107(3)(a) (a) The representative has failed to comply with a controlling instrument or with the law of the state having jurisdiction of the representative relationship, including any law requiring the representative to obtain court approval of the transaction; or

408.107(3)(b) (b) The representative’s action in making the endorsement, instruction or entitlement order or using the proceeds of the transaction is otherwise a breach of duty.

408.107(4) (4) If a security is registered in the name of or specially endorsed to a person described as a representative, or if a securities account is maintained in the name of a person described as a representative, an endorsement, instruction or entitlement order made by the person is effective even though the person is no longer serving in the described capacity.

408.107(5) (5) Effectiveness of an endorsement, instruction or entitlement order is determined as of the date the endorsement, instruction or entitlement order is made, and an endorsement, instruction or entitlement order does not become ineffective by reason of any later change of circumstances.

408.107 History History: 1997 a. 297.

408.108 408.108 Warranties in direct holding.

408.108(1) (1) A person who transfers a certificated security to a purchaser for value warrants to the purchaser, and an endorser, if the transfer is by endorsement, warrants to any subsequent purchaser, that:

408.108(1)(a) (a) The certificate is genuine and has not been materially altered;

408.108(1)(b) (b) The transferor or endorser does not know of any fact that might impair the validity of the security;

408.108(1)(c) (c) There is no adverse claim to the security;

408.108(1)(d) (d) The transfer does not violate any restriction on transfer;

408.108(1)(e) (e) If the transfer is by endorsement, the endorsement is made by an appropriate person, or if the endorsement is by an agent, the agent has actual authority to act on behalf of the appropriate person; and

408.108(1)(f) (f) The transfer is otherwise effective and rightful.

408.108(2) (2) A person who originates an instruction for registration of transfer of an uncertificated security to a purchaser for value warrants to the purchaser that:

408.108(2)(a) (a) The instruction is made by an appropriate person, or if the instruction is by an agent, the agent has actual authority to act on behalf of the appropriate person;

408.108(2)(b) (b) The security is valid;

408.108(2)(c) (c) There is no adverse claim to the security; and

408.108(2)(d) (d) At the time the instruction is presented to the issuer:

408.108(2)(d)1. 1. The purchaser will be entitled to the registration of transfer;

408.108(2)(d)2. 2. The transfer will be registered by the issuer free from all liens, security interests, restrictions and claims other than those specified in the instruction;

408.108(2)(d)3. 3. The transfer will not violate any restriction on transfer; and