Chapter 408

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

408.108(2)(d)4. 4. The requested transfer will otherwise be effective and rightful.

408.108(3) (3) A person who transfers an uncertificated security to a purchaser for value and does not originate an instruction in connection with the transfer warrants that:

408.108(3)(a) (a) The uncertificated security is valid;

408.108(3)(b) (b) There is no adverse claim to the security;

408.108(3)(c) (c) The transfer does not violate any restriction on transfer; and

408.108(3)(d) (d) The transfer is otherwise effective and rightful.

408.108(4) (4) A person who endorses a security certificate warrants to the issuer that:

408.108(4)(a) (a) There is no adverse claim to the security; and

408.108(4)(b) (b) The endorsement is effective.

408.108(5) (5) A person who originates an instruction for registration of transfer of an uncertificated security warrants to the issuer that:

408.108(5)(a) (a) The instruction is effective; and

408.108(5)(b) (b) At the time the instruction is presented to the issuer the purchaser will be entitled to the registration of transfer.

408.108(6) (6) A person who presents a certificated security for registration of transfer or for payment or exchange warrants to the issuer that the person is entitled to the registration, payment or exchange, but a purchaser for value and without notice of adverse claims to whom transfer is registered warrants only that the person has no knowledge of any unauthorized signature in a necessary endorsement.

408.108(7) (7) If a person acts as agent of another in delivering a certificated security to a purchaser, the identity of the principal was known to the person to whom the certificate was delivered, and the certificate delivered by the agent was received by the agent from the principal or received by the agent from another person at the direction of the principal, the person delivering the security certificate warrants only that the delivering person has authority to act for the principal and does not know of any adverse claim to the certificated security.

408.108(8) (8) A secured party who redelivers a security certificate received, or after payment and on order of the debtor delivers the security certificate to another person, makes only the warranties of an agent under sub. (7).

408.108(9) (9) Except as otherwise provided in sub. (7), a broker acting for a customer makes to the issuer and a purchaser the warranties provided in subs. (1) to (6). A broker that delivers a security certificate to its customer, or causes its customer to be registered as the owner of an uncertificated security, makes to the customer the warranties provided in sub. (1) or (2), and has the rights and privileges of a purchaser under this section. The warranties of and in favor of the broker acting as an agent are in addition to applicable warranties given by and in favor of the customer.

408.108 History History: 1997 a. 297.

408.109 408.109 Warranties in indirect holding.

408.109(1) (1) A person who originates an entitlement order to a securities intermediary warrants to the securities intermediary that:

408.109(1)(a) (a) The entitlement order is made by an appropriate person, or if the entitlement order is by an agent, the agent has actual authority to act on behalf of the appropriate person; and

408.109(1)(b) (b) There is no adverse claim to the security entitlement.

408.109(2) (2) A person who delivers a security certificate to a securities intermediary for credit to a securities account or originates an instruction with respect to an uncertificated security directing that the uncertificated security be credited to a securities account makes to the securities intermediary the warranties specified in s. 408.108 (1) or (2).

408.109(3) (3) If a securities intermediary delivers a security certificate to its entitlement holder or causes its entitlement holder to be registered as the owner of an uncertificated security, the securities intermediary makes to the entitlement holder the warranties specified in s. 408.108 (1) or (2).

408.109 History History: 1997 a. 297.

408.110 408.110 Applicability; choice of law.

408.110(1) (1) The local law of the issuer’s jurisdiction, as specified in sub. (4), governs:

408.110(1)(a) (a) The validity of a security;

408.110(1)(b) (b) The rights and duties of the issuer with respect to registration of transfer;

408.110(1)(c) (c) The effectiveness of registration of transfer by the issuer;

408.110(1)(d) (d) Whether the issuer owes any duties to an adverse claimant to a security; and

408.110(1)(e) (e) Whether an adverse claim can be asserted against a person to whom transfer of a certificated or uncertificated security is registered or a person who obtains control of an uncertificated security.

408.110(2) (2) The local law of the securities intermediary’s jurisdiction, as specified in sub. (5), governs:

408.110(2)(a) (a) Acquisition of a security entitlement from the securities intermediary;

408.110(2)(b) (b) The rights and duties of the securities intermediary and entitlement holder arising out of a security entitlement;

408.110(2)(c) (c) Whether the securities intermediary owes any duties to an adverse claimant to a security entitlement; and

408.110(2)(d) (d) Whether an adverse claim can be asserted against a person who acquires a security entitlement from the securities intermediary or a person who purchases a security entitlement or interest therein from an entitlement holder.

408.110(3) (3) The local law of the jurisdiction in which a security certificate is located at the time of delivery governs whether an adverse claim can be asserted against a person to whom the security certificate is delivered.

408.110(4) (4) In this section, “issuer’s jurisdiction” means the jurisdiction under which the issuer of the security is organized or, if permitted by the law of that jurisdiction, the law of another jurisdiction specified by the issuer. An issuer organized under the law of this state may specify the law of another jurisdiction as the law governing the matters specified in sub. (1) (b) to (e).

408.110(5) (5) The following rules determine a “securities intermediary’s jurisdiction” for purposes of this section:

408.110(5)(a) (a) If an agreement between the securities intermediary and its entitlement holder governing the securities account expressly provides that a particular jurisdiction is the securities intermediary’s jurisdiction for purposes of this subchapter, this chapter, or chs. 401 to 411, that jurisdiction is the securities intermediary’s jurisdiction.

408.110(5)(b) (b) If par. (a) does not apply and an agreement between the securities intermediary and its entitlement holder governing the securities account expressly provides that the agreement is governed by the law of a particular jurisdiction, that jurisdiction is the securities intermediary’s jurisdiction.

408.110(5)(c) (c) If neither par. (a) nor par. (b) applies and an agreement between the securities intermediary and its entitlement holder governing the securities account expressly provides that the securities account is maintained at an office in a particular jurisdiction, that jurisdiction is the securities intermediary’s jurisdiction.

408.110(5)(d) (d) If none of pars. (a) to (c) applies, the securities intermediary’s jurisdiction is the jurisdiction in which the office, identified in an account statement as the office serving the entitlement holder’s account, is located.

408.110(5)(e) (e) If none of pars. (a) to (d) applies, the securities intermediary’s jurisdiction is the jurisdiction in which the chief executive office of the securities intermediary is located.

408.110(6) (6) A securities intermediary’s jurisdiction is not determined by the physical location of certificates representing financial assets, or by the jurisdiction in which is organized the issuer of the financial asset with respect to which an entitlement holder has a security entitlement, or by the location of facilities for data processing or other record keeping concerning the account.

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

408.111 408.111 Clearing corporation rules. A rule adopted by a clearing corporation governing rights and obligations among the clearing corporation and its participants in the clearing corporation is effective even if the rule conflicts with chs. 401 to 411 and affects another party who does not consent to the rule.

408.111 History History: 1997 a. 297.