Chapter 408

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.

408.112 408.112 Creditor’s legal process.

408.112(1) (1) The interest of a debtor in a certificated security may be reached by a creditor only by actual seizure of the security certificate by the officer making the attachment or levy, except as otherwise provided in sub. (4). However, a certificated security for which the certificate has been surrendered to the issuer may be reached by a creditor by legal process upon the issuer.

408.112(2) (2) The interest of a debtor in an uncertificated security may be reached by a creditor only by legal process upon the issuer at its chief executive office in the United States, except as otherwise provided in sub. (4).

408.112(3) (3) The interest of a debtor in a security entitlement may be reached by a creditor only by legal process upon the securities intermediary with whom the debtor’s securities account is maintained, except as otherwise provided in sub. (4).

408.112(4) (4) The interest of a debtor in a certificated security for which the certificate is in the possession of a secured party, or in an uncertificated security registered in the name of a secured party, or a security entitlement maintained in the name of a secured party, may be reached by a creditor by legal process upon the secured party.

408.112(5) (5) A creditor whose debtor is the owner of a certificated security, uncertificated security or security entitlement is entitled to aid from a court of competent jurisdiction, by injunction or otherwise, in reaching the certificated security, uncertificated security or security entitlement or in satisfying the claim by means allowed at law or in equity in regard to property that cannot readily be reached by other legal process.

408.112 History History: 1997 a. 297.

408.113 408.113 Statute of frauds inapplicable. A contract or modification of a contract for the sale or purchase of a security is enforceable whether or not there is a writing signed or record authenticated by a party against whom enforcement is sought, even if the contract or modification is not capable of performance within one year of its making.

408.113 History History: 1997 a. 297.

408.114 408.114 Evidentiary rules concerning certificated securities. The following rules apply in an action on a certificated security against the issuer:

408.114(1) (1) Unless specifically denied in the pleadings, each signature on a security certificate or in a necessary endorsement is admitted.

408.114(2) (2) If the effectiveness of a signature is put in issue, the burden of establishing effectiveness is on the party claiming under the signature, but the signature is presumed to be genuine or authorized.

408.114(3) (3) If signatures on a security certificate are admitted or established, production of the certificate entitles a holder to recover on it unless the defendant establishes a defense or a defect going to the validity of the security.

408.114(4) (4) If it is shown that a defense or defect exists, the plaintiff has the burden of establishing that the plaintiff or some person under whom the plaintiff claims is a person against whom the defense or defect cannot be asserted.

408.114 History History: 1997 a. 297.

408.115 408.115 Securities intermediary and others not liable to adverse claimant. A securities intermediary that has transferred a financial asset pursuant to an effective entitlement order, or a broker or other agent or bailee that has dealt with a financial asset at the direction of its customer or principal, is not liable to a person having an adverse claim to the financial asset, unless the securities intermediary, or broker or other agent or bailee:

408.115(1) (1) Took the action after it had been served with an injunction, restraining order, or other legal process enjoining it from doing so, issued by a court of competent jurisdiction, and had a reasonable opportunity to act on the injunction, restraining order or other legal process; or