Chapter 408

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

408.115(2) (2) Acted in collusion with the wrongdoer in violating the rights of the adverse claimant; or

408.115(3) (3) In the case of a security certificate that has been stolen, acted with notice of the adverse claim.

408.115 History History: 1997 a. 297.

408.116 408.116 Securities intermediary as purchaser for value. A securities intermediary that receives a financial asset and establishes a security entitlement to the financial asset in favor of an entitlement holder is a purchaser for value of the financial asset. A securities intermediary that acquires a security entitlement to a financial asset from another securities intermediary acquires the security entitlement for value if the securities intermediary acquiring the security entitlement establishes a security entitlement to the financial asset in favor of an entitlement holder.

408.116 History History: 1997 a. 297.

subch. II of ch. 408 SUBCHAPTER II

ISSUE AND ISSUER

408.201 408.201 Issuer.

408.201(1) (1) With respect to an obligation on or a defense to a security, an “issuer” includes a person that:

408.201(1)(a) (a) Places or authorizes the placing of its name on a security certificate, other than as authenticating trustee, registrar, transfer agent or the like, to evidence a share, participation or other interest in its property or in an enterprise, or to evidence its duty to perform an obligation represented by the certificate;

408.201(1)(b) (b) Creates a share, participation or other interest in its property or in an enterprise, or undertakes an obligation, that is an uncertificated security;

408.201(1)(c) (c) Directly or indirectly creates a fractional interest in its rights or property, if the fractional interest is represented by a security certificate; or

408.201(1)(d) (d) Becomes responsible for, or in place of, another person described as an issuer in this section.

408.201(2) (2) With respect to an obligation on or defense to a security, a guarantor is an issuer to the extent of its guaranty, whether or not its obligation is noted on a security certificate.

408.201(3) (3) With respect to a registration of a transfer, “issuer” means a person on whose behalf transfer books are maintained.

408.201 History History: 1997 a. 297.

408.202 408.202 Issuer’s responsibility and defenses; notice of defect or defense.

408.202(1) (1) Even against a purchaser for value and without notice, the terms of a certificated security include terms stated on the certificate and terms made part of the security by reference on the certificate to another instrument, indenture or document or to a constitution, statute, ordinance, rule, regulation, order or the like, to the extent that the terms referred to do not conflict with terms stated on the certificate. A reference under this subsection does not of itself charge a purchaser for value with notice of a defect going to the validity of the security, even if the certificate expressly states that a person accepting it admits notice. The terms of an uncertificated security include those stated in any instrument, indenture or document or in a constitution, statute, ordinance, rule, regulation, order or the like, pursuant to which the security is issued.

408.202(2) (2) The following rules apply if an issuer asserts that a security is not valid:

408.202(2)(a) (a) A security other than one issued by a government or governmental subdivision, agency or instrumentality, even though issued with a defect going to its validity, is valid in the hands of a purchaser for value and without notice of the particular defect unless the defect involves a violation of a constitutional provision. In that case, the security is valid in the hands of a purchaser for value and without notice of the defect, other than one who takes by original issue.

408.202(2)(b) (b) Paragraph (a) applies to an issuer that is a government or governmental subdivision, agency or instrumentality only if there has been substantial compliance with the legal requirements governing the issue or the issuer has received a substantial consideration for the issue as a whole or for the particular security and a stated purpose of the issue is one for which the issuer has power to borrow money or issue the security.

408.202(3) (3) Except as otherwise provided in s. 408.205, lack of genuineness of a certificated security is a complete defense, even against a purchaser for value and without notice.

408.202(4) (4) All other defenses of the issuer of a security, including nondelivery and conditional delivery of a certificated security, are ineffective against a purchaser for value who has taken the certificated security without notice of the particular defense.

408.202(5) (5) This section does not affect the right of a party to cancel a contract for a security “when, as and if issued” or “when distributed” in the event of a material change in the character of the security that is the subject of the contract or in the plan or arrangement pursuant to which the security is to be issued or distributed.

408.202(6) (6) If a security is held by a securities intermediary against whom an entitlement holder has a security entitlement with respect to the security, the issuer may not assert any defense that the issuer could not assert if the entitlement holder held the security directly.

408.202 History History: 1997 a. 297.

408.203 408.203 Staleness as notice of defect or defense. After an act or event, other than a call that has been revoked, creating a right to immediate performance of the principal obligation represented by a certificated security or setting a date on or after which the security is to be presented or surrendered for redemption or exchange, a purchaser is charged with notice of any defect in its issue or defense of the issuer, if the act or event:

408.203(1) (1) Requires the payment of money, the delivery of a certificated security, the registration of transfer of an uncertificated security, or any of them on presentation or surrender of the security certificate, the money or security is available on the date set for payment or exchange, and the purchaser takes the security more than one year after that date; or

408.203(2) (2) Is not covered by sub. (1) and the purchaser takes the security more than 2 years after the date set for surrender or presentation or the date on which performance became due.

408.203 History History: 1997 a. 297.

408.204 408.204 Effect of issuer’s restriction on transfer. A restriction on the transfer of a security imposed by the issuer, even if otherwise lawful, is ineffective against a person without knowledge of the restriction unless:

408.204(1) (1) The security is certificated and the restriction is noted conspicuously on the security certificate; or

408.204(2) (2) The security is uncertificated and the registered owner has been notified of the restriction.

408.204 History History: 1997 a. 297.

408.205 408.205 Effect of unauthorized signature on security certificate. An unauthorized signature placed on a security certificate before or in the course of issue is ineffective, but the signature is effective in favor of a purchaser for value of the certificated security if the purchaser is without notice of the lack of authority and the signing has been done by:

408.205(1) (1) An authenticating trustee, registrar, transfer agent or other person entrusted by the issuer with the signing of the security certificate or of similar security certificates, or the immediate preparation for signing of any of them; or

408.205(2) (2) An employee of the issuer, or of any of the persons listed in sub. (1), entrusted with responsible handling of the security certificate.

408.205 History History: 1997 a. 297.