Chapter 408

408.402(1m)(c) (c) If the endorsement is made or the instruction is originated by a fiduciary pursuant to s. 408.107 (1) (d) or (e), appropriate evidence of appointment or incumbency;

408.402(1m)(d) (d) If there is more than one fiduciary, reasonable assurance that all who are required to sign have done so; and

408.402(1m)(e) (e) If the endorsement is made or the instruction is originated by a person not covered by another provision of this subsection, assurance appropriate to the case corresponding as nearly as may be to the provisions of this subsection.

408.402(2) (2) An issuer may elect to require reasonable assurance beyond that specified in this section.

408.402 History History: 1997 a. 297.

408.403 408.403 Demand that issuer not register transfer.

408.403(1) (1) A person who is an appropriate person to make an endorsement or originate an instruction may demand that the issuer not register transfer of a security by communicating to the issuer a notification that identifies the registered owner and the issue of which the security is a part and provides an address for communications directed to the person making the demand. The demand is effective only if it is received by the issuer at a time and in a manner affording the issuer reasonable opportunity to act on it.

408.403(2) (2) If a certificated security in registered form is presented to an issuer with a request to register transfer or an instruction is presented to an issuer with a request to register transfer of an uncertificated security after a demand that the issuer not register transfer has become effective, the issuer shall promptly communicate to the person who initiated the demand at the address provided in the demand and to the person who presented the security for registration of transfer or initiated the instruction requesting registration of transfer, a notification stating that:

408.403(2)(a) (a) The certificated security has been presented for registration of transfer or the instruction for registration of transfer of the uncertificated security has been received;

408.403(2)(b) (b) A demand that the issuer not register transfer had previously been received; and

408.403(2)(c) (c) The issuer will withhold registration of transfer for a period of time stated in the notification in order to provide the person who initiated the demand an opportunity to obtain legal process or an indemnity bond.

408.403(3) (3) The period described in sub. (2) (c) may not exceed 30 days after the date of communication of the notification. A shorter period may be specified by the issuer if it is not manifestly unreasonable.

408.403(4) (4) An issuer is not liable to a person who initiated a demand that the issuer not register transfer for any loss the person suffers as a result of registration of a transfer pursuant to an effective endorsement or instruction if the person who initiated the demand does not, within the time stated in the issuer’s communication, either:

408.403(4)(a) (a) Obtain an appropriate restraining order, injunction or other process from a court of competent jurisdiction enjoining the issuer from registering the transfer; or

408.403(4)(b) (b) File with the issuer an indemnity bond, sufficient in the issuer’s judgment to protect the issuer and any transfer agent, registrar or other agent of the issuer involved from any loss it or they may suffer by refusing to register the transfer.

408.403(5) (5) This section does not relieve an issuer from liability for registering transfer pursuant to an endorsement or instruction that was not effective.

408.403 History History: 1997 a. 297.

408.404 408.404 Wrongful registration.

408.404(1) (1) Except as otherwise provided in s. 408.406, an issuer is liable for wrongful registration of transfer if the issuer has registered a transfer of a security to a person not entitled to it, and the transfer was registered:

408.404(1)(a) (a) Pursuant to an ineffective endorsement or instruction;

408.404(1)(b) (b) After a demand that the issuer not register transfer became effective under s. 408.403 (1) and the issuer did not comply with s. 408.403 (2);

408.404(1)(c) (c) After the issuer had been served with an injunction, restraining order, or other legal process enjoining it from registering the transfer, issued by a court of competent jurisdiction, and the issuer had a reasonable opportunity to act on the injunction, restraining order or other legal process; or

408.404(1)(d) (d) By an issuer acting in collusion with the wrongdoer.

408.404(2) (2) An issuer that is liable for wrongful registration of transfer under sub. (1) on demand shall provide the person entitled to the security with a like certificated or uncertificated security, and any payments or distributions that the person did not receive as a result of the wrongful registration. If an overissue would result, the issuer’s liability to provide the person with a like security is governed by s. 408.210.

408.404(3) (3) Except as otherwise provided in sub. (1) or in a law relating to the collection of taxes, an issuer is not liable to an owner or other person suffering loss as a result of the registration of a transfer of a security if registration was made pursuant to an effective endorsement or instruction.

408.404 History History: 1997 a. 297.

408.405 408.405 Replacement of lost, destroyed or wrongfully taken security certificate.

408.405(1) (1) If an owner of a certificated security, whether in registered or bearer form, claims that the certificate has been lost, destroyed or wrongfully taken, the issuer shall issue a new certificate if the owner:

408.405(1)(a) (a) So requests before the issuer has notice that the certificate has been acquired by a protected purchaser;

408.405(1)(b) (b) Files with the issuer a sufficient indemnity bond; and

408.405(1)(c) (c) Satisfies other reasonable requirements imposed by the issuer.

408.405(2) (2) If, after the issue of a new security certificate, a protected purchaser of the original certificate presents it for registration of transfer, the issuer shall register the transfer unless an overissue would result. In that case, the issuer’s liability is governed by s. 408.210. In addition to any rights on the indemnity bond, an issuer may recover the new certificate from a person to whom it was issued or any person taking under that person, except a protected purchaser.

408.405 History History: 1997 a. 297.

408.406 408.406 Obligation to notify issuer of lost, destroyed or wrongfully taken security certificate. If a security certificate has been lost, apparently destroyed or wrongfully taken, and the owner fails to notify the issuer of that fact within a reasonable time after the owner has notice of it and the issuer registers a transfer of the security before receiving notification, the owner may not assert against the issuer a claim for registering the transfer under s. 408.404 or a claim to a new security certificate under s. 408.405.

408.406 History History: 1997 a. 297.

408.407 408.407 Authenticating trustee, transfer agent and registrar. A person acting as authenticating trustee, transfer agent, registrar or other agent for an issuer in the registration of a transfer of its securities, in the issue of new security certificates or uncertificated securities, or in the cancellation of surrendered security certificates has the same obligation to the holder or owner of a certificated or uncertificated security with regard to the particular functions performed as the issuer has in regard to those functions.

408.407 History History: 1997 a. 297.

subch. V of ch. 408 SUBCHAPTER V

SECURITY ENTITLEMENTS

408.501 408.501 Securities account; acquisition of security entitlement from securities intermediary.

408.501(1) (1) In this chapter, “securities account” means an account to which a financial asset is or may be credited in accordance with an agreement under which the person maintaining the account undertakes to treat the person for whom the account is maintained as entitled to exercise the rights that comprise the financial asset.

408.501(2) (2) Except as otherwise provided in subs. (4) and (5), a person acquires a security entitlement if a securities intermediary:

408.501(2)(a) (a) Indicates by book entry that a financial asset has been credited to the person’s securities account;

408.501(2)(b) (b) Receives a financial asset from the person or acquires a financial asset for the person and, in either case, accepts it for credit to the person’s securities account; or

408.501(2)(c) (c) Becomes obligated under other law, regulation or rule to credit a financial asset to the person’s securities account.

408.501(3) (3) If a condition of sub. (2) has been met, a person has a security entitlement even though the securities intermediary does not itself hold the financial asset.

408.501(4) (4) If a securities intermediary holds a financial asset for another person, and the financial asset is registered in the name of, payable to the order of, or specially endorsed to the other person, and has not been endorsed to the securities intermediary or in blank, the other person is treated as holding the financial asset directly rather than as having a security entitlement with respect to the financial asset.

408.501(5) (5) Issuance of a security is not establishment of a security entitlement.

408.501 History History: 1997 a. 297.

408.502 408.502 Assertion of adverse claim against entitlement holder. An action based on an adverse claim to a financial asset, whether framed in conversion, replevin, constructive trust, equitable lien or other theory, may not be asserted against a person who acquires a security entitlement under s. 408.501 for value and without notice of the adverse claim.

408.502 History History: 1997 a. 297.

408.503 408.503 Property interest of entitlement holder in financial asset held by securities intermediary.

408.503(1) (1) To the extent necessary for a securities intermediary to satisfy all security entitlements with respect to a particular financial asset, all interests in that financial asset held by the securities intermediary are held by the securities intermediary for the entitlement holders, are not property of the securities intermediary, and are not subject to claims of creditors of the securities intermediary, except as otherwise provided in s. 408.511.

408.503(2) (2) An entitlement holder’s property interest with respect to a particular financial asset under sub. (1) is a prorated property interest in all interests in that financial asset held by the securities intermediary, without regard to the time the entitlement holder acquired the security entitlement or the time the securities intermediary acquired the interest in that financial asset.

408.503(3) (3) An entitlement holder’s property interest with respect to a particular financial asset under sub. (1) may be enforced against the securities intermediary only by exercise of the entitlement holder’s rights under ss. 408.505 to 408.508.

408.503(4) (4) 

408.503(4)(a) (a) An entitlement holder’s property interest with respect to a particular financial asset under sub. (1) may be enforced against a purchaser of the financial asset or interest therein only if:

408.503(4)(a)1. 1. Insolvency proceedings have been initiated by or against the securities intermediary;

408.503(4)(a)2. 2. The securities intermediary does not have sufficient interests in the financial asset to satisfy the security entitlements of all of its entitlement holders to that financial asset;

408.503(4)(a)3. 3. The securities intermediary violated its obligations under s. 408.504 by transferring the financial asset or interest therein to the purchaser; and

408.503(4)(a)4. 4. The purchaser is not protected under sub. (5).

408.503(4)(b) (b) The trustee or other liquidator, acting on behalf of all entitlement holders having security entitlements with respect to a particular financial asset, may recover the financial asset, or interest therein, from the purchaser. If the trustee or other liquidator elects not to pursue that right, an entitlement holder whose security entitlement remains unsatisfied has the right to recover its interest in the financial asset from the purchaser.

408.503(5) (5) An action based on the entitlement holder’s property interest with respect to a particular financial asset under sub. (1), whether framed in conversion, replevin, constructive trust, equitable lien, or other theory, may not be asserted against any purchaser of a financial asset or interest therein who gives value, obtains control, and does not act in collusion with the securities intermediary in violating the securities intermediary’s obligations under s. 408.504.

408.503 History History: 1997 a. 297.

408.504 408.504 Duty of securities intermediary to maintain financial asset.

408.504(1) (1) A securities intermediary shall promptly obtain and thereafter maintain a financial asset in a quantity corresponding to the aggregate of all security entitlements it has established in favor of its entitlement holders with respect to that financial asset. The securities intermediary may maintain those financial assets directly or through one or more other securities intermediaries.

408.504(2) (2) Except to the extent otherwise agreed by its entitlement holder, a securities intermediary may not grant any security interests in a financial asset it is obligated to maintain pursuant to sub. (1).

408.504(3) (3) A securities intermediary satisfies the duty in sub. (1) if:

408.504(3)(a) (a) The securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or

408.504(3)(b) (b) In the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to obtain and maintain the financial asset.

408.504(4) (4) This section does not apply to a clearing corporation that is itself the obligor of an option or similar obligation to which its entitlement holders have security entitlements.

408.504 History History: 1997 a. 297.

408.505 408.505 Duty of securities intermediary with respect to payments and distributions.

408.505(1) (1) A securities intermediary shall take action to obtain a payment or distribution made by the issuer of a financial asset. A securities intermediary satisfies the duty if:

408.505(1)(a) (a) The securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or

408.505(1)(b) (b) In the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to attempt to obtain the payment or distribution.

408.505(2) (2) A securities intermediary is obligated to its entitlement holder for a payment or distribution made by the issuer of a financial asset if the payment or distribution is received by the securities intermediary.

408.505 History History: 1997 a. 297.

408.506 408.506 Duty of securities intermediary to exercise rights as directed by entitlement holder. A securities intermediary shall exercise rights with respect to a financial asset if directed to do so by an entitlement holder. A securities intermediary satisfies the duty if:

408.506(1) (1) The securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or

408.506(2) (2) In the absence of agreement, the securities intermediary either places the entitlement holder in a position to exercise the rights directly or exercises due care in accordance with reasonable commercial standards to follow the direction of the entitlement holder.

408.506 History History: 1997 a. 297.

408.507 408.507 Duty of securities intermediary to comply with entitlement order.

408.507(1) (1) A securities intermediary shall comply with an entitlement order if the entitlement order is originated by the appropriate person, the securities intermediary has had reasonable opportunity to assure itself that the entitlement order is genuine and authorized, and the securities intermediary has had reasonable opportunity to comply with the entitlement order. A securities intermediary satisfies the duty if:

408.507(1)(a) (a) The securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or

408.507(1)(b) (b) In the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to comply with the entitlement order.

408.507(2) (2) If a securities intermediary transfers a financial asset pursuant to an ineffective entitlement order, the securities intermediary shall reestablish a security entitlement in favor of the person entitled to it, and pay or credit any payments or distributions that the person did not receive as a result of the wrongful transfer. If the securities intermediary does not reestablish a security entitlement, the securities intermediary is liable to the entitlement holder for damages.

408.507 History History: 1997 a. 297.

408.508 408.508 Duty of securities intermediary to change entitlement holder’s position to other form of security holding. A securities intermediary shall act at the direction of an entitlement holder to change a security entitlement into another available form of holding for which the entitlement holder is eligible, or to cause the financial asset to be transferred to a securities account of the entitlement holder with another securities intermediary. A securities intermediary satisfies the duty if: