Chapter 408

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:

408.508(1) (1) The securities intermediary acts as agreed upon by the entitlement holder and the securities intermediary; or

408.508(2) (2) In the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to follow the direction of the entitlement holder.

408.508 History History: 1997 a. 297.

408.509 408.509 Specification of duties of securities intermediary by other statute or regulation; manner of performance of duties of securities intermediary; and exercise of rights of entitlement holder.

408.509(1) (1) If the substance of a duty imposed upon a securities intermediary by ss. 408.504 to 408.508 is the subject of any other statute, regulation or rule, compliance with that statute, regulation or rule satisfies the duty.

408.509(2) (2) To the extent that specific standards for the performance of the duties of a securities intermediary or the exercise of the rights of an entitlement holder are not specified by other statute, regulation or rule or by agreement between the securities intermediary and entitlement holder, the securities intermediary shall perform its duties and the entitlement holder shall exercise its rights in a commercially reasonable manner.

408.509(3) (3) The obligation of a securities intermediary to perform the duties imposed by ss. 408.504 to 408.508 is subject to:

408.509(3)(a) (a) Rights of the securities intermediary arising out of a security interest under a security agreement with the entitlement holder or otherwise; and

408.509(3)(b) (b) Rights of the securities intermediary under any other law, regulation, rule or agreement to withhold performance of its duties as a result of unfulfilled obligations of the entitlement holder to the securities intermediary.

408.509(4) (4) Sections 408.504 to 408.508 do not require a securities intermediary to take any action that is prohibited by any other statute, regulation or rule.

408.509 History History: 1997 a. 297.

408.510 408.510 Rights of purchaser of security entitlement from entitlement holder.

408.510(1) (1) In a case not covered by the priority rules in ch. 409 or the rules stated in sub. (3), an action based on an adverse claim to a financial asset or security entitlement, whether framed in conversion, replevin, constructive trust, equitable lien, or other theory, may not be asserted against a person who purchases a security entitlement, or an interest therein, from an entitlement holder if the purchaser gives value, does not have notice of the adverse claim, and obtains control.

408.510(2) (2) If an adverse claim could not have been asserted against an entitlement holder under s. 408.502, the adverse claim cannot be asserted against a person who purchases a security entitlement, or an interest therein, from the entitlement holder.

408.510(3) (3) In a case not covered by the priority rules in ch. 409, a purchaser for value of a security entitlement, or an interest therein, who obtains control has priority over a purchaser of a security entitlement, or an interest therein, who does not obtain control. Except as otherwise provided in sub. (4), purchasers who have control rank according to priority in time of:

408.510(3)(a) (a) The purchaser’s becoming the person for whom the securities account, in which the security entitlement is carried, is maintained, if the purchaser obtained control under s. 408.106 (4) (a);

408.510(3)(b) (b) The securities intermediary’s agreement to comply with the purchaser’s entitlement orders with respect to security entitlements carried or to be carried in the securities account in which the security entitlement is carried, if the purchaser obtained control under s. 408.106 (4) (b); or

408.510(3)(c) (c) If the purchaser obtained control through another person under s. 408.106 (4) (c), the time on which priority would be based under this subsection if the other person were the secured party.

408.510(4) (4) A securities intermediary as purchaser has priority over a conflicting purchaser who has control unless otherwise agreed by the securities intermediary.

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

408.511 408.511 Priority among security interests and entitlement holders.

408.511(1) (1) Except as otherwise provided in subs. (2) and (3), if a securities intermediary does not have sufficient interests in a particular financial asset to satisfy both its obligations to entitlement holders who have security entitlements to that financial asset and its obligation to a creditor of the securities intermediary who has a security interest in that financial asset, the claims of entitlement holders, other than the creditor, have priority over the claim of the creditor.

408.511(2) (2) A claim of a creditor of a securities intermediary who has a security interest in a financial asset held by a securities intermediary has priority over claims of the securities intermediary’s entitlement holders who have security entitlements with respect to that financial asset if the creditor has control over the financial asset.

408.511(3) (3) If a clearing corporation does not have sufficient financial assets to satisfy both its obligations to entitlement holders who have security entitlements with respect to a financial asset and its obligation to a creditor of the clearing corporation who has a security interest in that financial asset, the claim of the creditor has priority over the claims of entitlement holders.

408.511 History History: 1997 a. 297.

subch. VI of ch. 408 SUBCHAPTER VI

TRANSITIONAL PROVISIONS

408.603 408.603 Saving provision.

408.603(1) (1) If a security interest in a security is perfected on or before July 1, 1998, and the action by which the security interest was perfected would suffice to perfect a security interest under this chapter, no further action is required to continue perfection.

408.603(2) (2) If a security interest in a security is perfected on or before July 1, 1998, under ch. 408, 1995 stats., but the action by which the security interest was perfected would not suffice to perfect a security interest under this chapter, the security interest remains perfected for a period of 4 months after July 1, 1998, and continues perfected thereafter if appropriate action to perfect under this chapter is taken within that period. If a security interest is perfected on or before July 1, 1998, and the security interest can be perfected by filing under this chapter, a financing statement signed by the secured party instead of the debtor may be filed within that period to continue perfection or thereafter to perfect.

408.603 History History: 1997 a. 297.