Chapter 408

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.

408.206 408.206 Completion or alteration of security certificate.

408.206(1) (1) If a security certificate contains the signatures necessary to its issue or transfer but is incomplete in any other respect:

408.206(1)(a) (a) Any person may complete it by filling in the blanks as authorized; and

408.206(1)(b) (b) Even if the blanks are incorrectly filled in, the security certificate as completed is enforceable by a purchaser who took it for value and without notice of the incorrectness.

408.206(2) (2) A complete security certificate that has been improperly altered, even if fraudulently, remains enforceable, but only according to its original terms.

408.206 History History: 1997 a. 297.

408.207 408.207 Rights and duties of issuer with respect to registered owners.

408.207(1) (1) Before due presentment for registration of transfer of a certificated security in registered form or of an instruction requesting registration of transfer of an uncertificated security, the issuer or indenture trustee may treat the registered owner as the person exclusively entitled to vote, receive notifications, and otherwise exercise all the rights and powers of an owner.

408.207(2) (2) This chapter does not affect the liability of the registered owner of a security for a call, assessment or the like.

408.207 History History: 1997 a. 297.

408.208 408.208 Effect of signature of authenticating trustee, registrar or transfer agent.

408.208(1) (1) A person signing a security certificate as authenticating trustee, registrar, transfer agent or the like, warrants to a purchaser for value of the certificated security, if the purchaser is without notice of a particular defect, that:

408.208(1)(a) (a) The certificate is genuine;

408.208(1)(b) (b) The person’s own participation in the issue of the security is within the person’s capacity and within the scope of the authority received by the person from the issuer; and

408.208(1)(c) (c) The person has reasonable grounds to believe that the certificated security is in the form and within the amount that the issuer is authorized to issue.

408.208(2) (2) Unless otherwise agreed, a person signing under sub. (1) does not assume responsibility for the validity of the security in other respects.

408.208 History History: 1997 a. 297.

408.209 408.209 Issuer’s lien. A lien in favor of an issuer upon a certificated security is valid against a purchaser only if the right of the issuer to the lien is noted conspicuously on the security certificate.

408.209 History History: 1997 a. 297.

408.210 408.210 Overissue.

408.210(1) (1) In this chapter, “overissue” means the issue of securities in excess of the amount that the issuer has corporate power to issue, but an overissue does not occur if appropriate action has cured the overissue.

408.210(2) (2) Except as otherwise provided in subs. (3) and (4), the provisions of this chapter which validate a security or compel its issue or reissue do not apply to the extent that validation, issue or reissue would result in overissue.

408.210(3) (3) If an identical security not constituting an overissue is reasonably available for purchase, a person entitled to issue or validation may compel the issuer to purchase the security and deliver it if certificated or register its transfer if uncertificated, against surrender of any security certificate the person holds.

408.210(4) (4) If a security is not reasonably available for purchase, a person entitled to issue or validation may recover from the issuer the price that the person or the last purchaser for value paid for it with interest from the date of the person’s demand.

408.210 History History: 1997 a. 297.

subch. III of ch. 408 SUBCHAPTER III

TRANSFER OF CERTIFICATED AND
UNCERTIFICATED SECURITIES

408.301 408.301 Delivery.

408.301(1) (1) Delivery of a certificated security to a purchaser occurs when:

408.301(1)(a) (a) The purchaser acquires possession of the security certificate;

408.301(1)(b) (b) Another person, other than a securities intermediary, either acquires possession of the security certificate on behalf of the purchaser or, having previously acquired possession of the certificate, acknowledges that it holds for the purchaser; or

408.301(1)(c) (c) A securities intermediary acting on behalf of the purchaser acquires possession of the security certificate, only if the certificate is in registered form and is:

408.301(1)(c)1. 1. Registered in the name of the purchaser;

408.301(1)(c)2. 2. Payable to the order of the purchaser; or

408.301(1)(c)3. 3. Specially endorsed to the purchaser by an effective endorsement and has not been endorsed to the securities intermediary or in blank.

408.301(2) (2) Delivery of an uncertificated security to a purchaser occurs when:

408.301(2)(a) (a) The issuer registers the purchaser as the registered owner, upon original issue or registration of transfer; or

408.301(2)(b) (b) Another person, other than a securities intermediary, either becomes the registered owner of the uncertificated security on behalf of the purchaser or, having previously become the registered owner, acknowledges that it holds for the purchaser.

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

408.302 408.302 Rights of purchaser.

408.302(1) (1) Except as otherwise provided in subs. (2) and (3), a purchaser of a certificated or uncertificated security acquires all rights in the security that the transferor had or had power to transfer.

408.302(2) (2) A purchaser of a limited interest acquires rights only to the extent of the interest purchased.

408.302(3) (3) A purchaser of a certificated security who as a previous holder had notice of an adverse claim does not improve its position by taking from a protected purchaser.

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

408.303 408.303 Protected purchaser.

408.303(1) (1) In this chapter, “protected purchaser” means a purchaser of a certificated or uncertificated security, or of an interest therein, who:

408.303(1)(a) (a) Gives value;

408.303(1)(b) (b) Does not have notice of any adverse claim to the security; and

408.303(1)(c) (c) Obtains control of the certificated or uncertificated security.

408.303(2) (2) In addition to acquiring the rights of a purchaser, a protected purchaser also acquires its interest in the security free of any adverse claim.

408.303 History History: 1997 a. 297.

408.304 408.304 Endorsement.

408.304(1) (1) An endorsement may be in blank or special. An endorsement in blank includes an endorsement to bearer. A special endorsement specifies to whom a security is to be transferred or who has power to transfer it. A holder may convert a blank endorsement to a special endorsement.

408.304(2) (2) An endorsement purporting to be only an endorsement of part of a security certificate representing units intended by the issuer to be separately transferable is effective to the extent of the endorsement.

408.304(3) (3) An endorsement, whether special or in blank, does not constitute a transfer until delivery of the certificate on which it appears or, if the endorsement is on a separate document, until delivery of both the document and the certificate.

408.304(4) (4) If a security certificate in registered form has been delivered to a purchaser without a necessary endorsement, the purchaser may become a protected purchaser only when the endorsement is supplied. However, against a transferor, a transfer is complete upon delivery and the purchaser has a specifically enforceable right to have any necessary endorsement supplied.

408.304(5) (5) An endorsement of a security certificate in bearer form may give notice of an adverse claim to the certificate, but it does not otherwise affect a right to registration that the holder possesses.

408.304(6) (6) Unless otherwise agreed, a person making an endorsement assumes only the obligations provided in s. 408.108 and not an obligation that the security will be honored by the issuer.

408.304 History History: 1997 a. 297.

408.305 408.305 Instruction.

408.305(1) (1) If an instruction has been originated by an appropriate person but is incomplete in any other respect, any person may complete it as authorized and the issuer may rely on it as completed, even though it has been completed incorrectly.

408.305(2) (2) Unless otherwise agreed, a person initiating an instruction assumes only the obligations imposed by s. 408.108 and not an obligation that the security will be honored by the issuer.