Duty of securities intermediary to exercise rights as directed by entitlement holder

84-8-506. 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: (a) The securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or (b) 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. History: L. 1996, ch. 202, § 73; July 1. KANSAS COMMENT, 1996 This section is new and is identical to the 1995 Official Text. The section establishes the duty of the intermediary to follow the directions of the entitlement holder in exercising such rights as voting, responding to proxies and exercising conversion rights. The intermediary can meet the obligation imposed by this section in accordance with an agreement with the entitlement holder, if there is an agreement, or, if there is not, in accordance with reasonable commercial standards. Such agreements may direct the intermediary to vote regarding proxies and management. The intermediary may also satisfy the duty to the holder, where the intermediary does not wish to become involved, by placing the holder in a position to exercise a right, such as becoming involved in a shareholder law suit. The intermediary's compliance with governing statutes, regulations or rules satisfies the duty under 84-8-509(a).