Title 41, Uniform Commercial Code

This chapter may be cited as Uniform Commercial Code - Investment Securities.

1. In this chapter: a. "Adverse claim" means a claim that a claimant has a property interest in a financial asset and that it is a violation of the rights of the claimant for another person to hold, transfer, or deal with the financial asset. b. "Bearer form", as applied to a cer…

In this chapter: 1. A share or similar equity interest issued by a corporation, business trust, joint stock company, or similar entity is a security. 2. An "investment company security" is a security. "Investment company security" means a share or similar equity interest issued b…

1. A person acquires a security or an interest therein, under this chapter, if: a. The person is a purchaser to whom a security is delivered pursuant to section 41-08-27; or b. The person acquires a security entitlement to the security pursuant to section 41-08-41. 2. A person ac…

1. A person has notice of an adverse claim if: a. The person knows of the adverse claim; b. The person is aware of facts sufficient to indicate that there is a significant probability that the adverse claim exists and deliberately avoids information that would establish the exist…

1. A purchaser has "control" of a certificated security in bearer form if the certificated security is delivered to the purchaser. 2. A purchaser has "control" of a certificated security in registered form if the certificated security is delivered to the purchaser and: a. The cer…

1. "Appropriate person" means: a. With respect to an endorsement, the person specified by a security certificate or by an effective special endorsement to be entitled to the security; b. With respect to an instruction, the registered owner of an uncertificated security; c. With r…

1. A person who transfers a certificated security to a purchaser for value warrants to the purchaser, and an endorser, if the transfer is by endorsement, warrants to any subsequent purchaser, that: a. The certificate is genuine and has not been materially altered; b. The transfer…

1. A person who originates an entitlement order to a securities intermediary warrants to the securities intermediary that: 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…

1. The local law of the issuer's jurisdiction, as specified in subsection 4, governs: a. The validity of a security; b. The rights and duties of the issuer with respect to registration of transfer; c. The effectiveness of registration of transfer by the issuer; d. Whether the iss…

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 this chapter and affects another party who does not consent to the rule.

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 subsection 4. However, a certificated security for which the certif…

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…

The following rules apply in an action on a certificated security against the issuer: 1. Unless specifically denied in the pleadings, each signature on a security certificate or in a necessary endorsement is admitted. 2. If the effectiveness of a signature is put in issue, the bu…

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…

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…

1. With respect to an obligation on or a defense to a security, an "issuer" includes a person who: 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, partici…

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, …

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 exchan…

A restriction on transfer of a security imposed by the issuer, even if otherwise lawful, is ineffective against a person without knowledge of the restriction unless: 1. The security is certificated and the restriction is noted conspicuously on the security certificate; or 2. The …

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 ha…

1. If a security certificate contains the signatures necessary to its issue or transfer but is incomplete in any other respect: a. Any person may complete it by filling in the blanks as authorized; and b. Even if the blanks are incorrectly filled in, the security certificate as c…

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 en…

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: a. The certificate is genuine; b. The per…

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.

1. In this section, "overissue" means the issue of securities in excess of the amount the issuer has corporate power to issue, but an overissue does not occur if appropriate action has cured the overissue. 2. Except as otherwise provided in subsections 3 and 4, the provisions of …

1. Delivery of a certificated security to a purchaser occurs when: a. The purchaser acquires possession of the security certificate; b. Another person, other than a securities intermediary, either acquires possession of the security certificate on behalf of the purchaser or, havi…

1. Except as otherwise provided in subsections 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. 2. A purchaser of a limited interest acquires rights only to the extent of the in…

1. "Protected purchaser" means a purchaser of a certificated or uncertificated security, or of an interest therein, who: a. Gives value; b. Does not have notice of any adverse claim to the security; and c. Obtains control of the certificated or uncertificated security. 2. A prote…

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. 2. …

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. 2. Unless otherwise agreed, a person initi…

1. A person who guarantees a signature of an endorser of a security certificate warrants that at the time of signing: a. The signature was genuine; b. The signer was an appropriate person to endorse, or if the signature is by an agent, the agent had actual authority to act on beh…

Unless otherwise agreed, the transferor of a security on due demand shall supply the purchaser with proof of authority to transfer or with any other requisite necessary to obtain registration of the transfer of the security, but if the transfer is not for value, a transferor need…

1. 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, the issuer shall register the transfer as requested if: a.…

1. An issuer may require the following assurance that each necessary endorsement or each instruction is genuine and authorized: a. In all cases, a guaranty of the signature of the person making an endorsement or originating an instruction including, in the case of an instruction,…

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 p…

1. Except as otherwise provided in section 41-08-39, 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: a. Pursuant to an ineffective endorsement or instr…

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: a. So requests before the issuer has notice that the certificate has …

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, t…

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 certifica…

1. "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 compr…

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 section 41-08-41 for value and without notice of t…

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 holder…

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 inter…

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: a. The securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and t…

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: 1. The securities intermediary acts with respect to the duty as agreed upon by the entitlement holder …

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 securiti…

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 ent…

1. If the substance of a duty imposed upon a securities intermediary by sections 41-08-44 through 41-08-48 is the subject of other statute, regulation, or rule, compliance with that statute, regulation, or rule satisfies the duty. 2. To the extent that specific standards for the …

1. In a case not covered by the priority rules in chapter 41-09 or the rules stated in subsection 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 …