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| Home > Statutes > Usa Oregon |
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USA Statutes : oregon
Title : TITLE 08 COMMERCIAL TRANSACTIONS
Chapter : Chapter 78 Investment Securities
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This chapter may be cited as Uniform
Commercial Code–Investment Securities. [1961 c.726 §78.1010; 1985 c.676
§78.1010; 1995 c.328 §1] (1) In this chapter:
(a) “Adverse claim” means a claim in which a claimant who has a
property interest in a financial asset asserts 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 certificated security, means a
form in which the security is payable to the bearer of the security
certificate according to its terms but not by reason of an indorsement.
(c) “Broker” means a person defined as a broker or dealer under the
federal securities laws, but does not exclude a bank acting in that
capacity.
(d) “Certificated security” means a security that is represented by
a certificate.
(e) “Clearing corporation” means:
(A) A person that is registered as a clearing agency under the
federal securities laws;
(B) A federal reserve bank; or
(C) Any other person that provides clearance or settlement services
with respect to financial assets that would require it to register as a
clearing agency under the federal securities laws but for an exclusion or
exemption from the registration requirement, if its activities as a
clearing corporation, including promulgation of rules, are subject to
regulation by a federal or state governmental authority.
(f) “Communicate” means to:
(A) Send a signed writing; or
(B) Transmit information by any mechanism agreed upon by the
persons transmitting and receiving the information.
(g) “Entitlement holder” means a person identified in the records
of a securities intermediary as the person having a security entitlement
against the securities intermediary. If a person acquires a security
entitlement by virtue of ORS 78.5010 (2)(b) or (c), that person is the
entitlement holder.
(h) “Entitlement order” means a notification communicated to a
securities intermediary directing transfer or redemption of a financial
asset to which the entitlement holder has a security entitlement.
(i)(A) “Financial asset,” except as otherwise provided in ORS
78.1030, means:
(i) A security;
(ii) An obligation of a person or a share, participation, or other
interest in a person or in property or an enterprise of a person, that
is, or is of a type, dealt in or traded on financial markets, or that is
recognized in any area in which it is issued or dealt in as a medium for
investment; or
(iii) Any property that is held by a securities intermediary for
another person in a securities account if the securities intermediary has
expressly agreed with the other person that the property is to be treated
as a financial asset under this chapter.
(B) As context requires, “financial asset” means either the
interest itself or the means by which a person’s claim to it is
evidenced, including a certificated or uncertificated security, a
security certificate or a security entitlement.
(j) “Good faith,” for purposes of the obligation of good faith in
the performance or enforcement of contracts or duties within this
chapter, means honesty in fact and the observance of reasonable
commercial standards of fair dealing.
(k) “Indorsement” means a signature that alone or accompanied by
other words is made on a security certificate in registered form or on a
separate document for the purpose of assigning, transferring or redeeming
the security or granting the power to assign, transfer or redeem it.
(L) “Instruction” means a notification communicated to the issuer
of an uncertificated security that directs that the transfer of the
security be registered or that the security be redeemed.
(m) “Registered form,” as applied to a certificated security, means
a form in which:
(A) The security certificate specifies a person entitled to the
security; and
(B) A transfer of the security may be registered upon books
maintained for that purpose by or on behalf of the issuer, or the
security certificate so states.
(n) “Securities intermediary” means:
(A) A clearing corporation; or
(B) A person, including a bank or broker, that in the ordinary
course of business maintains securities accounts for others and is acting
in that capacity.
(o) “Security,” except as otherwise provided in ORS 78.1030, means
an obligation of an issuer or a share, participation or other interest in
an issuer or in property or an enterprise of an issuer:
(A) That is represented by a security certificate in bearer or
registered form, or the transfer of which may be registered upon books
maintained for that purpose by or on behalf of the issuer;
(B) That is one of a class or series or by its terms is divisible
into a class or series of shares, participations, interests or
obligations; and
(C)(i) That is, or is of a type, dealt in or traded on securities
exchanges or securities markets; or
(ii) That is a medium for investment and by its terms expressly
provides that it is a security governed by this chapter.
(p) “Security certificate” means a certificate representing a
security.
(q) “Security entitlement” means the rights and property interest
of an entitlement holder with respect to a financial asset specified in
ORS 78.5010 to 78.5110.
(r) “Uncertificated security” means a security that is not
represented by a certificate.
(2) Other definitions applying to this chapter and the sections in
which they appear are:
(a) “Appropriate person” as defined in ORS 78.1070.
(b) “Control” as defined in ORS 78.1060.
(c) “Delivery” as defined in ORS 78.3010.
(d) “Investment company security” as defined in ORS 78.1030.
(e) “Issuer” as defined in ORS 78.2010.
(f) “Overissue” as defined in ORS 78.2100.
(g) “Protected purchaser” as defined in ORS 78.3030.
(h) “Securities account” as defined in ORS 78.5010.
(3) In addition, ORS chapter 71 contains general definitions and
principles of construction and interpretation applicable throughout this
chapter.
(4) The characterization of a person, business or transaction for
purposes of this chapter does not determine the characterization of the
person, business or transaction for purposes of any other law, regulation
or rule. [1961 c.726 §78.1020; 1965 c.271 §3; 1973 c.362 §1; 1985 c.676
§78.1020; 1995 c.328 §2](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 by an
entity that is registered as an investment company under the federal
investment company laws, an interest in a unit investment trust that is
so registered or a face-amount certificate issued by a face-amount
certificate company that is so registered. “Investment company security”
does not include an insurance policy, endowment policy or annuity
contract issued by an insurance company.
(3) An interest in a partnership or limited liability company is
not a security unless it is dealt in or traded on securities exchanges or
in securities markets, its terms expressly provide that it is a security
governed by this chapter or it is an investment company security.
However, an interest in a partnership or limited liability company is a
financial asset if it is held in a securities account.
(4) A writing that is a security certificate is governed by this
chapter and not by ORS chapter 73, even though it also meets the
requirements of that chapter. However, a negotiable instrument governed
by ORS chapter 73 is a financial asset if it is held in a securities
account.
(5) An option or similar obligation issued by a clearing
corporation to its participants is not a security, but is a financial
asset.
(6) A commodity contract, as defined in ORS 79.0102, is not a
security or a financial asset. [1961 c.726 §78.1030; 1985 c.676 §78.1030;
1995 c.328 §3; 2001 c.445 §151](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 ORS 78.3010; or
(b) The person acquires a security entitlement to the security
pursuant to ORS 78.5010.
(2) A person acquires a financial asset other than a security or an
interest therein under this chapter if the person acquires a security
entitlement to the financial asset.
(3) A person who acquires a security entitlement to a security or
other financial asset has the rights specified in ORS 78.5010 to 78.5110,
but is a purchaser of any security, security entitlement or other
financial asset held by the securities intermediary only to the extent
provided in ORS 78.5030.
(4) Unless the context shows that a different meaning is intended,
a person who is required by other law, regulation, rule or agreement to
transfer, deliver, present, surrender, exchange or otherwise put in the
possession of another person a security or financial asset satisfies that
requirement by causing the other person to acquire an interest in the
security or financial asset pursuant to subsection (1) or (2) of this
section. [1961 c.726 §78.1040; 1985 c.676 §78.1040; 1995 c.328 §4] (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 existence of the
adverse claim; or
(c) The person has a duty, imposed by statute or regulation, to
investigate whether an adverse claim exists, and the investigation so
required would establish the existence of the adverse claim.
(2) Having knowledge that a financial asset or interest therein is
or has been transferred by a representative imposes no duty of inquiry
into the rightfulness of a transaction and is not notice of an adverse
claim. However, a person who knows that a representative has transferred
a financial asset or interest therein in a transaction that is, or whose
proceeds are being used, for the individual benefit of the representative
or otherwise in breach of duty has notice of an adverse claim.
(3) An act or event that creates a right to immediate performance
of the principal obligation represented by a security certificate or sets
a date on or after which the certificate is to be presented or
surrendered for redemption or exchange does not itself constitute notice
of an adverse claim except in the case of a transfer more than:
(a) One year after a date set for presentment or surrender for
redemption or exchange; or
(b) Six months after a date set for payment of moneys against
presentation or surrender of the certificate, if moneys were available
for payment on that date.
(4) A purchaser of a certificated security has notice of an adverse
claim if the security certificate:
(a) Whether in bearer or registered form, has been indorsed “for
collection” or “for surrender” or for some other purpose not involving
transfer; or
(b) Is in bearer form and has on it an unambiguous statement that
it is the property of a person other than the transferor. The mere
writing of a name on the certificate is not such a statement.
(5) Filing of a financing statement under ORS chapter 79 is not
notice of an adverse claim to a financial asset. [1961 c.726 §78.1050;
1985 c.676 §78.1050; 1995 c.328 §5] (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 certificate is indorsed to the purchaser or in blank by an
effective indorsement; or
(b) The certificate is registered in the name of the purchaser,
upon original issue or registration of transfer by the issuer.
(3) A purchaser has control of an uncertificated security if:
(a) The uncertificated security is delivered to the purchaser; or
(b) The issuer has agreed to comply with instructions originated by
the purchaser without further consent by the registered owner.
(4) A purchaser has control of a security entitlement if:
(a) The purchaser becomes the entitlement holder;
(b) The securities intermediary has agreed to comply with
entitlement orders originated by the purchaser without further consent by
the entitlement holder; or
(c) Another person has control of the security entitlement on
behalf of the purchaser or, having previously acquired control of the
security entitlement, acknowledges that the person has control on behalf
of the purchaser.
(5) If an interest in a security entitlement is granted by the
entitlement holder to the entitlement holder’s own securities
intermediary, the securities intermediary has control.
(6) A purchaser who has satisfied the requirements of subsection
(3) or (4) of this section has control, even if the registered owner in
the case of subsection (3) of this section, or the entitlement holder in
the case of subsection (4) of this section, retains the right to make
substitutions for the uncertificated security or security entitlement, to
originate instructions or entitlement orders to the issuer or securities
intermediary or otherwise to deal with the uncertificated security or
security entitlement.
(7) An issuer or a securities intermediary may not enter into an
agreement of the kind described in subsection (3)(b) or (4)(b) of this
section without the consent of the registered owner or entitlement
holder, but an issuer or a securities intermediary is not required to
enter into such an agreement even though the registered owner or
entitlement holder so directs. An issuer or securities intermediary that
has entered into such an agreement is not required to confirm the
existence of the agreement to another party unless requested to do so by
the registered owner or entitlement holder. [1961 c.726 §78.1060; 1985
c.676 §78.1060; 1995 c.328 §6; 2001 c.445 §152](1) “Appropriate person” means:
(a) With respect to an indorsement, the person specified by a
security certificate or by an effective special indorsement to be
entitled to the security;
(b) With respect to an instruction, the registered owner of an
uncertificated security;
(c) With respect to an entitlement order, the entitlement holder;
(d) If the person designated in paragraph (a), (b) or (c) of this
subsection is deceased, the designated person’s successor taking under
other law, or the designated person’s personal representative acting for
the estate of the decedent; or
(e) If the person designated in paragraph (a), (b) or (c) of this
subsection lacks capacity, the designated person’s guardian, conservator
or other similar representative who has power under other law to transfer
the security or financial asset.
(2) An indorsement, instruction or entitlement order is effective
if:
(a) It is made by the appropriate person;
(b) It is made by a person who has power under the law of agency to
transfer the security or financial asset on behalf of the appropriate
person, including, in the case of an instruction or entitlement order, a
person who has control under ORS 78.1060 (3)(b) or (4)(b); or
(c) The appropriate person has ratified it or is otherwise
precluded from asserting its ineffectiveness.
(3) An indorsement, instruction or entitlement order made by a
representative is effective even if:
(a) The representative has failed to comply with a controlling
instrument or with the law of the state having jurisdiction of the
representative relationship, including any law requiring the
representative to obtain court approval of the transaction; or
(b) The representative’s action in making the indorsement,
instruction or entitlement order or using the proceeds of the transaction
is otherwise a breach of duty.
(4) If a security is registered in the name of or specially
indorsed to a person described as a representative, or if a securities
account is maintained in the name of a person described as a
representative, an indorsement, instruction or entitlement order made by
the person is effective even though the person is no longer serving in
the described capacity.
(5) Effectiveness of an indorsement, instruction or entitlement
order is determined as of the date the indorsement, instruction or
entitlement order is made, and an indorsement, instruction or entitlement
order does not become ineffective by reason of any later change of
circumstances. [1985 c.676 §78.1070; 1995 c.328 §7] (1) A person that transfers a
certificated security to a purchaser for value warrants to the purchaser,
and an indorser, if the transfer is by indorsement, warrants to any
subsequent purchaser, that:
(a) The certificate is genuine and has not been materially altered;
(b) The transferor or indorser does not know of any fact that might
impair the validity of the security;
(c) There is no adverse claim to the security;
(d) The transfer does not violate any restriction on transfer;
(e) If the transfer is by indorsement, the indorsement is made by
an appropriate person, or if the indorsement is by an agent, the agent
has actual authority to act on behalf of the appropriate person; and
(f) The transfer is otherwise effective and rightful.
(2) A person that originates an instruction for registration of
transfer of an uncertificated security to a purchaser for value warrants
to the purchaser that:
(a) The instruction is made by an appropriate person, or if the
instruction is by an agent, the agent has actual authority to act on
behalf of the appropriate person;
(b) The security is valid;
(c) There is no adverse claim to the security; and
(d) At the time the instruction is presented to the issuer:
(A) The purchaser will be entitled to the registration of transfer;
(B) The transfer will be registered by the issuer free from all
liens, security interests, restrictions and claims other than those
specified in the instruction;
(C) The transfer will not violate any restriction on transfer; and
(D) The requested transfer will otherwise be effective and rightful.
(3) A person that transfers an uncertificated security to a
purchaser for value and does not originate an instruction in connection
with the transfer warrants that:
(a) The uncertificated security is valid;
(b) There is no adverse claim to the security;
(c) The transfer does not violate any restriction on transfer; and
(d) The transfer is otherwise effective and rightful.
(4) A person who indorses a security certificate warrants to the
issuer that:
(a) There is no adverse claim to the security; and
(b) The indorsement is effective.
(5) A person who originates an instruction for registration of
transfer of an uncertificated security warrants to the issuer that:
(a) The instruction is effective; and
(b) At the time the instruction is presented to the issuer, the
purchaser will be entitled to the registration of transfer.
(6) A person who presents a certificated security for registration
of transfer or for payment or exchange warrants to the issuer that the
person is entitled to the registration, payment or exchange, but a
purchaser for value and without notice of adverse claims to whom transfer
is registered warrants only that the person has no knowledge of any
unauthorized signature in a necessary indorsement.
(7) If a person acts as agent in delivering a certificated security
to a purchaser, the identity of the principal was known to the person to
whom the certificate was delivered and the certificate delivered by the
agent was received by the agent from the principal or received by the
agent from another person at the direction of the principal, the person
delivering the security certificate warrants only that the delivering
person has authority to act for the principal and does not know of any
adverse claim to the certificated security.
(8) A secured party who redelivers a security certificate received,
or after payment and on order of the debtor delivers the security
certificate to another person, makes only the warranties of an agent
under subsection (7) of this section.
(9) Except as otherwise provided in subsection (7) of this section,
a broker acting for a customer makes to the issuer and a purchaser the
warranties provided in subsections (1) to (6) of this section. A broker
that delivers a security certificate to its customer, or causes its
customer to be registered as the owner of an uncertificated security,
makes to the customer the warranties provided in subsection (1) or (2) of
this section, and has the rights and privileges of a purchaser under this
section. The warranties of and in favor of the broker acting as an agent
are in addition to applicable warranties given by and in favor of the
customer. [1985 c.676 §78.1080; 1995 c.328 §8] (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 appropriate person; and
(b) There is no adverse claim to the security entitlement.
(2) A person who delivers a security certificate to a securities
intermediary for credit to a securities account or originates an
instruction with respect to an uncertificated security directing that the
uncertificated security be credited to a securities account makes the
warranties specified in ORS 78.1080 (1) or (2) to the securities
intermediary.
(3) If a securities intermediary delivers a security certificate to
its entitlement holder or causes its entitlement holder to be registered
as the owner of an uncertificated security, the securities intermediary
makes the warranties specified in ORS 78.1080 (1) or (2) to the
entitlement holder. [1995 c.328 §9] (1) The local law of the
issuer’s jurisdiction, as defined in subsection (4) of this section,
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 issuer owes any duties to an adverse claimant to a
security; and
(e) Whether an adverse claim can be asserted against a person to
whom transfer of a certificated or uncertificated security is registered
or a person who obtains control of an uncertificated security.
(2) The local law of the securities intermediary’s jurisdiction, as
specified in subsection (5) of this section, governs:
(a) Acquisition of a security entitlement from the securities
intermediary;
(b) The rights and duties of the securities intermediary and
entitlement holder arising out of a security entitlement;
(c) Whether the securities intermediary owes any duties to an
adverse claimant to a security entitlement; and
(d) Whether an adverse claim can be asserted against a person who
acquires a security entitlement from the securities intermediary or a
person who purchases a security entitlement or interest therein from an
entitlement holder.
(3) The local law of the jurisdiction in which a security
certificate is located at the time of delivery governs whether an adverse
claim can be asserted against a person to whom the security certificate
is delivered.
(4) “Issuer’s jurisdiction” means the jurisdiction under which the
issuer of the security is organized or, if permitted by the law of that
jurisdiction, the law of another jurisdiction specified by the issuer. An
issuer organized under the law of this state may specify the law of
another jurisdiction as the law governing the matters specified in
subsection (1)(b) to (e) of this section.
(5) The following rules determine a securities intermediary’s
jurisdiction for purposes of this section:
(a) If an agreement between the securities intermediary and its
entitlement holder governing the securities account expressly provides
that a particular jurisdiction is the securities intermediary’s
jurisdiction for purposes of ORS 78.1010 to 78.1160, this chapter or ORS
chapter 79, that jurisdiction is the securities intermediary’s
jurisdiction.
(b) If paragraph (a) of this subsection does not apply and an
agreement between the securities intermediary and its entitlement holder
governing the securities account expressly provides that the agreement is
governed by the law of a particular jurisdiction, that jurisdiction is
the securities intermediary’s jurisdiction.
(c) If neither paragraph (a) nor (b) of this subsection applies and
an agreement between the securities intermediary and its entitlement
holder governing the securities account expressly provides that the
securities account is maintained at an office in a particular
jurisdiction, that jurisdiction is the securities intermediary’s
jurisdiction.
(d) If paragraphs (a) to (c) of this subsection do not apply, the
securities intermediary’s jurisdiction is the jurisdiction in which the
office identified in an account statement as the office serving the
entitlement holder’s account is located.
(e) If paragraphs (a) to (d) of this subsection do not apply, the
securities intermediary’s jurisdiction is the jurisdiction in which the
chief executive office of the securities intermediary is located.
(6) A securities intermediary’s jurisdiction is not determined by
the physical location of certificates representing financial assets, by
the jurisdiction in which is organized the issuer of the financial asset
for which an entitlement holder has a security entitlement or by the
location of facilities for data processing or other record keeping
concerning the account. [1995 c.328 §10; 2001 c.445 §153] A rule adopted by a clearing
corporation governing rights and obligations of the clearing corporation
and its participants in the clearing corporation is effective even if the
rule conflicts with chapter 328, Oregon Laws 1995, and affects another
party who does not consent to the rule. [1995 c.328 §11]Note: Legislative Counsel has substituted “chapter 328, Oregon Laws
1995,” for the words “this 1995 Act” in section 11, chapter 328, Oregon
Laws 1995, compiled as 78.1110. Specific ORS references have not been
substituted pursuant to 173.160. These sections may be determined by
referring to the 1995 Comparative Section Table located in Volume 20 of
ORS. (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) of this section. However,
a certificated security for which the certificate has been surrendered to
the issuer may be reached by a creditor by legal process upon the issuer.
(2) The interest of a debtor in an uncertificated security may be
reached by a creditor only by legal process upon the issuer at the
issuer’s chief executive office in the United States, except as otherwise
provided in subsection (4) of this section.
(3) The interest of a debtor in a security entitlement may be
reached by a creditor only by legal process upon the securities
intermediary with whom the debtor’s securities account is maintained,
except as otherwise provided in subsection (4) of this section.
(4) The interest of a debtor in a certificated security for which
the certificate is in the possession of a secured party, in an
uncertificated security registered in the name of a secured party or in a
security entitlement maintained in the name of a secured party may be
reached by a creditor by legal process upon the secured party.
(5) A creditor whose debtor is the owner of a certificated
security, uncertificated security or security entitlement is entitled to
aid from a court of competent jurisdiction, by injunction or otherwise,
in reaching the certificated security, uncertificated security or
security entitlement or in satisfying the claim by means allowed at law
or in equity in regard to property that cannot readily be reached by
other legal process. [1995 c.328 §12] 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 one year of its making.
[1995 c.328 §13] 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 indorsement is admitted.
(2) If the effectiveness of a signature is put in issue, the burden
of establishing effectiveness is on the party claiming under the
signature, but the signature is presumed to be genuine or authorized.
(3) If signatures on a security certificate are admitted or
established, production of the certificate entitles a holder to recover
on it unless the defendant establishes a defense or a defect going to the
validity of the security.
(4) If it is shown that a defense or defect exists, the plaintiff
has the burden of establishing that the plaintiff or some person under
whom the plaintiff claims is a person against whom the defense or defect
cannot be asserted. [1995 c.328 §14]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 to the financial asset, unless the securities intermediary, or
broker or other agent or bailee:
(1) Took the action after it had been served with an injunction,
restraining order or other legal process enjoining it from doing so,
issued by a court of competent jurisdiction, and had a reasonable
opportunity to act on the injunction, restraining order or other legal
process;
(2) Acted in collusion with the wrongdoer in violating the rights
of the adverse claimant; or
(3) In the case of a security certificate that has been stolen,
acted with notice of the adverse claim. [1995 c.328 §15] 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 asset
from another securities intermediary acquires the security entitlement
for value if the securities intermediary acquiring the security
entitlement establishes a security entitlement to the financial asset in
favor of an entitlement holder. [1995 c.328 §16]ISSUE; ISSUER” (1) With respect to an obligation on or a defense
to a security, an “issuer” includes a person that:
(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, participation or other interest
in its property or in an enterprise, or to evidence its duty to perform
an obligation represented by the certificate;
(b) Creates a share, participation or other interest in its
property or in an enterprise, or undertakes an obligation, that is an
uncertificated security;
(c) Directly or indirectly creates a fractional interest in its
rights or property, if the fractional interest is represented by a
security certificate; or
(d) Becomes responsible for, or stands in place of, another person
described as an issuer in this section.
(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.
(3) With respect to a registration of a transfer, “issuer” means a
person on whose behalf transfer books are maintained. [1961 c.726
§78.2010; 1985 c.676 §78.2010; 1995 c.328 §17](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.
(2) The following rules apply if an issuer asserts that a security
is not valid:
(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.
(b) Paragraph (a) of this subsection 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.
(3) Except as otherwise provided in ORS 78.2050, lack of
genuineness of a certificated security is a complete defense, even
against a purchaser for value and without notice.
(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.
(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.
(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. [1961 c.726
§78.2020; 1985 c.676 §78.2020; 1995 c.328 §18] 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 the security’s issue or defense of
the issuer, if the act or event:
(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
(2) Is not covered by subsection (1) of this section and the
purchaser takes the security more than two years after the date set for
surrender or presentation or the date on which performance became due.
[1961 c.726 §78.2030; 1995 c.328 §19] 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 security is uncertificated and the registered owner has
been notified of the restriction. [1961 c.726 §78.2040; 1985 c.676
§78.2040; 1995 c.328 §20]
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:
(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
(2) An employee of the issuer, or of any of the persons listed in
subsection (1) of this section, entrusted with responsible handling of
the security certificate. [1961 c.726 §78.2050; 1985 c.676 §78.2050; 1995
c.328 §21] (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 completed is enforceable by a purchaser who took it for
value and without notice of the incorrectness.
(2) A complete security certificate that has been improperly
altered, even if fraudulently, remains enforceable, but only according to
its original terms. [1961 c.726 §78.2060; 1985 c.676 §78.2060; 1995 c.328
§22] (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.
(2) This chapter does not affect the liability of the registered
owner of a security for a call, assessment, or the like. [1961 c.726
§78.2070; 1985 c.676 §78.2070; 1995 c.328 §23](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 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
(c) The person has reasonable grounds to believe that the
certificated security is in the form and within the amount the issuer is
authorized to issue.
(2) Unless otherwise agreed, a person signing under subsection (1)
of this section does not assume responsibility for the validity of the
security in other respects. [1961 c.726 §78.2080; 1985 c.676 §78.2080;
1995 c.328 §24] 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. [1995 c.328 §25] (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) of this
section, the provisions of this chapter that validate a security or
compel its issue or reissue do not apply to the extent that validation,
issue or reissue would result in overissue.
(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.
(4) If a security is not reasonably available for purchase, a
person entitled to issue or validation may recover from the issuer the
price the person or the last purchaser for value paid for it with
interest from the date of the person’s demand. [1995 c.328 §26]TRANSFER OF CERTIFICATED AND UNCERTIFICATED SECURITIES (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, having previously acquired possession of the certificate,
acknowledges that it holds for the purchaser; or
(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 (i) registered in the name of the purchaser,
(ii) payable to the order of the purchaser, or (iii) specially indorsed
to the purchaser by an effective indorsement and has not been indorsed to
the securities intermediary or in blank.
(2) Delivery of an uncertificated security to a purchaser occurs
when:
(a) The issuer registers the purchaser as the registered owner,
upon original issue or registration of transfer; or
(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. [1961 c.726 §78.3010; 1985
c.676 §78.3010; 1995 c.328 §27; 2001 c.445 §154] (1) Except as otherwise provided in
subsections (2) and (3) of this section, 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 interest purchased.
(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. [1961 c.726 §78.3020; 1985 c.676 §78.3020;
1995 c.328 §28; 2001 c.445 §155]” (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) In addition to acquiring the rights of a purchaser, a protected
purchaser also acquires its interest in the security free of any adverse
claim. [1961 c.726 §78.3030; 1985 c.676 §78.3030; 1995 c.328 §29](1) An indorsement may be in blank or special.
An indorsement in blank includes an indorsement to bearer. A special
indorsement specifies to whom a security is to be transferred or who has
power to transfer it. A holder may convert a blank indorsement to a
special indorsement.
(2) An indorsement purporting to be only of part of a security
certificate representing units intended by the issuer to be separately
transferable is effective to the extent of the indorsement.
(3) An indorsement, whether special or in blank, does not
constitute a transfer until delivery of the certificate on which it
appears or, if the indorsement is on a separate document, until delivery
of both the document and the certificate.
(4) If a security certificate in registered form has been delivered
to a purchaser without a necessary indorsement, the purchaser may become
a protected purchaser only when the indorsement is supplied. However,
against a transferor, a transfer is complete upon delivery and the
purchaser has a specifically enforceable right to have any necessary
indorsement supplied.
(5) An indorsement 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.
(6) Unless otherwise agreed, a person making an indorsement assumes
only the obligations imposed by ORS 78.1080 and not an obligation that
the security will be honored by the issuer. [1961 c.726 §78.3040; 1985
c.676 §78.3040; 1995 c.328 §30] (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 initiating an instruction
assumes only the obligations imposed by ORS 78.1080 and not an obligation
that the security will be honored by the issuer. [1961 c.726 §78.3050;
1985 c.676 §78.3050; 1995 c.328 §31](1) A person who guarantees a signature of an indorser of a
security certificate warrants that at the time of signing:
(a) The signature was genuine;
(b) The signer was an appropriate person to indorse, or if the
signature was by an agent, the agent had actual authority to act on
behalf of the appropriate person; and
(c) The signer had legal capacity to sign.
(2) A person who guarantees a signature of the originator of an
instruction warrants that at the time of signing:
(a) The signature was genuine;
(b) The signer was an appropriate person to originate the
instruction, or if the signature was by an agent, the agent had actual
authority to act on behalf of the appropriate person, if the person
specified in the instruction as the registered owner was, in fact, the
registered owner, as to which fact the signature guarantor does not make
a warranty; and
(c) The signer had legal capacity to sign.
(3) A person who specially guarantees the signature of an
originator of an instruction makes the warranties of a signature
guarantor under subsection (2) of this section and also warrants that at
the time the instruction is presented to the issuer:
(a) The person specified in the instruction as the registered owner
of the uncertificated security will be the registered owner; and
(b) The transfer of the uncertificated security requested in the
instruction will be registered by the issuer free from all liens,
security interests, restrictions and claims other than those specified in
the instruction.
(4) A guarantor under subsections (1) and (2) of this section or a
special guarantor under subsection (3) of this section does not otherwise
warrant the rightfulness of the transfer.
(5) A person who guarantees an indorsement of a security
certificate makes the warranties of a signature guarantor under
subsection (1) of this section and also warrants the rightfulness of the
transfer in all respects.
(6) A person who guarantees an instruction requesting the transfer
of an uncertificated security makes the warranties of a special signature
guarantor under subsection (3) of this section and also warrants the
rightfulness of the transfer in all respects.
(7) An issuer may not require a special guaranty of signature, a
guaranty of indorsement or a guaranty of instruction as a condition to
registration of transfer.
(8) The warranties under this section are made to a person taking
or dealing with the security in reliance on the guaranty, and the
guarantor is liable to the person for loss resulting from their breach.
An indorser or originator of an instruction whose signature, indorsement
or instruction has been guaranteed is liable to a guarantor for any loss
suffered by the guarantor as a result of breach of the warranties of the
guarantor. [1961 c.726 §78.3060; 1985 c.676 §78.3060; 1995 c.328 §32]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
not comply unless the purchaser pays the necessary expenses. If the
transferor fails within a reasonable time to comply with the demand, the
purchaser may reject or rescind the transfer. [1961 c.726 §78.3070; 1985
c.676 §78.3070; 1995 c.328 §33]REGISTRATION (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) Under the terms of the security the person seeking registration
of transfer is eligible to have the security registered in its name;
(b) The indorsement or instruction is made by the appropriate
person or by an agent who has actual authority to act on behalf of the
appropriate person;
(c) Reasonable assurance as described in ORS 78.4020 is given that
the indorsement or instruction is genuine and authorized;
(d) Any applicable law relating to the collection of taxes has been
complied with;
(e) The transfer does not violate any restriction on transfer
imposed by the issuer in accordance with ORS 78.2040;
(f) A demand that the issuer not register transfer has not become
effective under ORS 78.4030, or the issuer has complied with ORS 78.4030
(2) but no legal process or indemnity bond has been obtained as provided
in ORS 78.4030 (4); and
(g) The transfer is in fact rightful or is to a protected purchaser.
(2) If an issuer is under a duty to register a transfer of a
security, the issuer is liable to a person presenting a certificated
security or an instruction for registration or to the person’s principal
for loss resulting from unreasonable delay in registration or failure or
refusal to register the transfer. [1961 c.726 §78.4010; 1985 c.676
§78.4010; 1995 c.328 §34] (1)
An issuer may require the following assurance that each necessary
indorsement or each instruction is genuine and authorized:
(a) In all cases, a guaranty of the signature of the person making
an indorsement or originating an instruction including, in the case of an
instruction, reasonable assurance of identity;
(b) If the indorsement is made or the instruction is originated by
an agent, appropriate assurance of actual authority to sign;
(c) If the indorsement is made or the instruction is originated by
a fiduciary pursuant to ORS 78.1070 (1)(d) or (1)(e), appropriate
evidence of appointment or incumbency;
(d) If there is more than one fiduciary, reasonable assurance that
all who are required to sign have done so; and
(e) If the indorsement 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.
(2) An issuer may elect to require reasonable assurance beyond that
specified in this section.
(3) In this section:
(a) “Guaranty of the signature” means a guaranty signed by or on
behalf of a person reasonably believed by the issuer to be responsible.
An issuer may adopt standards with respect to responsibility if they are
not manifestly unreasonable.
(b) “Appropriate evidence of appointment or incumbency” means:
(A) In the case of a fiduciary appointed or qualified by a court, a
certificate issued by or under the direction or supervision of the court
or an officer thereof and dated within 60 days before the date of
presentation for transfer; or
(B) In any other case, a copy of a document showing the appointment
or a certificate issued by or on behalf of a person reasonably believed
by an issuer to be responsible or, in the absence of that document or
certificate, other evidence the issuer reasonably considered appropriate.
[1961 c.726 §78.4020; 1985 c.676 §78.4020; 1995 c.328 §35] (1) A person who
is an appropriate person to make an indorsement 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.
(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
(i) the person who initiated the demand at the address provided in the
demand and (ii) the person who presented the security for registration of
transfer or initiated the instruction requesting registration of transfer
a notification stating that:
(a) The certificated security has been presented for registration
of transfer or that instruction for registration of transfer of
uncertificated security has been received;
(b) A demand that the issuer not register transfer has previously
been received; and
(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.
(3) The period described in subsection (2)(c) of this section 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.
(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 indorsement
or instruction if the person who initiated the demand does not, within
the time stated in the issuer’s communication, either:
(a) Obtain an appropriate restraining order, injunction or other
process from a court of competent jurisdiction enjoining the issuer from
registering the transfer; or
(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 the issuer
and any transfer agent, registrar or other agent of the issuer may suffer
by refusing to register the transfer.
(5) This section does not relieve an issuer from liability for
registering transfer pursuant to an indorsement or instruction that was
not effective. [1961 c.726 §78.4030; 1985 c.676 §78.4030; 1995 c.328 §36] (1) Except as otherwise provided in
ORS 78.4060, 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 indorsement or instruction;
(b) After a demand that the issuer not register transfer became
effective under ORS 78.4030 (1) and the issuer did not comply with ORS
78.4030 (2);
(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
(d) By an issuer acting in collusion with the wrongdoer.
(2) An issuer that is liable for wrongful registration of transfer
under subsection (1) of this section 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 ORS 78.2100.
(3) Except as otherwise provided in subsection (1) of this section
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 indorsement or instruction. [1961 c.726
§78.4040; 1985 c.676 §78.4040; 1995 c.328 §37](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 been acquired by a protected purchaser;
(b) Files with the issuer a sufficient indemnity bond; and
(c) Satisfies other reasonable requirements imposed by the issuer.
(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 ORS
78.2100. 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. [1961
c.726 §78.4050; 1985 c.676 §78.4050; 1995 c.328 §38]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 ORS 78.4040 or a claim
to a new security certificate under ORS 78.4050. [1961 c.726 §78.4060;
1985 c.676 §78.4060; 1995 c.328 §39] A
person acting as authenticating trustee, transfer agent, registrar or
other agent for an issuer in the registration of a transfer of the
issuer’s 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. [1985
c.676 §78.4070; 1995 c.328 §40]SECURITY ENTITLEMENTS(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 comprise the financial asset.
(2) Except as otherwise provided in subsections (4) and (5) of this
section, a person acquires a security entitlement if a securities
intermediary:
(a) Indicates by book entry that a financial asset has been
credited to the person’s securities account;
(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
(c) Becomes obligated under other law, regulation or rule to credit
a financial asset to the person’s securities account.
(3) If a condition of subsection (2) of this section has been met,
a person has a security entitlement even though the securities
intermediary does not itself hold the financial asset.
(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 indorsed to the other person, and
has not been indorsed 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.
(5) Issuance of a security is not establishment of a security
entitlement. [1995 c.328 §41] 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 ORS 78.5010 for value and without notice of the adverse claim.
[1995 c.328 §42](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 ORS 78.5110.
(2) An entitlement holder’s property interest with respect to a
particular financial asset under subsection (1) of this section is a pro
rata 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.
(3) An entitlement holder’s property interest with respect to a
particular financial asset under subsection (1) of this section may be
enforced against the securities intermediary only by exercise of the
entitlement holder’s rights under ORS 78.5050, 78.5060, 78.5070 and
78.5080.
(4) An entitlement holder’s property interest with respect to a
particular financial asset under subsection (1) of this section may be
enforced against a purchaser of the financial asset or interest therein
only if:
(a) Insolvency proceedings have been initiated by or against the
securities intermediary;
(b) 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;
(c) The securities intermediary violated its obligations under ORS
78.5040 by transferring the financial asset or interest therein to the
purchaser; and
(d) The purchaser is not protected under subsection (5) of this
section. 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.
(5) An action based on the entitlement holder’s property interest
with respect to a particular financial asset under subsection (1) of this
section, 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 ORS 78.5040.
[1995 c.328 §43](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.
(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 subsection (1)
of this section.
(3) A securities intermediary satisfies the duty in subsection (1)
of this section 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
exercises due care in accordance with reasonable commercial standards to
obtain and maintain the financial asset.
(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. [1995 c.328 §44](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 the securities intermediary; or
(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.
(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. [1995 c.328 §45]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 and the securities intermediary; or
(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. [1995 c.328
§46](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:
(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
exercises due care in accordance with reasonable commercial standards to
comply with the entitlement order.
(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. [1995 c.328
§47]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:
(1) The securities intermediary acts as agreed upon by the
entitlement holder and the securities intermediary; or
(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. [1995 c.328 §48](1) If the
substance of a duty imposed upon a securities intermediary by ORS
78.5040, 78.5050, 78.5060, 78.5070 and 78.5080 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 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 the
entitlement holder, the securities intermediary shall perform its duties
and the entitlement holder shall exercise its rights in a commercially
reasonable manner.
(3) The obligation of a securities intermediary to perform the
duties imposed by ORS 78.5040, 78.5050, 78.5060, 78.5070 and 78.5080 is
subject to:
(a) Rights of the securities intermediary arising out of a security
interest under a security agreement with the entitlement holder or
otherwise; and
(b) Rights of the securities intermediary under 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.
(4) ORS 78.5040, 78.5050, 78.5060, 78.5070 and 78.5080 do not
require a securities intermediary to take any action that is prohibited
by other statute, regulation or rule. [1995 c.328 §49](1) In a case not covered by the priority rules in
ORS chapter 79 or the rules stated in subsection (3) of this section, 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.
(2) If an adverse claim could not have been asserted against an
entitlement holder under ORS 78.5020, the adverse claim cannot be
asserted against a person who purchases a security entitlement, or an
interest therein, from the entitlement holder.
(3) In a case not covered by the priority rules in ORS chapter 79,
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 subsection (4) of this section, purchasers who
have control rank according to priority in time of:
(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 ORS 78.1060 (4)(a);
(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 ORS
78.1060 (4)(b); or
(c) If the purchaser obtained control through another person under
ORS 78.1060 (4)(c), the time on which priority would be based under this
subsection if the other person were the secured party.
(4) A securities intermediary as purchaser has priority over a
conflicting purchaser who has control unless otherwise agreed by the
securities intermediary. [1995 c.328 §50; 2001 c.445 §156]
(1) Except as otherwise provided in subsections (2) and (3) of this
section 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.
(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.
(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. [1995 c.328 §51]
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