(810 ILCS 5/8-102)
(from Ch. 26, par. 8-102)
Sec. 8-102.
Definitions.
(a) In this Article:
(1) "Adverse claim" means a claim that a claimant has
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| 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. |
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(2) "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. |
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(3) "Broker" means a person defined as a broker or |
| dealer under the federal securities laws, but without excluding a bank acting in that capacity. |
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(4) "Certificated security" means a security that is |
| represented by a certificate. |
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(5) "Clearing corporation" means:
(i) a person that is registered as a "clearing |
| agency" under the federal securities laws; |
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(ii) a federal reserve bank; or
(iii) 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. |
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(6) "Communicate" means to:
(i) send a signed writing; or
(ii) transmit information by any mechanism agreed |
| upon by the persons transmitting and receiving the information. |
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(7) "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 Section 8-501(b)(2) or (3), that person is the entitlement holder. |
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(8) "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. |
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(9) "Financial asset," except as otherwise provided |
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(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, which is, or is of a type, dealt in or traded on financial markets, or which is recognized in any area in which it is issued or dealt in as a medium for investment; or |
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(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 Article. As context requires, the term 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. |
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(10) "Good faith," for purposes of the obligation of |
| good faith in the performance or enforcement of contracts or duties within this Article, means honesty in fact and the observance of reasonable commercial standards of fair dealing. |
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(11) "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 a power to assign, transfer, or redeem it. |
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(12) "Instruction" means a notification communicated |
| to the issuer of an uncertificated security which directs that the transfer of the security be registered or that the security be redeemed. |
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(13) "Registered form," as applied to a certificated |
| security, means a form in which: |
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(i) the security certificate specifies a person |
| entitled to the security; and |
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(ii) 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. |
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(14) "Securities intermediary" means:
(i) a clearing corporation; or
(ii) a person, including a bank or broker, that |
| in the ordinary course of its business maintains securities accounts for others and is acting in that capacity. |
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(15) "Security," except as otherwise provided in |
| Section 8-103, 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: |
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(i) which 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; |
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(ii) which 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 |
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(iii) which:
(A) is, or is of a type, dealt in or traded |
| on securities exchanges or securities markets; or |
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(B) is a medium for investment and by its |
| terms expressly provides that it is a security governed by this Article. |
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(16) "Security certificate" means a certificate |
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(17) "Security entitlement" means the rights and |
| property interest of an entitlement holder with respect to a financial asset specified in Part 5. |
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(18) "Uncertificated security" means a security that |
| is not represented by a certificate. |
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(b) Other definitions applying to this Article and the sections in which they appear are:
Appropriate person Section 8-107
Control Section 8-106
Delivery Section 8-301
Investment company security Section 8-103
Issuer Section 8-201
Overissue Section 8-210
Protected purchaser Section 8-303
Securities account Section 8-501
(c) In addition, Article 1 contains general definitions and principles of construction and interpretation applicable throughout this Article.
(d) The characterization of a person, business, or transaction for purposes of this Article does not determine the characterization of the person, business, or transaction for purposes of any other law, regulation, or rule.
(Source: P.A. 89-364, eff. 1-1-96.) |
(810 ILCS 5/8-105)
(from Ch. 26, par. 8-105)
Sec. 8-105.
Notice of adverse claim.
(a) A person has notice of an adverse claim if:
(1) the person knows of the adverse claim;
(2) the person is aware of facts sufficient to
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| 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 |
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(3) 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. |
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(b) 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.
(c) 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:
(1) one year after a date set for presentment or |
| surrender for redemption or exchange; or |
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(2) six months after a date set for payment of money |
| against presentation or surrender of the certificate, if money was available for payment on that date. |
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(d) A purchaser of a certificated security has notice of an adverse claim if the security certificate:
(1) whether in bearer or registered form, has been |
| indorsed "for collection" or "for surrender" or for some other purpose not involving transfer; or |
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(2) is in bearer form and has on it an unambiguous |
| statement that it is the property of a person other than the transferor, but the mere writing of a name on the certificate is not such a statement. |
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(e) Filing of a financing statement under Article 9 is not notice of an adverse claim to a financial asset.
(Source: P.A. 89-364, eff. 1-1-96.) |
(810 ILCS 5/8-106)
(from Ch. 26, par. 8-106)
Sec. 8-106.
Control.
(a) A purchaser has "control" of a certificated security in bearer form if the certificated security is delivered to the purchaser.
(b) A purchaser has "control" of a certificated security in registered form if the certificated security is delivered to the purchaser, and:
(1) the certificate is indorsed to the purchaser or
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| in blank by an effective indorsement; or |
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(2) the certificate is registered in the name of the |
| purchaser, upon original issue or registration of transfer by the issuer. |
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(c) A purchaser has "control" of an uncertificated security if:
(1) the uncertificated security is delivered to the |
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(2) the issuer has agreed that it will comply with |
| instructions originated by the purchaser without further consent by the registered owner. |
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(d) A purchaser has "control" of a security entitlement if:
(1) the purchaser becomes the entitlement holder;
(2) the securities intermediary has agreed that it |
| will comply with entitlement orders originated by the purchaser without further consent by the entitlement holder; or |
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(3) another person has control of the security |
| entitlement on behalf of the purchaser or, having previously acquired control of the security entitlement, acknowledges that it has control on behalf of the purchaser. |
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(e) 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.
(f) A purchaser who has satisfied the requirements of subsection (c) or (d) has control even if the registered owner in the case of subsection (c) or the entitlement holder in the case of subsection (d) 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.
(g) An issuer or a securities intermediary may not enter into an agreement of the kind described in subsection (c)(2) or (d)(2) 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.
(Source: P.A. 95-331, eff. 8-21-07.) |
(810 ILCS 5/8-107)
(from Ch. 26, par. 8-107)
Sec. 8-107.
Whether indorsement, instruction, or entitlement order is effective.
(a) "Appropriate person" means:
(1) with respect to an indorsement, the person
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| specified by a security certificate or by an effective special indorsement to be entitled to the security; |
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(2) with respect to an instruction, the registered |
| owner of an uncertificated security; |
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(3) with respect to an entitlement order, the |
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(4) if the person designated in paragraph (1), (2), |
| or (3) 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 |
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(5) if the person designated in paragraph (1), (2), |
| or (3) 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. |
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(b) An indorsement, instruction, or entitlement order is effective if:
(1) it is made by the appropriate person;
(2) 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 Section 8-106(c)(2) or (d)(2); or |
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(3) the appropriate person has ratified it or is |
| otherwise precluded from asserting its ineffectiveness. |
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(c) An indorsement, instruction, or entitlement order made by a representative is effective even if:
(1) 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 |
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(2) 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. |
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(d) 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.
(e) 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.
(Source: P.A. 89-364, eff. 1-1-96.) |
(810 ILCS 5/8-108)
(from Ch. 26, par. 8-108)
Sec. 8-108.
Warranties in direct holding.
(a) A person who 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:
(1) the certificate is genuine and has not been
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(2) the transferor or indorser does not know of any |
| fact that might impair the validity of the security; |
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(3) there is no adverse claim to the security;
(4) the transfer does not violate any restriction on |
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(5) 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 |
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(6) the transfer is otherwise effective and rightful.
(b) A person who originates an instruction for registration of transfer of an uncertificated security to a purchaser for value warrants to the purchaser that:
(1) 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; |
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(2) the security is valid;
(3) there is no adverse claim to the security; and
(4) at the time the instruction is presented to the |
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(i) the purchaser will be entitled to the |
| registration of transfer; |
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(ii) the transfer will be registered by the |
| issuer free from all liens, security interests, restrictions, and claims other than those specified in the instruction; |
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(iii) the transfer will not violate any |
| restriction on transfer; and |
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(iv) the requested transfer will otherwise be |
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(c) A person who transfers an uncertificated security to a purchaser for value and does not originate an instruction in connection with the transfer warrants that:
(1) the uncertificated security is valid;
(2) there is no adverse claim to the security;
(3) the transfer does not violate any restriction on |
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(4) the transfer is otherwise effective and rightful.
(d) A person who indorses a security certificate warrants to the issuer that:
(1) there is no adverse claim to the security; and
(2) the indorsement is effective.
(e) A person who originates an instruction for registration of transfer of an uncertificated security warrants to the issuer that:
(1) the instruction is effective; and
(2) at the time the instruction is presented to the |
| issuer the purchaser will be entitled to the registration of transfer. |
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(f) 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.
(g) If a person acts as agent of another 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.
(h) 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 (g).
(i) Except as otherwise provided in subsection (g), a broker acting for a customer makes to the issuer and a purchaser the warranties provided in subsections (a) through (f). 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 (a) or (b), 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.
(Source: P.A. 89-364, eff. 1-1-96.) |
(810 ILCS 5/8-110)
Sec. 8-110.
Applicability; choice of law.
(a) The local law of the issuer's jurisdiction, as specified in subsection (d), governs:
(1) the validity of a security;
(2) the rights and duties of the issuer with respect
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| to registration of transfer; |
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(3) the effectiveness of registration of transfer by |
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(4) whether the issuer owes any duties to an adverse |
| claimant to a security; and |
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(5) 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. |
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(b) The local law of the securities intermediary's jurisdiction, as specified in subsection (e), governs:
(1) acquisition of a security entitlement from the |
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(2) the rights and duties of the securities |
| intermediary and entitlement holder arising out of a security entitlement; |
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(3) whether the securities intermediary owes any |
| duties to an adverse claimant to a security entitlement; and |
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(4) 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. |
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(c) 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.
(d) "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 (a)(2) through (5).
(e) The following rules determine a "securities intermediary's jurisdiction" for purposes of this Section:
(1) 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 this Part, this Article, or this Act, that jurisdiction is the securities intermediary's jurisdiction. |
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(2) If paragraph (1) 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. |
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(3) If neither paragraph (1) nor paragraph (2) |
| 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. |
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(4) If none of the preceding paragraphs applies, 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. |
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(5) If none of the preceding paragraphs applies, the |
| securities intermediary's jurisdiction is the jurisdiction in which the chief executive office of the securities intermediary is located. |
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(f) A securities intermediary's jurisdiction is not determined by the physical location of certificates representing financial assets, or by the jurisdiction in which is organized the issuer of the financial asset with respect to which an entitlement holder has a security entitlement, or by the location of facilities for data processing or other record keeping concerning the account.
(Source: P.A. 91-893, eff. 7-1-01.) |
(810 ILCS 5/8-201)
(from Ch. 26, par. 8-201)
Sec. 8-201.
Issuer.
(a) With respect to an obligation on or a defense to a security, an "issuer" includes a person that:
(1) places or authorizes the placing of its name on a
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| 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; |
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(2) creates a share, participation, or other interest |
| in its property or in an enterprise, or undertakes an obligation, that is an uncertificated security; |
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(3) directly or indirectly creates a fractional |
| interest in its rights or property, if the fractional interest is represented by a security certificate; or |
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(4) becomes responsible for, or in place of, another |
| person described as an issuer in this Section. |
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(b) 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.
(c) With respect to a registration of a transfer, issuer means a person on whose behalf transfer books are maintained.
(Source: P.A. 89-364, eff. 1-1-96.) |
(810 ILCS 5/8-301)
(from Ch. 26, par. 8-301)
Sec. 8-301.
Delivery.
(a) Delivery of a certificated security to a purchaser occurs when:
(1) the purchaser acquires possession of the security
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(2) 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 |
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(3) 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. |
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(b) Delivery of an uncertificated security to a purchaser occurs when:
(1) the issuer registers the purchaser as the |
| registered owner, upon original issue or registration of transfer; or |
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(2) 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. |
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(Source: P.A. 91-893, eff. 7-1-01.) |
(810 ILCS 5/8-306)
(from Ch. 26, par. 8-306)
Sec. 8-306.
Effect of guaranteeing signature, indorsement, or instruction.
(a) A person who guarantees a signature of an indorser of a security certificate warrants that at the time of signing:
(1) the signature was genuine;
(2) the signer was an appropriate person to indorse,
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| or if the signature is by an agent, the agent had actual authority to act on behalf of the appropriate person; and |
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(3) the signer had legal capacity to sign.
(b) A person who guarantees a signature of the originator of an instruction warrants that at the time of signing:
(1) the signature was genuine;
(2) the signer was an appropriate person to originate |
| the instruction, or if the signature is 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 |
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(3) the signer had legal capacity to sign.
(c) A person who specially guarantees the signature of an originator of an instruction makes the warranties of a signature guarantor under subsection (b) and also warrants that at the time the instruction is presented to the issuer:
(1) the person specified in the instruction as the |
| registered owner of the uncertificated security will be the registered owner; and |
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(2) 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. |
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(d) A guarantor under subsections (a) and (b) or a special guarantor under subsection (c) does not otherwise warrant the rightfulness of the transfer.
(e) A person who guarantees an indorsement of a security certificate makes the warranties of a signature guarantor under subsection (a) and also warrants the rightfulness of the transfer in all respects.
(f) A person who guarantees an instruction requesting the transfer of an uncertificated security makes the warranties of a special signature guarantor under subsection (c) and also warrants the rightfulness of the transfer in all respects.
(g) 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.
(h) 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.
(Source: P.A. 89-364, eff. 1-1-96.) |
(810 ILCS 5/8-402)
(from Ch. 26, par. 8-402)
Sec. 8-402.
Assurance that indorsement or instruction is effective.
(a) An issuer may require the following assurance that each necessary indorsement or each instruction is genuine and authorized:
(1) in all cases, a guaranty of the signature of the
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| person making an indorsement or originating an instruction including, in the case of an instruction, reasonable assurance of identity; |
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(2) if the indorsement is made or the instruction is |
| originated by an agent, appropriate assurance of actual authority to sign; |
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(3) if the indorsement is made or the instruction is |
| originated by a fiduciary pursuant to Section 8-107(a)(4) or (a)(5), appropriate evidence of appointment or incumbency; |
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(4) if there is more than one fiduciary, reasonable |
| assurance that all who are required to sign have done so; and |
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(5) 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. |
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(b) An issuer may elect to require reasonable assurance beyond that specified in this Section.
(c) In this Section:
(1) "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. |
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(2) "Appropriate evidence of appointment or |
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(i) 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 |
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(ii) 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. |
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(Source: P.A. 89-364, eff. 1-1-96.) |