2007 California Commercial Code Chapter 1. Short Title And General Matters

CA Codes (com:8101-8116)

8101.  This division may be cited as Uniform Commercial
Code--Investment Securities.



8102.  (a) In this division:
   (1) "Adverse claim" means a claim that a claimant has a property
interest in a financial asset and that it is a violation of the
rights of the claimant for another person to hold, transfer, or deal
with the financial asset.
   (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.
   (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.
   (4) "Certificated security" means a security that is represented
by a certificate.
   (5) "Clearing corporation" means any of the following:
   (A) A person that is registered as a "clearing agency" under the
federal securities laws.
   (B) A federal reserve bank.
   (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.
   (6) "Communicate" means to either:
   (A) Send a signed writing.
   (B) Transmit information by any mechanism agreed upon by the
persons transmitting and receiving the information.
   (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 paragraph (2) or (3) of
subdivision (b) of Section 8501, that person is the entitlement
holder.
   (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.
   (9) "Financial asset," except as otherwise provided in Section
8103, means any of the following:
   (A) A security.
   (B) 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.
   (C) 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 division. 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.
   (10) (Reserved)
   (11) "Endorsement" 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.
   (12) "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.
   (13) "Registered form," as applied to a certificated security,
means a form in which both of the following apply:
   (A) The security certificate specifies a person entitled to the
security.
   (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.
   (14) "Securities intermediary" means either:
   (A) A clearing corporation.
   (B) 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.
   (15) "Security," except as otherwise provided in Section 8103,
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
that is all of the following:
   (A) It is represented by a security certificate in bearer or
registered form, or the transfer of it may be registered upon books
maintained for that purpose by or on behalf of the issuer.
   (B) It is one of a class or series or by its terms is divisible
into a class or series of shares, participations, interests, or
obligations.
   (C) It is either of the following:
   (i) It is, or is of a type, dealt in or traded on securities
exchanges or securities markets.
   (ii) It is a medium for investment and by its terms expressly
provides that it is a security governed by this division.
   (16) "Security certificate" means a certificate representing a
security.
   (17) "Security entitlement" means the rights and property interest
of an entitlement holder with respect to a financial asset specified
in Chapter 5 (commencing with Section 8501).
   (18) "Uncertificated security" means a security that is not
represented by a certificate.
   (b) Other definitions applying to this division and the sections
in which they appear are:
   Appropriate person. Section 8107.
   Control. Section 8106.
   Delivery. Section 8301.
   Investment company security. Section 8103.
   Issuer. Section 8201.
   Overissue. Section 8210.
   Protected purchaser. Section 8303.
   Securities account. Section 8501.
   (c) In addition, Division 1 (commencing with Section 1101)
contains general definitions and principles of construction and
interpretation applicable throughout this division.
   (d) The characterization of a person, business, or transaction for
purposes of this division does not determine the characterization of
the person, business, or transaction for purposes of any other law,
regulation, or rule.



8103.  (a) A share or similar equity interest issued by a
corporation, business trust, joint stock company, or similar entity
is a security.
   (b) 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 or endowment
policy or annuity contract issued by an insurance company.
   (c) 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 division, 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.
   (d) A writing that is a security certificate is governed by this
division and not by Division 3 (commencing with Section 3101), even
though it also meets the requirements of that division. However, a
negotiable instrument governed by Division 3 (commencing with Section
3101) is a financial asset if it is held in a securities account.
   (e) An option or similar obligation issued by a clearing
corporation to its participants is not a security, but is a financial
asset.
   (f) A commodity contract, as defined in paragraph (15) of
subdivision (a) of Section 9102, is not a security or a financial
asset.
   (g) A document of title is not a financial asset unless
subparagraph (C) of paragraph (9) of subdivision (a) of Section 8102
applies.


8104.  (a) A person acquires a security or an interest therein,
under this division, if either of the following applies:
   (1) The person is a purchaser to whom a security is delivered
pursuant to Section 8301; or
   (2) The person acquires a security entitlement to the security
pursuant to Section 8501.
   (b) A person acquires a financial asset, other than a security, or
an interest therein, under this division, if the person acquires a
security entitlement to the financial asset.
   (c) A person who acquires a security entitlement to a security or
other financial asset has the rights specified in Chapter 5
(commencing with Section 8501), but is a purchaser of any security,
security entitlement, or other financial asset held by the securities
intermediary only to the extent provided in Section 8503.
   (d) 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 subdivision (a) or (b).



8105.  (a) A person has notice of an adverse claim if any of the
following applies:
   (1) The person knows of the adverse claim.
   (2) 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.
   (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.
   (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
either of the following:
   (1) One year after a date set for presentment or surrender for
redemption or exchange.
   (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.
   (d) A purchaser of a certificated security has notice of an
adverse claim if the security certificate is any of the following:
   (1) Whether in bearer or registered form, has been endorsed "for
collection" or "for surrender" or for some other purpose not
involving transfer.
   (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.
   (e) Filing of a financing statement under Division 9 (commencing
with Section 9101) is not notice of an adverse claim to a financial
asset.


8106.  (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 either of the following applies:
   (1) The certificate is endorsed to the purchaser or in blank by an
effective endorsement.
   (2) The certificate is registered in the name of the purchaser,
upon original issue or registration of transfer by the issuer.
   (c) A purchaser has "control" of an uncertificated security if
either of the following applies:
   (1) The uncertificated security is delivered to the purchaser;  or

   (2) The issuer has agreed that it will comply with instructions
originated by the purchaser without further consent by the registered
owner.
   (d) A purchaser has "control" of a security entitlement if any of
the following  apply:
   (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.
   (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.
   (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 subdivision
(c) or (d) has control, even if the registered owner in the case of
subdivision (c) or the entitlement holder in the case of subdivision
(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 paragraph (2) of subdivision (c)
or paragraph (2) of subdivision (d) 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.



8107.  (a) "Appropriate person" means any of the following:
   (1) With respect to an endorsement, the person specified by a
security certificate or by an effective special endorsement to be
entitled to the security.
   (2) With respect to an instruction, the registered owner of an
uncertificated security.
   (3) With respect to an entitlement order, the entitlement holder.

   (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 the beneficiary of a security, as defined
in subdivision (d) of Section 5501 of the Probate Code, registered in
beneficiary form, as defined in subdivision (a) of Section 5501 of
the Probate Code, if the beneficiary has survived the death of the
registered owner or all registered owners.
   (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.
   (b) An endorsement, instruction, or entitlement order is effective
if it is made by any of the following:
   (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 paragraph (2) of
subdivision (c) or paragraph (2) of subdivision (d) of Section 8106.

   (3) The appropriate person has ratified it or is otherwise
precluded from asserting its ineffectiveness.
   (c) An endorsement, 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.
   (2) The representative's action in making the endorsement,
instruction, or entitlement order or using the proceeds of the
transaction is otherwise a breach of duty.
   (d) If a security is registered in the name of or specially
endorsed 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 endorsement, 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 endorsement, instruction, or entitlement
order is determined as of the date the endorsement, instruction, or
entitlement order is made, and an endorsement, instruction, or
entitlement order does not become ineffective by reason of any later
change of circumstances.



8108.  (a) A person who transfers a certificated security to a
purchaser for value warrants to the purchaser, and an endorser, if
the transfer is by endorsement, warrants to any subsequent purchaser,
all of the following:
   (1) The certificate is genuine and has not been materially
altered.
   (2) The transferor or endorser does not know of any fact that
might impair the validity of the security.
   (3) There is no adverse claim to the security.
   (4) The transfer does not violate any restriction on transfer.
   (5) If the transfer is by endorsement, the endorsement is made by
an appropriate person, or if the endorsement is by an agent, the
agent has actual authority to act on behalf of the appropriate
person.
   (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 all of the following:
   (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.
   (2) The security is valid.
   (3) There is no adverse claim to the security.
   (4) At the time the instruction is presented to the issuer, all of
the following will be applicable:
   (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.
   (D) The requested transfer will otherwise be effective and
rightful.
   (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 all of the following:
   (1) The uncertificated security is valid.
   (2) There is no adverse claim to the security.
   (3) The transfer does not violate any restriction on transfer.
   (4) The transfer is otherwise effective and rightful.
   (d) A person who endorses a security certificate warrants all of
the following to the issuer:
   (1) There is no adverse claim to the security.
   (2) The endorsement is effective.
   (e) A person who originates an instruction for registration of
transfer of an uncertificated security warrants all of the following
to the issuer:
   (1) The instruction is effective.
   (2) At the time the instruction is presented to the issuer the
purchaser will be entitled to the registration of transfer.
   (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 endorsement.
   (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 subdivision (g).
   (i) Except as otherwise provided in subdivision (g), a broker
acting for a customer makes to the issuer and a purchaser the
warranties provided in subdivisions (a) to (f), inclusive.  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 subdivision (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.


8109.  (a) A person who originates an entitlement order to a
securities intermediary warrants all of the following to the
securities intermediary:
   (1) 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.
   (2) There is no adverse claim to the security entitlement.
   (b) 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 to the securities intermediary the warranties specified in
subdivision (a) or (b) of Section 8108.
   (c) 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 to the entitlement holder the warranties
specified in subdivision (a) or (b) of Section 8108.



8110.  (a) The local law of the issuer's jurisdiction, as specified
in subdivision (d), governs the following:
   (1) The validity of a security.
   (2) The rights and duties of the issuer with respect to
registration of transfer.
   (3) The effectiveness of registration of transfer by the issuer.
   (4) Whether the issuer owes any duties to an adverse claimant to a
security.
   (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.
   (b) The local law of the securities intermediary's jurisdiction,
as specified in subdivision (e), governs the following:
   (1) Acquisition of a security entitlement from the securities
intermediary.
   (2) The rights and duties of the securities intermediary and
entitlement holder arising out of a security entitlement.
   (3) Whether the securities intermediary owes any duties to an
adverse claimant to a security entitlement.
   (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.
   (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 paragraphs (2) to (5), inclusive, of subdivision (a).
   (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 security intermediary'
s jurisdiction for purposes of this code, that jurisdiction is the
securities intermediary's jurisdiction.
   (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.
   (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.
   (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.
   (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.
   (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.



8111.  A rule adopted by a clearing corporation governing rights and
obligations among the clearing corporation and its participants in
the clearing corporation is effective even if the rule conflicts with
this division and affects another party who does not consent to the
rule.


8112.  (a) 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 subdivision (d).  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.
   (b) The interest of a debtor in an uncertificated security may be
reached by a creditor only by legal process upon the issuer at its
chief executive office in the United States, except as otherwise
provided in subdivision (d).
   (c) 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 subdivision (d).
   (d) The interest of a debtor in a certificated security for which
the certificate is in the possession of a secured party, or in an
uncertificated security registered in the name of a secured party, or
a security entitlement maintained in the name of a secured party,
may be reached by a creditor by legal process upon the secured party.

   (e) 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.



8113.  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.



8114.  The following rules apply in an action on a certificated
security against the issuer:
   (a) Unless specifically denied in the pleadings, each signature on
a security certificate or in a necessary endorsement is admitted.
   (b) 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.
   (c) 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.
   (d) 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.



8115.  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 did one or more of
the following:
   (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.
   (3) In the case of a security certificate that has been stolen,
acted with notice of the adverse claim.



8116.  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.