2012 Pennsylvania Consolidated Statutes
Title 13 - COMMERCIAL CODE
Chapter 82 - Issue and Issuer
Section 8202 - Issuer's responsibility and defenses; notice of defect or defense

     § 8202.  Issuer's responsibility and defenses; notice of defect
                or defense.
        (a)  Terms included in certificated security.--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 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.
        (b)  Defect affecting validity of security.--The following
     rules apply if an issuer asserts that a security is not valid:
            (1)  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.
            (2)  Paragraph (1) 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.
        (c)  Lack of genuineness as complete defense.--Except as
     otherwise provided in section 8205 (relating to effect of
     unauthorized signature on security certificate), lack of
     genuineness of a certificated security is a complete defense,
     even against a purchaser for value and without notice.
        (d)  Defenses ineffective against purchaser for value without
     notice.--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.
        (e)  Right to cancel certain contracts unaffected.--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.
        (f)  When security held by securities intermediary.--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.