CHAPTER 8.1. INVESTMENT SECURITIES - Indiana Statutes

IC 26-1-8.1
     Chapter 8.1. Investment Securities

IC 26-1-8.1-101
Short title
     Sec. 101. IC 26-1-8.1 may be cited as Uniform Commercial Code.Investment Securities.
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-102
Definitions; rules of construction
     Sec. 102. (a) In IC 26-1-8.1:
        (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 endorsement.
        (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:
            (i) a person that is registered as a "clearing agency" under the federal securities laws;
            (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.
        (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.
        (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 IC 26-1-8.1-501(b)(2) or IC 26-1-8.1-501(b)(3), 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 IC 26-1-8.1-103, 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 IC 26-1-8.1.
        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 an uncertificated security, a security certificate, or a security entitlement.
        (10) "Good faith", for purposes of the obligation of good faith in the performance or enforcement of contracts or duties within IC 26-1-8.1, means honesty in fact and the observance of reasonable commercial standards of fair dealing.
        (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 which 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:
            (i) the security certificate specifies a person entitled to the security; and
            (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.
        (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.
        (15) "Security", except as otherwise provided in IC 26-1-8.1-103, 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:
            (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;             (ii) which is one (1) of a class or series or by its terms is divisible into a class or series of shares, participations, interests, or obligations; and
            (iii) which:
                (A) is, or is of a type, dealt in or traded on securities exchanges or securities markets; or
                (B) is a medium for investment and by its terms expressly provides that it is a security governed by IC 26-1-8.1.
        (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 IC 26-1-8.1-501 through IC 26-1-8.1-511.
        (18) "Uncertificated security" means a security that is not represented by a certificate.
    (b) Other definitions applying to IC 26-1-8.1 and the sections in which they appear are:
        "Appropriate person". IC 26-1-8.1-107.
        "Control". IC 26-1-8.1-106.
        "Delivery". IC 26-1-8.1-301.
        "Investment company security". IC 26-1-8.1-103.
        "Issuer". IC 26-1-8.1-201.
        "Overissue". IC 26-1-8.1-210.
        "Protected purchaser". IC 26-1-8.1-303.
        "Securities account". IC 26-1-8.1-501.
    (c) In addition, IC 26-1-1 contains general definitions and principles of construction and interpretation applicable throughout IC 26-1-8.1.
    (d) The characterization of a person, business, or transaction for purposes of IC 26-1-8.1 does not determine the characterization of the person, business, or transaction for purposes of any other law, regulation, or rule.
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-103
Classification as security or financial asset
     Sec. 103. (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 IC 26-1-8.1, 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 IC 26-1-8.1 and not by IC 26-1-3.1, even though it also meets the requirements of that article. However, a negotiable instrument governed by IC 26-1-3.1 is a financial asset if it is held in a securities account.
    (e) An option or a similar obligation issued by a clearing corporation to its participants is not a security, but it is a financial asset.
    (f) A commodity contract (as defined in IC 26-1-9.1-102(a)(15)) is not a security or a financial asset.
    (g) A document of title is not a financial asset unless section 102(a)(9)(iii) of this chapter applies.
As added by P.L.247-1995, SEC.10. Amended by P.L.57-2000, SEC.38; P.L.143-2007, SEC.64.

IC 26-1-8.1-104
Acquisition of a security or financial asset
     Sec. 104. (a) A person acquires a security or an interest therein, under IC 26-1-8.1, if:
        (1) the person is a purchaser to whom a security is delivered under IC 26-1-8.1-301; or
        (2) the person acquires a security entitlement to the security under IC 26-1-8.1-501.
    (b) A person acquires a financial asset, other than a security, or an interest therein, under IC 26-1-8.1, 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 IC 26-1-8.1-501 through IC 26-1-8.1-511, but is a purchaser of any security, security entitlement, or other financial asset held by the securities intermediary only to the extent provided in IC 26-1-8.1-503.
    (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 under subsection (a) or (b).
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-105
Notice of adverse claim
     Sec. 105. (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 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
        (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:
        (1) one (1) year after a date set for presentment or surrender for redemption or exchange; or
        (2) six (6) 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:
        (1) whether in bearer or registered form, has been endorsed "for collection" or "for surrender" or for some other purpose not involving transfer; or
        (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 IC 26-1-9.1 is not notice of an adverse claim to a financial asset.
As added by P.L.247-1995, SEC.10. Amended by P.L.57-2000, SEC.39.

IC 26-1-8.1-106
Control of securities
     Sec. 106. (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 endorsed to the purchaser or in blank by an effective endorsement; or
        (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:         (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:
        (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
        (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 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 a 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.
As added by P.L.247-1995, SEC.10. Amended by P.L.57-2000, SEC.40.

IC 26-1-8.1-107
Effectiveness of endorsement, instruction, or entitlement order
     Sec. 107. (a) "Appropriate person" means:
        (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 subdivision (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
        (5) if the person designated in subdivision (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:
        (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 IC 26-1-8.1-106(c)(2) or IC 26-1-8.1-106(d)(2); or
        (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; or
        (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.
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-108
Warranties upon purchase or transfer of security
     Sec. 108. (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, that:
        (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; and
        (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;
        (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 issuer:
            (i) the purchaser will be entitled to the registration of transfer;
            (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;
            (iii) the transfer will not violate any restriction on transfer; and
            (iv) 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 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 transfer; and
        (4) the transfer is otherwise effective and rightful.
    (d) A person who endorses a security certificate warrants to the issuer that:
        (1) there is no adverse claim to the security; and
        (2) the endorsement 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.
    (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 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.
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-109
Warranties made by and to a securities intermediary
     Sec. 109. (a) A person who originates an entitlement order to a securities intermediary warrants to the securities intermediary that:
        (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; and
        (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 IC 26-1-8.1-108(a) or IC 26-1-8.1-108(b).
    (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 IC 26-1-8.1-108(a) or IC 26-1-8.1-108(b).
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-110
Applicability of local law; determination of jurisdiction
     Sec. 110. (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 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; and
        (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 subsection (e), governs:
        (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; and
        (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 subsection (a)(2) through (a)(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 IC 26-1-8.1-101 through IC 26-1-8.1-116, that jurisdiction is the securities intermediary's jurisdiction.
        (2) If subdivision (1) does not apply, and an agreement between the securities intermediary and its entitlement holder 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 subdivision (1) nor subdivision (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 subdivisions 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.
        (5) If none of the preceding subdivisions apply, 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.
As added by P.L.247-1995, SEC.10. Amended by P.L.57-2000, SEC.41.

IC 26-1-8.1-111
Applicability of rules adopted by clearing corporations
     Sec. 111. 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 IC 26-1-8.1 and affects another party who does not consent to the rule.
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-112
Creditor access to debtor's interest in a security
     Sec. 112. (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 subsection (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 subsection (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 subsection (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.
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-113
Enforceability of contracts for sale or purchase of a security
     Sec. 113. 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 (1) year of its making.
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-114
Special rules in actions against issuers of a certificated security
     Sec. 114. The following rules apply in an action on a certificated security against the issuer:
        (1) Unless specifically denied in the pleadings, each signature on a security certificate or in a necessary endorsement is admitted.
        (2) If the effectiveness of a signature is put in issue, the 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.
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-115
Liability of securities intermediary, broker, or other agent or bailee
     Sec. 115. A securities intermediary that has transferred a financial asset under 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.
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-116
Determination of securities intermediary as purchaser for value
     Sec. 116. 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.
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-201
"Issuer" defined
     Sec. 201. (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 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;
        (2) creates a share, participation, or other interest in its property or in an enterprise, or undertakes an obligation, that is an uncertificated security;
        (3) directly or indirectly creates a fractional interest in its rights or property, if the fractional interest is represented by a security certificate; or
        (4) becomes responsible for, or is in place of, another person described as an issuer in this section.
    (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.
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-202
Terms of security; rules on validity; issuer's defenses; cancellation of contracts
     Sec. 202. (a) 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, a statute, an ordinance, a rule, a regulation, an 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, a statute, an ordinance, a rule, a regulation, an order, or the like, under which the security is issued.
    (b) The following rules apply if an issuer asserts that a security is not valid:
        (1) A security other than a security 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) Subdivision (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) Except as otherwise provided in IC 26-1-8.1-205, lack of genuineness of a certificated security is a complete defense, even against a purchaser for value and without notice.
    (d) 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) 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 under which the security is to be issued or distributed.
    (f) 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.
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-203
Notice of defects
     Sec. 203. 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 its 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 (1) year after that date; or
        (2) is not covered by subdivision (1) and the purchaser takes the security more than two (2) years after the date set for surrender or presentation or the date on which performance became due. As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-204
Restrictions on transfer
     Sec. 204. 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.
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-205
Effect of unauthorized signature or certificate
     Sec. 205. 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, a registrar, a 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 subdivision (1), entrusted with responsible handling of the security certificate.
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-206
Enforceability of incomplete or incorrect certificate
     Sec. 206. (a) If a security certificate contains the signatures necessary to its issue or transfer but is incomplete in any other respect:
        (1) any person may complete it by filling in the blanks as authorized; and
        (2) 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.
    (b) A complete security certificate that has been improperly altered, even if fraudulently, remains enforceable, but only according to its original terms.
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-207
Registered owner to exercise all rights and powers of owner absent appropriate notice of transfer
     Sec. 207. (a) 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.
    (b) IC 26-1-8.1 does not affect the liability of the registered owner of a security for a call, an assessment, or the like.
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-208
Warranties by security certificate authenticating signatory
     Sec. 208. (a) 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:
        (1) the certificate is genuine;
        (2) 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
        (3) 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.
    (b) Unless otherwise agreed, a person signing under subsection (a) does not assume responsibility for the validity of the security in other respects.
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-209
Issuer's lien
     Sec. 209. 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.
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-210
Overissue of security; refund in the event of unavailability of security
     Sec. 210. (a) 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.
    (b) Except as otherwise provided in subsections (c) and (d), the provisions of IC 26-1-8.1 which validate a security or compel its issue or reissue do not apply to the extent that validation, issue, or reissue would result in overissue.
    (c) 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.
    (d) 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.
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-301
Delivery of security
     Sec. 301. (a) Delivery of a certificated security to a purchaser occurs when:
        (1) the purchaser acquires possession of the security certificate;
        (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
        (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 endorsed to the purchaser by an effective endorsement and has not been endorsed to the securities intermediary or in blank.
    (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
        (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.
As added by P.L.247-1995, SEC.10. Amended by P.L.57-2000, SEC.42.

IC 26-1-8.1-302
Rights acquired by purchaser
     Sec. 302. (a) Except as otherwise provided in subsections (b) and (c), a purchaser of a certificated or uncertificated security acquires all rights in the security that the transferor had or had power to transfer.
    (b) A purchaser of a limited interest acquires rights only to the extent of the interest purchased.
    (c) 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.
As added by P.L.247-1995, SEC.10. Amended by P.L.57-2000, SEC.43.

IC 26-1-8.1-303
"Protected purchaser" defined; acquisition of interest free of adverse claims
     Sec. 303. (a) "Protected purchaser" means a purchaser of a certificated or uncertificated security, or of an interest therein, who:         (1) gives value;
        (2) does not have notice of any adverse claim to the security; and
        (3) obtains control of the certificated or uncertificated security.
    (b) In addition to acquiring the rights of a purchaser, a protected purchaser also acquires its interest in the security free of any adverse claim.
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-304
Endorsement of securities
     Sec. 304. (a) An endorsement may be in blank or special. An endorsement in blank includes an endorsement to bearer. A special endorsement specifies to whom a security is to be transferred or who has power to transfer it. A holder may convert a blank endorsement to a special endorsement.
    (b) An endorsement 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 endorsement.
    (c) An endorsement, whether special or in blank, does not constitute a transfer until delivery of the certificate on which it appears or, if the endorsement is on a separate document, until delivery of both the document and the certificate.
    (d) If a security certificate in registered form has been delivered to a purchaser without a necessary endorsement, the purchaser may become a protected purchaser only when the endorsement is supplied. However, against a transferor, a transfer is complete upon delivery and the purchaser has a specifically enforceable right to have any necessary endorsement supplied.
    (e) An endorsement 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.
    (f) Unless otherwise agreed, a person making an endorsement assumes only the obligations provided in IC 26-1-8.1-108 and not an obligation that the security will be honored by the issuer.
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-305
Incomplete instructions; obligations imposed on person initiating instructions
     Sec. 305. (a) 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.
    (b) Unless otherwise agreed, a person initiating an instruction assumes only the obligations imposed by IC 26-1-8.1-108 and not an obligation that the security will be honored by the issuer.
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-306 Warranties by guarantor
     Sec. 306. (a) A person who guarantees a signature of an endorser of a security certificate warrants that at the time of signing:
        (1) the signature was genuine;
        (2) the signer was an appropriate person to endorse, or if the signature is by an agent, the agent had actual authority to act on behalf of the appropriate person; and
        (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
        (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
        (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.
    (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 endorsement 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 endorsement, 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 endorser or originator of an instruction whose signature, endorsement, 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. As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-307
Duties of transferor of security
     Sec. 307. 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.
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-401
Issuer's duty to register transfer
     Sec. 401. (a) 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:
        (1) under the terms of the security the person seeking registration of transfer is eligible to have the security registered in its name;
        (2) the endorsement or instruction is made by the appropriate person or by an agent who has actual authority to act on behalf of the appropriate person;
        (3) reasonable assurance is given that the endorsement or instruction is genuine and authorized (IC 26-1-8.1-402);
        (4) any applicable law relating to the collection of taxes has been complied with;
        (5) the transfer does not violate any restriction on transfer imposed by the issuer in accordance with IC 26-1-8.1-204;
        (6) a demand that the issuer not register transfer has not become effective under IC 26-1-8.1-403, or the issuer has complied with IC 26-1-8.1-403(b) but no legal process or indemnity bond is obtained as provided in IC 26-1-8.1-403(d); and
        (7) the transfer is in fact rightful or is to a protected purchaser.
    (b) 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.
As added by P.L.247-1995, SEC.10.

IC 26-1-8.1-402
Issuer's right to assurances
     Sec. 402. (a) An issuer may require the following assurance that each necessary endorsement or each instruction is genuine and authorized:
        (1) in all cases, a guaranty of the signature of the person making

an endorsement or originating an instruction including, in the case of an instruction, reasonable assurance