400.8-202. Issuer's responsibility and defenses--notice of defect or defense.

MISSOURI STATUTES AND CODES

400.8-202. Issuer's responsibility and defenses--notice of defect or defense.

Issuer's responsibility and defenses--notice of defect or defense.

400.8-202. (a) Even against a purchaser for value and withoutnotice, the terms of a certificated security include terms stated on thecertificate and terms made part of the security by reference on thecertificate to another instrument, indenture or document or to aconstitution, statute, ordinance, rule, regulation, order or the like, tothe extent the terms referred to do not conflict with terms stated on thecertificate. A reference under this subsection does not of itself charge apurchaser for value with notice of a defect going to the validity of thesecurity, even if the certificate expressly states that a person acceptingit admits notice. The terms of an uncertificated security include thosestated in any instrument, indenture or document or in a constitution,statute, ordinance, rule, regulation, order or the like, pursuant to whichthe security is issued.

(b) The following rules apply if an issuer asserts that a security isnot valid:

(1) A security other than one issued by a government or governmentalsubdivision, agency or instrumentality, even though issued with a defectgoing to its validity, is valid in the hands of a purchaser for value andwithout notice of the particular defect unless the defect involves aviolation of a constitutional provision. In that case, the security isvalid in the hands of a purchaser for value and without notice of thedefect, other than one who takes by original issue;

(2) Paragraph (1) applies to an issuer that is a government orgovernmental subdivision, agency or instrumentality only if there has beensubstantial compliance with the legal requirements governing the issue orthe issuer has received a substantial consideration for the issue as awhole or for the particular security and a stated purpose of the issue isone for which the issuer has power to borrow money or issue the security.

(c) Except as otherwise provided in section 400.8-205, lack ofgenuineness of a certificated security is a complete defense, even againsta purchaser for value and without notice.

(d) All other defenses of the issuer of a security, includingnondelivery and conditional delivery of a certificated security, areineffective against a purchaser for value who has taken the certificatedsecurity without notice of the particular defense.

(e) This section does not affect the right of a party to cancel acontract for a security "when, as and if issued" or "when distributed" inthe event of a material change in the character of the security that is thesubject of the contract or in the plan or arrangement pursuant to which thesecurity is to be issued or distributed.

(f) If a security is held by a securities intermediary against whoman entitlement holder has a security entitlement with respect to thesecurity, the issuer may not assert any defense that the issuer could notassert if the entitlement holder held the security directly.