8501-8511

COMMERCIAL CODE
SECTION 8501-8511




8501.  (a) "Securities account" means an account to which a
financial asset is or may be credited in accordance with an agreement
under which the person maintaining the account undertakes to treat
the person for whom the account is maintained as entitled to exercise
the rights that comprise the financial asset.
   (b) Except as otherwise provided in subdivisions (d) and (e), a
person acquires a security entitlement if a securities intermediary
does any of the following:
   (1) Indicates by book entry that a financial asset has been
credited to the person's securities account.
   (2) Receives a financial asset from the person or acquires a
financial asset for the person and, in either case, accepts it for
credit to the person's securities account.
   (3) Becomes obligated under other law, regulation, or rule to
credit a financial asset to the person's securities account.
   (c) If a condition of subdivision (b) has been met, a person has a
security entitlement even though the securities intermediary does
not itself hold the financial asset.
   (d) If a securities intermediary holds a financial asset for
another person, and the financial asset is registered in the name of,
payable to the order of, or specially endorsed to the other person,
and has not been endorsed to the securities intermediary or in blank,
the other person is treated as holding the financial asset directly
rather than as having a security entitlement with respect to the
financial asset.
   (e) Issuance of a security is not establishment of a security
entitlement.



8502.  An action based on an adverse claim to a financial asset,
whether framed in conversion, replevin, constructive trust, equitable
lien, or other theory, may not be asserted against a person who
acquires a security entitlement under Section 8501 for value and
without notice of the adverse claim.



8503.  (a) To the extent necessary for a securities intermediary to
satisfy all security entitlements with respect to a particular
financial asset, all interests in that financial asset held by the
securities intermediary are held by the securities intermediary for
the entitlement holders, are not property of the securities
intermediary, and are not subject to claims of creditors of the
securities intermediary, except as otherwise provided in Section
8511.
   (b) An entitlement holder's property interest with respect to a
particular financial asset under subdivision (a) is a pro rata
property interest in all interests in that financial asset held by
the securities intermediary, without regard to the time the
entitlement holder acquired the security entitlement or the time the
securities intermediary acquired the interest in that financial
asset.
   (c) An entitlement holder's property interest with respect to a
particular financial asset under subdivision (a) may be enforced
against the securities intermediary only by exercise of the
entitlement holder's rights under Sections 8505 to 8508, inclusive.
   (d) An entitlement holder's property interest with respect to a
particular financial asset under subdivision (a) may be enforced
against a purchaser of the financial asset or interest therein only
if all of the following conditions are met:
   (1) Insolvency proceedings have been initiated by or against the
securities intermediary.
   (2) The securities intermediary does not have sufficient interests
in the financial asset to satisfy the security entitlements of all
of its entitlement holders to that financial asset.
   (3) The securities intermediary violated its obligations under
Section 8504 by transferring the financial asset or interest therein
to the purchaser.
   (4) The purchaser is not protected under subdivision (e). The
trustee or other liquidator, acting on behalf of all entitlement
holders having security entitlements with respect to a particular
financial asset, may recover the financial asset, or interest
therein, from the purchaser. If the trustee or other liquidator
elects not to pursue that right, an entitlement holder whose security
entitlement remains unsatisfied has the right to recover its
interest in the financial asset from the purchaser.
   (e) An action based on the entitlement holder's property interest
with respect to a particular financial asset under subdivision (a),
whether framed in conversion, replevin, constructive trust, equitable
lien, or other theory, may not be asserted against any purchaser of
a financial asset or interest therein who gives value, obtains
control, and does not act in collusion with the securities
intermediary in violating the securities intermediary's obligations
under Section 8504.


8504.  (a) A securities intermediary shall promptly obtain and
thereafter maintain a financial asset in a quantity corresponding to
the aggregate of all security entitlements it has established in
favor of its entitlement holders with respect to that financial
asset. The securities intermediary may maintain those financial
assets directly or through one or more other securities
intermediaries.
   (b) Except to the extent otherwise agreed by its entitlement
holder, a securities intermediary may not grant any security
interests in a financial asset it is obligated to maintain pursuant
to subdivision (a).
   (c) A securities intermediary satisfies the duty in subdivision
(a) if it does either of the following:
   (1) The securities intermediary acts with respect to the duty as
agreed upon by the entitlement holder and the securities
intermediary.
   (2) In the absence of agreement, the securities intermediary
exercises due care in accordance with reasonable commercial standards
to obtain and maintain the financial asset.
   (d) This section does not apply to a clearing corporation that is
itself the obligor of an option or similar obligation to which its
entitlement holders have security entitlements.



8505.  (a) A securities intermediary shall take action to obtain a
payment or distribution made by the issuer of a financial asset. A
securities intermediary satisfies the duty if it does either of the
following:
   (1) The securities intermediary acts with respect to the duty as
agreed upon by the entitlement holder and the securities
intermediary.
   (2) In the absence of agreement, the securities intermediary
exercises due care in accordance with reasonable commercial standards
to attempt to obtain the payment or distribution.
   (b) A securities intermediary is obligated to its entitlement
holder for a payment or distribution made by the issuer of a
financial asset if the payment or distribution is received by the
securities intermediary.



8506.  A securities intermediary shall exercise rights with respect
to a financial asset if directed to do so by an entitlement holder. A
securities intermediary satisfies the duty if it does either of the
following:
   (1) The securities intermediary acts with respect to the duty as
agreed upon by the entitlement holder and the securities
intermediary.
   (2) In the absence of agreement, the securities intermediary
either places the entitlement holder in a position to exercise the
rights directly or exercises due care in accordance with reasonable
commercial standards to follow the direction of the entitlement
holder.


8507.  (a) A securities intermediary shall comply with an
entitlement order if the entitlement order is originated by the
appropriate person, the securities intermediary has had reasonable
opportunity to assure itself that the entitlement order is genuine
and authorized, and the securities intermediary has had reasonable
opportunity to comply with the entitlement order. A securities
intermediary satisfies the duty if it does either of the following:
   (1) The securities intermediary acts with respect to the duty as
agreed upon by the entitlement holder and the securities
intermediary.
   (2) In the absence of agreement, the securities intermediary
exercises due care in accordance with reasonable commercial standards
to comply with the entitlement order.
   (b) If a securities intermediary transfers a financial asset
pursuant to an ineffective entitlement order, the securities
intermediary shall reestablish a security entitlement in favor of the
person entitled to it, and pay or credit any payments or
distributions that the person did not receive as a result of the
wrongful transfer. If the securities intermediary does not
reestablish a security entitlement, the securities intermediary is
liable to the entitlement holder for damages.



8508.  A securities intermediary shall act at the direction of an
entitlement holder to change a security entitlement into another
available form of holding for which the entitlement holder is
eligible, or to cause the financial asset to be transferred to a
securities account of the entitlement holder with another securities
intermediary. A securities intermediary satisfies the duty if it does
either of the following:
   (1) The securities intermediary acts as agreed upon by the
entitlement holder and the securities intermediary.
   (2) In the absence of agreement, the securities intermediary
exercises due care in accordance with reasonable commercial standards
to follow the direction of the entitlement holder.




8509.  (a) If the substance of a duty imposed upon a securities
intermediary by Sections 8504 to 8508, inclusive, is the subject of a
federal statute, regulation, or rule, compliance with that statute,
regulation, or rule satisfies the duty.
   (b) To the extent that specific standards for the performance of
the duties of a securities intermediary or the exercise of the rights
of an entitlement holder are not specified by other statute,
regulation, or rule or by agreement between the securities
intermediary and entitlement holder, the securities intermediary
shall perform its duties and the entitlement holder shall exercise
its rights in a commercially reasonable manner.
   (c) The obligation of a securities intermediary to perform the
duties imposed by Sections 8504 to 8508, inclusive, is subject to the
following:
   (1) Rights of the securities intermediary arising out of a
security interest under a security agreement with the entitlement
holder or otherwise.
   (2) Rights of the securities intermediary under other law,
regulation, rule, or agreement to withhold performance of its duties
as a result of unfulfilled obligations of the entitlement holder to
the securities intermediary.
   (d) Sections 8504 to 8508, inclusive, do not require a securities
intermediary to take any action that is prohibited by other statute,
regulation, or rule.



8510.  (a) In a case not covered by the priority rules in Division 9
(commencing with Section 9101) or the rules stated in subdivision
(c), an action based on an adverse claim to a financial asset or
security entitlement, whether framed in conversion, replevin,
constructive trust, equitable lien, or other theory, may not be
asserted against a person who purchases a security entitlement, or an
interest therein, from an entitlement holder if the purchaser gives
value, does not have notice of the adverse claim, and obtains
control.
   (b) If an adverse claim could not have been asserted against an
entitlement holder under Section 8502, the adverse claim cannot be
asserted against a person who purchases a security entitlement, or an
interest therein, from the entitlement holder.
   (c) In a case not covered by the priority rules in Division 9
(commencing with Section 9101), a purchaser for value of a security
entitlement, or an interest therein, who obtains control has priority
over a purchaser of a security entitlement, or an interest therein,
who does not obtain control. Except as otherwise provided in
subdivision (d), purchasers who have control rank according to
priority in time of any of the following:
   (1) The purchaser's becoming the person for whom the securities
account, in which the security entitlement is carried, is maintained,
if the purchaser obtained control under paragraph (1) of subdivision
(d) of Section 8106.
   (2) The securities intermediary's agreement to comply with the
purchaser's entitlement orders with respect to security entitlements
carried or to be carried in the securities account in which the
security entitlement is carried, if the purchaser obtained control
under paragraph (2) of subdivision (d) of Section 8106.
   (3) If the purchaser obtained control through another person under
paragraph (3) of subdivision (d) of Section 8106, the time on which
priority would be based under this subdivision if the other person
were the secured party.
   (d) A securities intermediary as purchaser has priority over a
conflicting purchaser who has control unless otherwise agreed by the
securities intermediary.



8511.  (a) Except as otherwise provided in subdivisions (b) and (c),
if a securities intermediary does not have sufficient interests in a
particular financial asset to satisfy both its obligations to
entitlement holders who have security entitlements to that financial
asset and its obligation to a creditor of the securities intermediary
who has a security interest in that financial asset, the claims of
entitlement holders, other than the creditor, have priority over the
claim of the creditor.
   (b) A claim of a creditor of a securities intermediary who has a
security interest in a financial asset held by a securities
intermediary has priority over claims of the securities intermediary'
s entitlement holders who have security entitlements with respect to
that financial asset if the creditor has control over the financial
asset.
   (c) If a clearing corporation does not have sufficient financial
assets to satisfy both its obligations to entitlement holders who
have security entitlements with respect to a financial asset and its
obligation to a creditor of the clearing corporation who has a
security interest in that financial asset, the claim of the creditor
has priority over the claims of entitlement holders.