8.8A-108 - A-108. Warranties in direct holding.
§ 8.8A-108. Warranties in direct holding.
(a) A person who transfers a certificated security to a purchaser for valuewarrants to the purchaser, and an endorser, if the transfer is byendorsement, 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 impairthe 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 anappropriate person, or if the endorsement is by an agent, the agent hasactual 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 anuncertificated security to a purchaser for value warrants to the purchaserthat:
(1) the instruction is made by an appropriate person, or if the instructionis by an agent, the agent has actual authority to act on behalf of theappropriate 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 inthe 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 forvalue and does not originate an instruction in connection with the transferwarrants 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 anuncertificated 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 willbe entitled to the registration of transfer.
(f) A person who presents a certificated security for registration oftransfer or for payment or exchange warrants to the issuer that the person isentitled to the registration, payment, or exchange, but a purchaser for valueand without notice of adverse claims to whom transfer is registered warrantsonly that the person has no knowledge of any unauthorized signature in anecessary endorsement.
(g) If a person acts as agent of another in delivering a certificatedsecurity to a purchaser, the identity of the principal was known to theperson to whom the certificate was delivered, and the certificate deliveredby the agent was received by the agent from the principal or received by theagent from another person at the direction of the principal, the persondelivering the security certificate warrants only that the delivering personhas authority to act for the principal and does not know of any adverse claimto the certificated security.
(h) A secured party who redelivers a security certificate received, or afterpayment and on order of the debtor delivers the security certificate toanother person, makes only the warranties of an agent under subsection (g).
(i) Except as otherwise provided in subsection (g), a broker acting for acustomer makes to the issuer and a purchaser the warranties provided insubsections (a) through (f). A broker that delivers a security certificate toits customer, or causes its customer to be registered as the owner of anuncertificated security, makes to the customer the warranties provided insubsection (a) or (b), and has the rights and privileges of a purchaser underthis section. The warranties of and in favor of the broker acting as an agentare in addition to applicable warranties given by and in favor of thecustomer.
(1996, c. 216.)