Minnesota Legislature
SF 4080
as introduced - 93rd Legislature (2023 - 2024) Posted on 02/23/2024 09:41am
Current Version - as introduced
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A bill for an act
relating to commerce; removing certain provisions in the Uniform Commercial
Code regarding securities intermediaries; amending Minnesota Statutes 2022,
sections 336.8-110; 336.8-503; 336.8-511; 336.9-305.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
Minnesota Statutes 2022, section 336.8-110, is amended to read:
336.8-110 APPLICABILITY; CHOICE OF LAW.
(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 deleted text begin securities intermediary'sdeleted text end new text begin entitlement holder'snew text end jurisdictiondeleted text begin , as
specified in subsection (e),deleted text end governsdeleted text begin :deleted text end new text begin .
new text end
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(1) acquisition of a security entitlement from the securities intermediary;
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(2) the rights and duties of the securities intermediary and entitlement holder arising out
of a security entitlement;
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(3) whether the securities intermediary owes any duties to an adverse claimant to a
security entitlement; and
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(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.
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(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
(5).
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(e) The following rules determine a "securities intermediary's jurisdiction" for purposes
of this section:
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(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 this part, this article, or Laws 2000,
chapter 399, that jurisdiction is the securities intermediary's jurisdiction.
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(2) If paragraph (1) does not apply and an agreement between the securities intermediary
and its entitlement holder governing the securities account expressly provides that the
agreement is governed by the law of a particular jurisdiction, that jurisdiction is the securities
intermediary's jurisdiction.
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(3) If neither paragraph (1) nor (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.
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(4) If none of the preceding paragraphs 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.
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(5) If none of the preceding paragraphs apply, the securities intermediary's jurisdiction
is the jurisdiction in which the chief executive office of the securities intermediary is located.
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(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.
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Sec. 2.
Minnesota Statutes 2022, section 336.8-503, is amended to read:
336.8-503 PROPERTY INTEREST OF ENTITLEMENT HOLDER IN FINANCIAL
ASSET HELD BY SECURITIES INTERMEDIARY.
(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 intermediarydeleted text begin , except as otherwise provided in section 336.8-511deleted text end .
(b) An entitlement holder's property interest with respect to a particular financial asset
under subsection (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 subsection (a) may be enforced against the securities intermediary only by exercise
of the entitlement holder's rights under sections 336.8-505 through 336.8-508.
(d) An entitlement holder's property interest with respect to a particular financial asset
under subsection (a) may be enforced against a purchaser of the financial asset or interest
therein only if:
(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 336.8-504 by
transferring the financial asset or interest therein to the purchaser; and
(4) the purchaser is not protected under subsection (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 subsection (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 336.8-504.
Sec. 3.
Minnesota Statutes 2022, section 336.8-511, is amended to read:
336.8-511 PRIORITY AMONG SECURITY INTERESTS AND ENTITLEMENT
HOLDERS.
deleted text begin (a) Except as otherwise provided in subsections (b) and (c),deleted text end 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.
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(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.
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(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.
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Sec. 4.
Minnesota Statutes 2022, section 336.9-305, is amended to read:
336.9-305 LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY
INTERESTS IN INVESTMENT PROPERTY.
(a) Governing law: general rules. Except as otherwise provided in subsection (c), the
following rules apply:
(1) While a security certificate is located in a jurisdiction, the local law of that jurisdiction
governs perfection, the effect of perfection or nonperfection, and the priority of a security
interest in the certificated security represented thereby.
(2) The local law of the issuer's jurisdiction as specified in section 336.8-110(d), governs
perfection, the effect of perfection or nonperfection, and the priority of a security interest
in an uncertificated security.
(3) deleted text begin The local law of the securities intermediary's jurisdiction as specified in section
336.8-110(e), governs perfection, the effect of perfection or nonperfection, and the priority
of a security interest in a security entitlement or securities account.deleted text end new text begin (Reserved.)
new text end
(4) The local law of the commodity intermediary's jurisdiction governs perfection, the
effect of perfection or nonperfection, and the priority of a security interest in a commodity
contract or commodity account.
(b) Commodity intermediary's jurisdiction. The following rules determine a commodity
intermediary's jurisdiction for purposes of this part:
(1) If an agreement between the commodity intermediary and commodity customer
governing the commodity account expressly provides that a particular jurisdiction is the
commodity intermediary's jurisdiction for purposes of this part, this article, or this chapter,
that jurisdiction is the commodity intermediary's jurisdiction.
(2) If paragraph (1) does not apply and an agreement between the commodity intermediary
and commodity customer governing the commodity account expressly provides that the
agreement is governed by the law of a particular jurisdiction, that jurisdiction is the
commodity intermediary's jurisdiction.
(3) If neither paragraph (1) nor paragraph (2) applies and an agreement between the
commodity intermediary and commodity customer governing the commodity account
expressly provides that the commodity account is maintained at an office in a particular
jurisdiction, that jurisdiction is the commodity intermediary's jurisdiction.
(4) If none of the preceding paragraphs applies, the commodity intermediary's jurisdiction
is the jurisdiction in which the office identified in an account statement as the office serving
the commodity customer's account is located.
(5) If none of the preceding paragraphs applies, the commodity intermediary's jurisdiction
is the jurisdiction in which the chief executive office of the commodity intermediary is
located.
(c) When perfection governed by law of jurisdiction where debtor located. The local
law of the jurisdiction in which the debtor is located governs:
(1) perfection of a security interest in investment property by filing;
(2) automatic perfection of a security interest in investment property created by a broker
or securities intermediary; and
(3) automatic perfection of a security interest in a commodity contract or commodity
account created by a commodity intermediary.