Skip to main content Skip to office menu Skip to footer
Minnesota Legislature

Office of the Revisor of Statutes

Key: (1) language to be deleted (2) new language

                            CHAPTER 194-S.F.No. 732 
                  An act relating to commerce; enacting the revised 
                  article 8 of the uniform commercial code proposed by 
                  the national conference of commissioners on uniform 
                  state laws; regulating investment securities; amending 
                  Minnesota Statutes 1994, sections 336.1-105; 
                  336.1-206; 336.4-104; 336.5-114; 336.9-103; 336.9-105; 
                  336.9-106; 336.9-203; 336.9-301; 336.9-302; 336.9-304; 
                  336.9-305; 336.9-306; 336.9-309; 336.9-312; and 
                  336.10-104; proposing coding for new law in Minnesota 
                  Statutes, chapter 336; repealing Minnesota Statutes 
                  1994, sections 336.8-101; 336.8-102; 336.8-103; 
                  336.8-104; 336.8-105; 336.8-106; 336.8-107; 336.8-108; 
                  336.8-201; 336.8-202; 336.8-203; 336.8-204; 336.8-205; 
                  336.8-206; 336.8-207; 336.8-208; 336.8-301; 336.8-302; 
                  336.8-303; 336.8-304; 336.8-305; 336.8-306; 336.8-307; 
                  336.8-308; 336.8-309; 336.8-310; 336.8-311; 336.8-312; 
                  336.8-313; 336.8-314; 336.8-315; 336.8-316; 336.8-317; 
                  336.8-318; 336.8-319; 336.8-320; 336.8-321; 336.8-401; 
                  336.8-402; 336.8-403; 336.8-404; 336.8-405; 336.8-406; 
                  336.8-407; and 336.8-408.  
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
                                   ARTICLE 1 
                            UNIFORM COMMERCIAL CODE 
                               Revised Article 8 
                             INVESTMENT SECURITIES 
                                     Part 1 
                        SHORT TITLE AND GENERAL MATTERS
           Section 1.  [336.8-101] [SHORT TITLE.] This article may be 
        cited as Uniform Commercial Code - Investment Securities. 
           Sec. 2.  [336.8-102] [DEFINITIONS.] 
           (a) In this article: 
           (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 section 
        336.8-501(b)(2) or (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 
        section 336.8-103, 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, which is, or is of a type, dealt in or traded on 
        financial markets, or which 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 this article.  
        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 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 this article, 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 section 
        336.8-103, 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 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 this article. 
           (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 part 5. 
           (18) "Uncertificated security" means a security that is not 
        represented by a certificate. 
           (b) Other definitions applying to this article and the 
        sections in which they appear are: 
           "Appropriate person," section 336.8-107 
           "Control," section 336.8-106 
           "Delivery," section 336.8-301 
           "Investment company security," section 336.8-103 
           "Issuer," section 336.8-201 
           "Overissue," section 336.8-210 
           "Protected purchaser," section 336.8-303 
           "Securities account," section 336.8-501 
           (c) In addition, article 1 contains general definitions and 
        principles of construction and interpretation applicable 
        throughout this article. 
           (d) The characterization of a person, business, or 
        transaction for purposes of this article does not determine the 
        characterization of the person, business, or transaction for 
        purposes of any other law, regulation, or rule. 
           Sec. 3.  [336.8-103] [RULES FOR DETERMINING WHETHER CERTAIN 
        OBLIGATIONS AND INTERESTS ARE SECURITIES OR FINANCIAL ASSETS.] 
           (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 this 
        article, 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 
        this article and not by article 3, even though it also meets the 
        requirements of that article.  However, a negotiable instrument 
        governed by article 3 is a financial asset if it is held in a 
        securities account. 
           (e) An option or similar obligation issued by a clearing 
        corporation to its participants is not a security, but is a 
        financial asset. 
           (f) A commodity contract, as defined in section 336.9-115, 
        is not a security or a financial asset. 
           Sec. 4.  [336.8-104] [ACQUISITION OF SECURITY OR FINANCIAL 
        ASSET OR INTEREST THEREIN.] 
           (a) A person acquires a security or an interest therein, 
        under this article, if: 
           (1) the person is a purchaser to whom a security is 
        delivered pursuant to section 336.8-301; or 
           (2) the person acquires a security entitlement to the 
        security pursuant to section 336.8-501. 
           (b) A person acquires a financial asset, other than a 
        security, or an interest therein, under this article, 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 
        part 5, but is a purchaser of any security, security 
        entitlement, or other financial asset held by the securities 
        intermediary only to the extent provided in section 336.8-503. 
           (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 pursuant to subsection (a) or (b). 
           Sec. 5.  [336.8-105] [NOTICE OF ADVERSE CLAIM.] 
           (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 principle 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 year after a date set for presentment or surrender 
        for redemption or exchange; or 
           (2) six 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 article 9 is not 
        notice of an adverse claim to a financial asset. 
           Sec. 6.  [336.8-106] [CONTROL.] 
           (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; or 
           (2) the securities intermediary has agreed that it will 
        comply with entitlement orders originated by the purchaser 
        without further consent by the entitlement holder. 
           (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)(2) or (d)(2) has control even if the registered 
        owner in the case of subsection (c)(2) or the entitlement holder 
        in the case of subsection (d)(2) retains the right to make 
        substitutions for the uncertificated security or security 
        entitlement, to originate instructions or entitlement orders to 
        the issuer or 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. 
           Sec. 7.  [336.8-107] [WHETHER ENDORSEMENT, INSTRUCTION, OR 
        ENTITLEMENT ORDER IS EFFECTIVE.] 
           (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 paragraph (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 paragraph (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 section 
        336.8-106(c)(2) or (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. 
           Sec. 8.  [336.8-108] [WARRANTIES IN DIRECT HOLDING.] 
           (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. 
           Sec. 9.  [336.8-109] [WARRANTIES IN INDIRECT HOLDING.] 
           (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 section 336.8-108(a) or (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 section 336.8-108(a) or (b). 
           Sec. 10.  [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 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 
        (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 specifies that it is governed by the law 
        of a particular jurisdiction, that jurisdiction is the 
        securities intermediary's jurisdiction. 
           (2) If an agreement between the securities intermediary and 
        its entitlement holder does not specify the governing law as 
        provided in paragraph (1), but expressly specifies that the 
        securities account is maintained at an office in a particular 
        jurisdiction, that jurisdiction is the securities intermediary's 
        jurisdiction. 
           (3) If an agreement between the securities intermediary and 
        its entitlement holder does not specify a jurisdiction as 
        provided in paragraph (1) or (2), the securities intermediary's 
        jurisdiction is the jurisdiction in which is located the office 
        identified in an account statement as the office serving the 
        entitlement holder's account. 
           (4) If an agreement between the securities intermediary and 
        its entitlement holder does not specify a jurisdiction as 
        provided in paragraph (1) or (2) and an account statement does 
        not identify an office serving the entitlement holder's account 
        as provided in paragraph (3), the securities intermediary's 
        jurisdiction is the jurisdiction in which is located the chief 
        executive office of the securities intermediary. 
           (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. 
           Sec. 11.  [336.8-111] [CLEARING CORPORATION RULES.] 
           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 this chapter and affects another party 
        who does not consent to the rule. 
           Sec. 12.  [336.8-112] [CREDITOR'S LEGAL PROCESS.] 
           (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.  
           Sec. 13.  [336.8-113] [STATUTE OF FRAUDS INAPPLICABLE.] 
           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 year of its making. 
           Sec. 14.  [336.8-114] [EVIDENTIARY RULES CONCERNING 
        CERTIFICATED SECURITIES.] 
           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. 
           Sec. 15.  [336.8-115] [SECURITIES INTERMEDIARY AND OTHERS 
        NOT LIABLE TO ADVERSE CLAIMANT.] 
           A securities intermediary that has transferred a financial 
        asset pursuant to 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; or 
           (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. 
           Sec. 16.  [336.8-116] [SECURITIES INTERMEDIARY AS PURCHASER 
        FOR VALUE.] 
           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. 
                                     Part 2  
                                ISSUE AND ISSUER 
           Sec. 17.  [336.8-201] [ISSUER.] 
           (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 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. 
           Sec. 18.  [336.8-202] [ISSUER'S RESPONSIBILITY AND 
        DEFENSES; NOTICE OF DEFECT OR DEFENSE.] 
           (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, statute, ordinance, rule, regulation, 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, statute, ordinance, rule, regulation, order, or 
        the like, pursuant to 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 one 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) Paragraph (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 section 336.8-205, 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 pursuant to 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. 
           Sec. 19.  [336.8-203] [STALENESS AS NOTICE OF DEFECT OR 
        DEFENSE.] 
           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 year after that date; 
        or 
           (2) is not covered by paragraph (1) and the purchaser takes 
        the security more than two years after the date set for 
        surrender or presentation or the date on which performance 
        became due. 
           Sec. 20.  [336.8-204] [EFFECT OF ISSUER'S RESTRICTION ON 
        TRANSFER.] 
           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. 
           Sec. 21.  [336.8-205] [EFFECT OF UNAUTHORIZED SIGNATURE ON 
        SECURITY CERTIFICATE.] 
           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, registrar, 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 paragraph (1), entrusted with responsible handling of 
        the security certificate. 
           Sec. 22.  [336.8-206] [COMPLETION OR ALTERATION OF SECURITY 
        CERTIFICATE.] 
           (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. 
           Sec. 23.  [336.8-207] [RIGHTS AND DUTIES OF ISSUER WITH 
        RESPECT TO REGISTERED OWNERS.] 
           (a) Before due presentment for registration of transfer of 
        a certificated security in registered form or of an instruction 
        requesting registration of transfer of a 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 
        power of an owner. 
           (b) This article does not affect the liability of the 
        registered owner of a security for a call, assessment, or the 
        like. 
           Sec. 24.  [336.8-208] [EFFECT OF SIGNATURE OF 
        AUTHENTICATING TRUSTEE, REGISTRAR, OR TRANSFER AGENT.] 
           (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. 
           Sec 25.  [336.8-209] [ISSUER'S LIEN.] 
           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. 
           Sec. 26.  [336.8-210] [OVERISSUE.] 
           (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 this article 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. 
                                     Part 3 
                            TRANSFER OF CERTIFICATED 
                         AND UNCERTIFICATED SECURITIES 
           Sec. 27.  [336.8-301] [DELIVERY.] 
           (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 has been specially 
        endorsed to the purchaser by an effective endorsement. 
           (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.  
           Sec 28.  [336.8-302] [RIGHTS OF PURCHASER.] 
           (a) Except as otherwise provided in subsections (b) and 
        (c), upon delivery of a certificated or uncertificated security 
        to a purchaser, the purchaser 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. 
           Sec. 29.  [336.8-303] [PROTECTED PURCHASER.] 
           (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. 
           Sec. 30.  [336.8-304] [ENDORSEMENT.] 
           (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 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 section 336.8-108 and 
        not an obligation that the security will be honored by the 
        issuer. 
           Sec. 31.  [336.8-305] [INSTRUCTION.] 
           (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 section 
        336.8-108 and not an obligation that the security will be 
        honored by the issuer. 
           Sec. 32.  [336.8-306] [EFFECT OF GUARANTEEING SIGNATURE, 
        ENDORSEMENT, OR INSTRUCTION.] 
           (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 capability 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. 
           Sec. 33.  [336.8-307] [PURCHASER'S RIGHT TO REQUISITES FOR 
        REGISTRATION OF TRANSFER.] 
           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. 
                                     Part 4
                                  REGISTRATION 
           Sec.  34.  [336.8-401] [DUTY OF ISSUER TO REGISTER 
        TRANSFER.] 
           (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 (section 336.8-402); 
           (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 section 
        336.8-204; 
           (6) a demand that the issuer not register transfer has not 
        become effective under section 336.8-403, or the issuer has 
        complied with section 336.8-403(b) but no legal process or 
        indemnity bond is obtained as provided in section 336.8-403(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. 
           Sec. 35.  [336.8-402] [ASSURANCE THAT ENDORSEMENT OR 
        INSTRUCTION IS EFFECTIVE.] 
           (a) An issuer may require the following assurance that each 
        necessary endorsement of 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 of identity; 
           (2) if the endorsement is made or the instruction is 
        originated by an agent, appropriate assurance of actual 
        authority to sign; 
           (3) if the endorsement is made or the instruction is 
        originated by a fiduciary pursuant to section 336.8-107(a)(4) or 
        (a)(5), appropriate evidence of appointment or incumbency; 
           (4) if there is more than one fiduciary, reasonable 
        assurance that all who are required to sign have done so; and 
           (5) if the endorsement is made or the instruction is 
        originated by a person not covered by another provision of this 
        subsection, assurance appropriate to the case corresponding as 
        nearly as may be to the provisions of this subsection. 
           (b) An issuer may elect to require reasonable assurance 
        beyond that specified in this section. 
           (c) In this section: 
           (1) "Guaranty of the signature" means a guaranty signed by 
        or on behalf of a person reasonably believed by the issuer to be 
        responsible.  An issuer may adopt standards with respect to 
        responsibility if they are not manifestly unreasonable. 
           (2) "Appropriate evidence of appointment or incumbency" 
        means: 
           (i) in the case of a fiduciary appointed or qualified by a 
        court, a certificate issued by or under the direction or 
        supervision of the court or an officer thereof and dated within 
        60 days before the date of presentation for transfer; or 
           (ii) in any other case, a copy of a document showing the 
        appointment or a certificate issued by or on behalf of a person 
        reasonably believed by an issuer to be responsible or, in the 
        absence of that document or certificate, other evidence the 
        issuer reasonably considered appropriate. 
           Sec. 36.  [336.8-403] [DEMAND THAT ISSUER NOT REGISTER 
        TRANSFER.] 
           (a) A person who is an appropriate person to make an 
        endorsement or originate an instruction may demand that the 
        issuer not register transfer of a security by communicating to 
        the issuer a notification that identifies the registered owner 
        and the issue of which the security is a part and provides an 
        address for communications directed to the person making the 
        demand.  The demand is effective only if it is received by the 
        issuer at a time and in a manner affording the issuer reasonable 
        opportunity to act on it.  
           (b) 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 after a demand that the 
        issuer not register transfer has become effective, the issuer 
        shall promptly communicate to (i) the person who initiated the 
        demand at the address provided in the demand and (ii) the person 
        who presented the security for registration of transfer or 
        initiated the instruction requesting registration of transfer a 
        notification stating that:  
           (1) the certificated security has been presented for 
        registration of transfer or the instruction for registration of 
        transfer of the uncertificated security has been received; 
           (2) a demand that the issuer not register transfer had 
        previously been received; and 
           (3) the issuer will withhold registration of transfer for a 
        period of time stated in the notification in order to provide 
        the person who initiated the demand an opportunity to obtain 
        legal process or an indemnity bond.  
           (c) The period described in subsection (b)(3) may not 
        exceed 30 days after the date of communication of the 
        notification.  A shorter period may be specified by the issuer 
        if it is not manifestly unreasonable.  
           (d) An issuer is not liable to a person who initiated a 
        demand that the issuer not register transfer for any loss the 
        person suffers as a result of registration of a transfer 
        pursuant to an effective endorsement or instruction if the 
        person who initiated the demand does not, within the time stated 
        in the issuer's communication, either:  
           (1) obtain an appropriate restraining order, injunction, or 
        other process from a court of competent jurisdiction enjoining 
        the issuer from registering the transfer; or 
           (2) file with the issuer an indemnity bond, sufficient in 
        the issuer's judgment to protect the issuer and any transfer 
        agent, registrar, or other agent of the issuer involved from any 
        loss it or they may suffer by refusing to register the transfer. 
           (e) This section does not relieve an issuer from liability 
        for registering transfer pursuant to an endorsement or 
        instruction that was not effective.  
           Sec. 37.  [336.8-404] [WRONGFUL REGISTRATION.] 
           (a) Except as otherwise provided in section 336.8-406, an 
        issuer is liable for wrongful registration of transfer if the 
        issuer has registered a transfer of a security to a person not 
        entitled to it, and the transfer was registered:  
           (1) pursuant to an ineffective endorsement or instruction; 
           (2) after a demand that the issuer not register transfer 
        became effective under section 336.8-403(a) and the issuer did 
        not comply with section 336.8-403(b); 
           (3) after the issuer had been served with an injunction, 
        restraining order, or other legal process enjoining it from 
        registering the transfer, issued by a court of competent 
        jurisdiction, and the issuer had a reasonable opportunity to act 
        on the injunction, restraining order, or other legal process; or 
           (4) by an issuer acting in collusion with the wrongdoer.  
           (b) An issuer that is liable for wrongful registration of 
        transfer under subsection (a) on demand shall provide the person 
        entitled to the security with a like certificated or 
        uncertificated security, and any payments or distributions that 
        the person did not receive as a result of the wrongful 
        registration.  If an overissue would result, the issuer's 
        liability to provide the person with a like security is governed 
        by section 336.8-210.  
           (c) Except as otherwise provided in subsection (a) or in a 
        law relating to the collection of taxes, an issuer is not liable 
        to an owner or other person suffering loss as a result of the 
        registration of a transfer of a security if registration was 
        made pursuant to an effective endorsement or instruction.  
           Sec. 38.  [336.8-405] [REPLACEMENT OF LOST, DESTROYED, OR 
        WRONGFULLY TAKEN SECURITY CERTIFICATE.] 
           (a) If an owner of a certificated security, whether in 
        registered or bearer form, claims that the certificate has been 
        lost, destroyed, or wrongfully taken, the issuer shall issue a 
        new certificate if the owner:  
           (1) so requests before the issuer has notice that the 
        certificate has been acquired by a protected purchaser; 
           (2) files with the issuer a sufficient indemnity bond; and 
           (3) satisfies other reasonable requirements imposed by the 
        issuer.  
           (b) If, after the issue of a new security certificate, a 
        protected purchaser of the original certificate presents it for 
        registration of transfer, the issuer shall register the transfer 
        unless an overissue would result.  In that case, the issuer's 
        liability is governed by section 336.8-210.  In addition to any 
        rights on the indemnity bond, an issuer may recover the new 
        certificate from a person to whom it was issued or any person 
        taking under that person, except a protected purchaser.  
           Sec. 39.  [336.8-406] [OBLIGATION TO NOTIFY ISSUER OF LOST, 
        DESTROYED, OR WRONGFULLY TAKEN SECURITY CERTIFICATE.] 
           If a security certificate has been lost, apparently 
        destroyed, or wrongfully taken, and the owner fails to notify 
        the issuer of that fact within a reasonable time after the owner 
        has notice of it and the issuer registers a transfer of the 
        security before receiving notification, the owner may not assert 
        against the issuer a claim for registering the transfer under 
        section 336.8-404 or a claim to a new security certificate under 
        section 336.8-405.  
           Sec. 40.  [336.8-407] [AUTHENTICATING TRUSTEE, TRANSFER 
        AGENT, AND REGISTRAR.] 
           A person acting as authenticating trustee, transfer agent, 
        registrar, or other agent for an issuer in the registration of a 
        transfer of its securities, in the issue of new security 
        certificates or uncertificated securities, or in the 
        cancellation of surrendered security certificates has the same 
        obligation to the holder or owner of a certificated or 
        uncertificated security with regard to the particular functions 
        performed as the issuer has in regard to those functions.  
                                     Part 5 
                             SECURITY ENTITLEMENTS 
           Sec. 41.  [336.8-501] [SECURITIES ACCOUNT; ACQUISITION OF 
        SECURITY ENTITLEMENT FROM SECURITIES INTERMEDIARY.] 
           (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 subsections (d) and 
        (e), a person acquires a security entitlement if a securities 
        intermediary:  
           (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; or 
           (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 subsection (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. 
           Sec. 42.  [336.8-502] [ASSERTION OF ADVERSE CLAIM AGAINST 
        ENTITLEMENT HOLDER.] 
           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 
        336.8-501 for value and without notice of the adverse claim.  
           Sec. 43.  [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 intermediary, except as 
        otherwise provided in section 336.8-511. 
           (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. 44.  [336.8-504] [DUTY OF SECURITIES INTERMEDIARY TO 
        MAINTAIN FINANCIAL ASSET.] 
           (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 to by its 
        entitlement holder, a securities intermediary may not grant any 
        security interests in a financial asset it is obligated to 
        maintain pursuant to subsection (a). 
           (c) A securities intermediary satisfies the duty in 
        subsection (a) if:  
           (1) the securities intermediary acts with respect to the 
        duty as agreed upon by the entitlement holder and the securities 
        intermediary; or 
           (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.  
           Sec. 45.  [336.8-505] [DUTY OF SECURITIES INTERMEDIARY WITH 
        RESPECT TO PAYMENTS AND DISTRIBUTIONS.] 
           (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:  
           (1) the securities intermediary acts with respect to the 
        duty as agreed upon by the entitlement holder and the securities 
        intermediary; or 
           (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.  
           Sec. 46.  [336.8-506] [DUTY OF SECURITIES INTERMEDIARY TO 
        EXERCISE RIGHTS AS DIRECTED BY ENTITLEMENT HOLDER.] 
           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:  
           (1) the securities intermediary acts with respect to the 
        duty as agreed upon by the entitlement holder and the securities 
        intermediary; or 
           (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. 
           Sec. 47.  [336.8-507] [DUTY OF SECURITIES INTERMEDIARY TO 
        COMPLY WITH ENTITLEMENT ORDER.] 
           (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:  
           (1) the securities intermediary acts with respect to the 
        duty as agreed upon by the entitlement holder and the securities 
        intermediary; or 
           (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.  
           Sec. 48.  [336.8-508] [DUTY OF SECURITIES INTERMEDIARY TO 
        CHANGE ENTITLEMENT HOLDER'S POSITION TO OTHER FORM OF SECURITY 
        HOLDING.] 
           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:  
           (1) the securities intermediary acts as agreed upon by the 
        entitlement holder and the securities intermediary; or 
           (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. 
           Sec. 49.  [336.8-509] [SPECIFICATION OF DUTIES OF 
        SECURITIES INTERMEDIARY BY OTHER STATUTE OR REGULATION; MANNER 
        OF PERFORMANCE OF DUTIES OF SECURITIES INTERMEDIARY AND EXERCISE 
        OF RIGHTS OF ENTITLEMENT HOLDER.] 
           (a) If the substance of a duty imposed upon a securities 
        intermediary by sections 336.8-504 through 336.8-508 is the 
        subject of other 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 336.8-504 through 336.8-508 is 
        subject to:  
           (1) rights of the securities intermediary arising out of a 
        security interest under a security agreement with the 
        entitlement holder or otherwise; and 
           (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.  
           Sec. 50.  [336.8-510] [RIGHTS OF PURCHASER OF SECURITY 
        ENTITLEMENT FROM ENTITLEMENT HOLDER.] 
           (a) 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 336.8-502, 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 article 
        9, 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.  Purchasers who have control rank 
        equally, except that a securities intermediary as purchaser has 
        priority over a conflicting purchaser who has control, unless 
        otherwise agreed by the securities intermediary.  
           Sec. 51.  [336.8-511] [PRIORITY AMONG SECURITY INTERESTS 
        AND ENTITLEMENT HOLDERS.] 
           (a) Except as otherwise provided in subsections (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.  
                                     Part 6 
                  TRANSITION PROVISIONS for Revised Article 8
             and CONFORMING AMENDMENTS to Articles 1, 5, 9, and 10
           Sec. 52.  [336.8-601] [EFFECTIVE DATE.] 
           This act takes effect January 1, 1996. 
           Sec. 53.  [336.8-602] [REPEALS.] 
           Minnesota Statutes 1994, sections 336.8-101; 336.8-102; 
        336.8-103; 336.8-104; 336.8-105; 336.8-106; 336.8-107; 
        336.8-108; 336.8-201; 336.8-202; 336.8-203; 336.8-204; 
        336.8-205; 336.8-206; 336.8-207; 336.8-208; 336.8-301; 
        336.8-302; 336.8-303; 336.8-304; 336.8-305; 336.8-306; 
        336.8-307; 336.8-308; 336.8-309; 336.8-310; 336.8-311; 
        336.8-312; 336.8-313; 336.8-314; 336.8-315; 336.8-316; 
        336.8-317; 336.8-318; 336.8-319; 336.8-320; 336.8-321; 
        336.8-401; 336.8-402; 336.8-403; 336.8-404; 336.8-405; 
        336.8-406; 336.8-407; and 336.8-408, are repealed. 
           Sec. 54.  [336.8-603] [SAVINGS CLAUSE.] 
           (a) This act does not affect an action or proceeding 
        commenced before this act takes effect.  
           (b) If a security interest in a security is perfected at 
        the date this act takes effect, and the action by which the 
        security interest was perfected would suffice to perfect a 
        security interest under this act, no further action is required 
        to continue perfection.  If a security interest in a security is 
        perfected at the date this act takes effect but the action by 
        which the security interest was perfected would not suffice to 
        perfect a security interest under this act, the security 
        interest remains perfected for a period of four months after the 
        effective date and continues perfected thereafter if appropriate 
        action to perfect under this act is taken within that period.  
        If a security interest is perfected at the date this act takes 
        effect and the security interest can be perfected by filing 
        under this act, a financing statement signed by the secured 
        party instead of the debtor may be filed within that period to 
        continue perfection or thereafter to perfect. 
                                   ARTICLE 2 
                       Conforming Amendments to Article 9 
           Section 1.  Minnesota Statutes 1994, section 336.9-103, is 
        amended to read: 
           336.9-103 [PERFECTION OF SECURITY INTERESTS IN MULTIPLE 
        STATE TRANSACTIONS.] 
           (1) Documents, instruments and ordinary goods. 
           (a) This subsection applies to documents and instruments 
        and to goods other than those covered by a certificate of title 
        described in subsection (2), mobile goods described in 
        subsection (3), and minerals described in subsection (5). 
           (b) Except as otherwise provided in this subsection, 
        perfection and the effect of perfection or nonperfection of a 
        security interest in collateral are governed by the law of the 
        jurisdiction where the collateral is when the last event occurs 
        on which is based the assertion that the security interest is 
        perfected or unperfected. 
           (c) If the parties to a transaction creating a purchase 
        money security interest in goods in one jurisdiction understand 
        at the time that the security interest attaches that the goods 
        will be kept in another jurisdiction, then the law of the other 
        jurisdiction governs the perfection and the effect of perfection 
        or nonperfection of the security interest from the time it 
        attaches until 30 days after the debtor receives possession of 
        the goods and thereafter if the goods are taken to the other 
        jurisdiction before the end of the 30 day period. 
           (d) When collateral is brought into and kept in this state 
        while subject to a security interest perfected under the law of 
        the jurisdiction from which the collateral was removed, the 
        security interest remains perfected, but if action is required 
        by part 3 of this article to perfect the security interest, 
           (i) if the action is not taken before the expiration of the 
        period of perfection in the other jurisdiction or the end of 
        four months after the collateral is brought into this state, 
        whichever period first expires, the security interest becomes 
        unperfected at the end of that period and is thereafter deemed 
        to have been unperfected as against a person who became a 
        purchaser after removal; 
           (ii) if the action is taken before the expiration of the 
        period specified in subparagraph (i), the security interest 
        continues perfected thereafter; 
           (iii) for the purpose of priority over a buyer of consumer 
        goods (subsection (2) of section 336.9-307), the period of the 
        effectiveness of a filing in the jurisdiction from which the 
        collateral is removed is governed by the rules with respect to 
        perfection in subparagraphs (i) and (ii). 
           (2) Certificate of title. 
           (a) This subsection applies to goods covered by a 
        certificate of title issued under a statute of this state or of 
        another jurisdiction under the law of which indication of a 
        security interest on the certificate is required as a condition 
        of perfection. 
           (b) Except as otherwise provided in this subsection, 
        perfection and the effect of perfection or nonperfection of the 
        security interest are governed by the law (including the 
        conflict of laws rules) of the jurisdiction issuing the 
        certificate until four months after the goods are removed from 
        that jurisdiction and thereafter until the goods are registered 
        in another jurisdiction, but in any event not beyond surrender 
        of the certificate.  After the expiration of that period, the 
        goods are not covered by the certificate of title within the 
        meaning of this section. 
           (c) Except with respect to the rights of a buyer described 
        in the next paragraph, a security interest, perfected in another 
        jurisdiction otherwise than by notation on a certificate of 
        title, in goods brought into this state and thereafter covered 
        by a certificate of title issued by this state is subject to the 
        rules stated in paragraph (d) of subsection (1). 
           (d) If goods are brought into this state while a security 
        interest therein is perfected in any manner under the law of the 
        jurisdiction from which the goods are removed and a certificate 
        of title is issued by this state and the certificate does not 
        show that the goods are subject to the security interest or that 
        they may be subject to security interests not shown on the 
        certificate, the security interest is subordinate to the rights 
        of a buyer of the goods who is not in the business of selling 
        goods of that kind to the extent that the buyer gives value and 
        receives delivery of the goods after issuance of the certificate 
        and without knowledge of the security interest. 
           (3) Accounts, general intangibles and mobile goods. 
           (a) This subsection applies to accounts (other than an 
        account described in subsection (5) on minerals) and general 
        intangibles (other than uncertificated securities) and to goods 
        which are mobile and which are of a type normally used in more 
        than one jurisdiction, such as motor vehicles, trailers, rolling 
        stock, airplanes, shipping containers, road building and 
        construction machinery and commercial harvesting machinery and 
        the like, if the goods are equipment or are inventory leased or 
        held for lease by the debtor to others, and are not covered by a 
        certificate of title described in subsection (2). 
           (b) The law (including the conflict of laws rules) of the 
        jurisdiction in which the debtor is located governs the 
        perfection and the effect of perfection or nonperfection of the 
        security interest. 
           (c) If, however, the debtor is located in a jurisdiction 
        which is not a part of the United States, and which does not 
        provide for perfection of the security interest by filing or 
        recording in that jurisdiction, the law of the jurisdiction in 
        the United States in which the debtor has its major executive 
        office in the United States governs the perfection and the 
        effect of perfection or nonperfection of the security interest 
        through filing.  In the alternative, if the debtor is located in 
        a jurisdiction which is not a part of the United States or 
        Canada and the collateral is accounts or general intangibles for 
        money due or to become due, the security interest may be 
        perfected by notification to the account debtor.  As used in 
        this paragraph, "United States" includes its territories and 
        possessions and the Commonwealth of Puerto Rico. 
           (d) A debtor shall be deemed located at the debtor's place 
        of business if the debtor has one, at the chief executive office 
        if there is more than one place of business, otherwise at the 
        debtor's residence.  If, however, the debtor is a foreign air 
        carrier under the Federal Aviation Act of 1958, as amended, it 
        shall be deemed located at the designated office of the agent 
        upon whom service of process may be made on behalf of the 
        foreign air carrier. 
           (e) A security interest perfected under the law of the 
        jurisdiction of the location of the debtor is perfected until 
        the expiration of four months after a change of the debtor's 
        location to another jurisdiction, or until perfection would have 
        ceased by the law of the first jurisdiction, whichever period 
        first expires.  Unless perfected in the new jurisdiction before 
        the end of that period, it becomes unperfected thereafter and is 
        deemed to have been unperfected as against a person who became a 
        purchaser after the change. 
           (4) Chattel paper. 
           The rules stated for goods in subsection (1) apply to a 
        possessory security interest in chattel paper.  The rules stated 
        for accounts in subsection (3) apply to a nonpossessory security 
        interest in chattel paper, but the security interest may not be 
        perfected by notification to the account debtor. 
           (5) Minerals. 
           Perfection and the effect of perfection or nonperfection of 
        a security interest which is created by a debtor who has an 
        interest in minerals or the like (including oil and gas) before 
        extraction and which attaches thereto as extracted, or which 
        attaches to an account resulting from the sale thereof at the 
        wellhead or minehead are governed by the law (including the 
        conflict of laws rules) of the jurisdiction wherein the wellhead 
        or minehead is located. 
           (6) Uncertificated securities Investment property. 
           The law (including the conflict of laws rules) of the 
        jurisdiction of organization of the issuer governs the 
        perfection and the effect of perfection or nonperfection of a 
        security interest in uncertificated securities. 
           (a) This subsection applies to investment property.  
           (b) Except as otherwise provided in paragraph (f), during 
        the time that a security certificate is located in a 
        jurisdiction, perfection of a security interest, the effect of 
        perfection or nonperfection, and the priority of a security 
        interest in the certificated security represented thereby are 
        governed by the local law of that jurisdiction.  
           (c) Except as otherwise provided in paragraph (f), 
        perfection of a security interest, the effect of perfection or 
        nonperfection, and the priority of a security interest in an 
        uncertificated security are governed by the local law of the 
        issuer's jurisdiction as specified in section 336.8-110(d).  
           (d) Except as otherwise provided in paragraph (f), 
        perfection of a security interest, the effect of perfection or 
        nonperfection, and the priority of a security interest in a 
        security entitlement or securities account are governed by the 
        local law of the securities intermediary's jurisdiction as 
        specified in section 336.8-110(e).  
           (e) Except as otherwise provided in paragraph (f), 
        perfection of a security interest, the effect of perfection or 
        nonperfection, and the priority of a security interest in a 
        commodity contract or commodity account are governed by the 
        local law of the commodity intermediary's jurisdiction.  The 
        following rules determine a "commodity intermediary's 
        jurisdiction" for purposes of this paragraph:  
           (i) If an agreement between the commodity intermediary and 
        commodity customer specifies that it is governed by the law of a 
        particular jurisdiction, that jurisdiction is the commodity 
        intermediary's jurisdiction.  
           (ii) If an agreement between the commodity intermediary and 
        commodity customer does not specify the governing law as 
        provided in subparagraph (i), but expressly specifies that the 
        commodity account is maintained at an office in a particular 
        jurisdiction, that jurisdiction is the commodity intermediary's 
        jurisdiction.  
           (iii) If an agreement between the commodity intermediary 
        and commodity customer does not specify a jurisdiction as 
        provided in subparagraph (i) or (ii), the commodity 
        intermediary's jurisdiction is the jurisdiction in which is 
        located the office identified in an account statement as the 
        office serving the commodity customer's account.  
           (iv) If an agreement between the commodity intermediary and 
        commodity customer does not specify a jurisdiction as provided 
        in subparagraph (i) or (ii) and an account statement does not 
        identify an office serving the commodity customer's account as 
        provided in subparagraph (iii), the commodity intermediary's 
        jurisdiction is the jurisdiction in which is located the chief 
        executive office of the commodity intermediary.  
           (f) Perfection of a security interest by filing, automatic 
        perfection of a security interest in investment property granted 
        by a broker or securities intermediary, and automatic perfection 
        of a security interest in a commodity contract or commodity 
        account granted by a commodity intermediary are governed by the 
        local law of the jurisdiction in which the debtor is located. 
           Sec. 2.  Minnesota Statutes 1994, section 336.9-105, is 
        amended to read: 
           336.9-105 [DEFINITIONS AND INDEX OF DEFINITIONS.] 
           (1) In this article unless the context otherwise requires: 
           (a) "Account debtor" means the person who is obligated on 
        an account, chattel paper or general intangible; 
           (b) "Chattel paper" means a writing or writings which 
        evidence both a monetary obligation and a security interest in 
        or a lease of specific goods, but a charter or other contract 
        involving the use or hire of a vessel is not chattel paper.  
        When a transaction is evidenced both by such a security 
        agreement or a lease and by an instrument or a series of 
        instruments, the group of writings taken together constitutes 
        chattel paper; 
           (c) "Collateral" means the property subject to a security 
        interest, and includes accounts and chattel paper which have 
        been sold; 
           (d) "Debtor" means the person who owes payment or other 
        performance of the obligation secured, whether or not the person 
        owns or has rights in the collateral, and includes the seller of 
        accounts or chattel paper.  Where the debtor and the owner of 
        the collateral are not the same person, the term "debtor" means 
        the owner of the collateral in any provision of the article 
        dealing with the collateral, the obligor in any provision 
        dealing with the obligation, and may include both where the 
        context so requires; 
           (e) "Deposit account" means a demand, time, savings, 
        passbook or like account maintained with a bank, savings and 
        loan association, credit union or like organization, other than 
        an account evidenced by a certificate of deposit; 
           (f) "Document" means document of title as defined in the 
        general definitions of article 1 (section 336.1-201) and a 
        receipt of the kind described in subsection (2) of section 
        336.7-201; 
           (g) "Encumbrance" includes real estate mortgages and other 
        liens on real estate and all other rights in real estate that 
        are not ownership interests; 
           (h) "Goods" includes all things which are movable at the 
        time the security interest attaches or which are fixtures 
        (section 336.9-313), but does not include money, documents, 
        instruments, investment property, accounts, chattel paper, 
        general intangibles, or minerals or the like (including oil and 
        gas) before extraction.  "Goods" also include standing timber 
        which is to be cut and removed under a conveyance or contract 
        for sale, the unborn young of animals and growing crops; 
           (i) "Instrument" means a negotiable instrument (defined in 
        section 336.3-104), or a certificated security (defined in 
        section 336.8-102) or any other writing which evidences a right 
        to the payment of money and is not itself a security agreement 
        or lease and is of a type which is in ordinary course of 
        business transferred by delivery with any necessary endorsement 
        or assignment.  The term does not include investment property; 
           (j) "Mortgage" means a consensual interest created by a 
        real estate mortgage, a trust deed on real estate, or the like; 
           (k) An advance is made "pursuant to commitment" if the 
        secured party has made a binding promise to make it, whether or 
        not a subsequent event of default or other event not within the 
        secured party's control has relieved or may relieve the secured 
        party from the obligation; 
           (l) "Security agreement" means an agreement which creates 
        or provides for a security interest; 
           (m) "Secured party" means a lender, seller or other person 
        in whose favor there is a security interest, including a person 
        to whom accounts or chattel paper have been sold.  When the 
        holders of obligations issued under an indenture of trust, 
        equipment trust agreement or the like are represented by a 
        trustee or other person, the representative is the secured 
        party; and 
           (n) "Transmitting utility" means any person engaged in the 
        railroad, street railway or trolley bus business, the electric 
        or electronics communications transmission business, the 
        transmission of goods by pipeline, or the transmission or the 
        production and transmission of electricity, steam, gas or water, 
        or the provision of sewer service.  Any person filing a 
        financing statement under this article and under authority of 
        the provisions of Minnesota Statutes 1974, Sections 300.111 to 
        300.115 shall be deemed a "transmitting utility" hereunder. 
           (2) Other definitions applying to this article and the 
        sections in which they appear are: 
           "Account," section 336.9-106. 
           "Attach," section 336.9-203. 
           "Commodity contract," section 336.9-115. 
           "Commodity customer," section 336.9-115. 
           "Commodity intermediary," section 336.9-115. 
           "Construction mortgage," section 336.9-313(1). 
           "Consumer goods," section 336.9-109(1). 
           "Control," section 336.9-115. 
           "Equipment," section 336.9-109(2). 
           "Farm products," section 336.9-109(3). 
           "Fixture," section 336.9-313. 
           "Fixture filing," section 336.9-313. 
           "General intangibles," section 336.9-106. 
           "Inventory," section 336.9-109(4). 
           "Investment property," section 336.9-115. 
           "Lien creditor," section 336.9-301(3). 
           "Motor vehicle," section 336.9-401(7). 
           "Proceeds," section 336.9-306(1). 
           "Purchase money security interest," section 336.9-107. 
           "United States," section 336.9-103. 
           (3) The following definitions in other articles apply to 
        this article: 
           "Broker," section 336.8-102. 
           "Certificated security," section 336.8-102. 
           "Check," section 336.3-104. 
           "Clearing corporation," section 336.8-102. 
           "Contract for sale," section 336.2-106. 
           "Control," section 336.8-106. 
           "Delivery," section 336.8-301. 
           "Entitlement holder," section 336.8-102. 
           "Financial asset," section 336.8-102. 
           "Holder in due course," section 336.3-302. 
           "Note," section 336.3-104. 
           "Sale," section 336.2-106. 
           "Securities intermediary," section 336.8-102. 
           "Security," section 336.8-102. 
           "Security certificate," section 336.8-102. 
           "Security entitlement," section 336.8-102. 
           "Uncertificated security," section 336.8-102. 
           (4) In addition article 1 contains general definitions and 
        principles of construction and interpretation applicable 
        throughout this article. 
           Sec. 3.  Minnesota Statutes 1994, section 336.9-106, is 
        amended to read: 
           336.9-106 [DEFINITIONS:  "ACCOUNT"; "GENERAL INTANGIBLES".] 
           "Account" means any right to payment for goods sold or 
        leased or for services rendered which is not evidenced by an 
        instrument or chattel paper whether or not it has been earned by 
        performance.  "General intangibles" means any personal property 
        (including things in action) other than goods, accounts, chattel 
        paper, documents, instruments, investment property, and money.  
        All rights earned or unearned under a charter or other contract 
        involving the use or hire of a vessel and all rights incident to 
        the charter or contract are accounts. 
           Sec. 4.  [336.9-115] [INVESTMENT PROPERTY.] 
           In this article:  
           (a) "Commodity account" means an account maintained by a 
        commodity intermediary in which a commodity contract is carried 
        for a commodity customer. 
           (b) "Commodity contract" means a commodity futures 
        contract, an option on a commodity futures contract, a commodity 
        option, or other contract that, in each case, is:  
           (i) traded on or subject to the rules of a board of trade 
        that has been designated as a contract market for such a 
        contract pursuant to the federal commodities laws; or 
           (ii) traded on a foreign commodity board of trade, 
        exchange, or market, and is carried on the books of a commodity 
        intermediary for a commodity customer. 
           (c) "Commodity customer" means a person for whom a 
        commodity intermediary carries a commodity contract on its books.
           (d) "Commodity intermediary" means:  
           (i) a person who is registered as a futures commission 
        merchant under the federal commodities laws; or 
           (ii) a person who in the ordinary course of its business 
        provides clearance or settlement services for a board of trade 
        that has been designated as a contract market pursuant to the 
        federal commodities laws.  
           (e) "Control" with respect to a certificated security, 
        uncertificated security, or security entitlement has the meaning 
        specified in section 336.8-106.  A secured party has control 
        over a commodity contract if, by agreement among the commodity 
        customer, the commodity intermediary, and the secured party, the 
        commodity intermediary has agreed that it will apply any value 
        distributed on account of the commodity contract as directed by 
        the secured party without further consent by the commodity 
        customer.  If a commodity customer grants a security interest in 
        a commodity contract to its own commodity intermediary, the 
        commodity intermediary as secured party has control.  A secured 
        party has control over a securities account or commodity account 
        if the secured party has control over all security entitlements 
        or commodity contracts carried in the securities account or 
        commodity account.  
           (f) "Investment property" means:  
           (i) a security, whether certificated or uncertificated; 
           (ii) a security entitlement; 
           (iii) a securities account; 
           (iv) a commodity contract; or 
           (v) a commodity account.  
           (2) Attachment or perfection of a security interest in a 
        securities account is also attachment or perfection of a 
        security interest in all security entitlements carried in the 
        securities account.  Attachment or perfection of a security 
        interest in a commodity account is also attachment or perfection 
        of a security interest in all commodity contracts carried in the 
        commodity account.  
           (3) A description of collateral in a security agreement or 
        financing statement is sufficient to create or perfect a 
        security interest in a certificated security, uncertificated 
        security, security entitlement, securities account, commodity 
        contract, or commodity account whether it describes the 
        collateral by those terms, or as investment property, or by 
        description of the underlying security, financial asset, or 
        commodity contract.  A description of investment property 
        collateral in a security agreement or financing statement is 
        sufficient if it identifies the collateral by specific listing, 
        by category, by quantity, by a computational or allocational 
        formula or procedure, or by any other method, if the identity of 
        the collateral is objectively determinable.  
           (4) Perfection of a security interest in investment 
        property is governed by the following rules:  
           (a) A security interest in investment property may be 
        perfected by control.  
           (b) Except as otherwise provided in paragraphs (c) and (d), 
        a security interest in investment property may be perfected by 
        filing.  
           (c) If the debtor is a broker or securities intermediary, a 
        security interest in investment property is perfected when it 
        attaches.  The filing of a financing statement with respect to a 
        security interest in investment property granted by a broker or 
        securities intermediary has no effect for purposes of perfection 
        or priority with respect to that security interest.  
           (d) If a debtor is a commodity intermediary, a security 
        interest in a commodity contract or a commodity account is 
        perfected when it attaches.  The filing of a financing statement 
        with respect to a security interest in a commodity contract or a 
        commodity account granted by a commodity intermediary has no 
        effect for purposes of perfection or priority with respect to 
        that security interest.  
           (5) Priority between conflicting security interests in the 
        same investment property is governed by the following rules: 
           (a) A security interest of a secured party who has control 
        over investment property has priority over a security interest 
        of a secured party who does not have control over the investment 
        property.  
           (b) Except as otherwise provided in paragraphs (c) and (d), 
        conflicting security interests of secured parties each of whom 
        has control rank equally.  
           (c) Except as otherwise agreed by the securities 
        intermediary, a security interest in a security entitlement or a 
        securities account granted to the debtor's own securities 
        intermediary has priority over any security interest granted by 
        the debtor to another secured party.  
           (d) Except as otherwise agreed by the commodity 
        intermediary, a security interest in a commodity contract or a 
        commodity account granted to the debtor's own commodity 
        intermediary has priority over any security interest granted by 
        the debtor to another secured party. 
           (e) Conflicting security interests granted by a broker, a 
        securities intermediary, or a commodity intermediary which are 
        perfected without control rank equally.  
           (f) In all other cases, priority between conflicting 
        security interests in investment property is governed by section 
        336.9-312(5), (6), and (7).  Section 336.9-312(4) does not apply 
        to investment property.  
           (6) If a security certificate in registered form is 
        delivered to a secured party pursuant to agreement, a written 
        security agreement is not required for attachment or 
        enforceability of the security interest, delivery suffices for 
        perfection of the security interest, and the security interest 
        has priority over a conflicting security interest perfected by 
        means other than control, even if a necessary endorsement is 
        lacking. 
           Sec. 5.  [336.9-116] [SECURITY INTEREST ARISING IN PURCHASE 
        OR DELIVERY OF FINANCIAL ASSET.] 
           (1) If a person buys a financial asset through a securities 
        intermediary in a transaction in which the buyer is obligated to 
        pay the purchase price to the securities intermediary at the 
        time of the purchase, and the securities intermediary credits 
        the financial asset to the buyer's securities account before the 
        buyer pays the securities intermediary, the securities 
        intermediary has a security interest in the buyer's security 
        entitlement securing the buyer's obligation to pay.  A security 
        agreement is not required for attachment or enforceability of 
        the security interest, and the security interest is 
        automatically perfected. 
           (2) If a certificated security, or other financial asset 
        represented by a writing which in the ordinary course of 
        business is transferred by delivery with any necessary 
        endorsement or assignment is delivered pursuant to an agreement 
        between persons in the business of dealing with such securities 
        or financial assets and the agreement calls for delivery versus 
        payment, the person delivering the certificate or other 
        financial asset has a security interest in the certificated 
        security or other financial asset securing the seller's right to 
        receive payment.  A security agreement is not required for 
        attachment or enforceability of the security interest, and the 
        security interest is automatically perfected.  
           Sec. 6.  Minnesota Statutes 1994, section 336.9-203, is 
        amended to read: 
           336.9-203 [ATTACHMENT AND ENFORCEABILITY OF SECURITY 
        INTEREST; PROCEEDS; FORMAL REQUISITES.] 
           (1) Subject to the provisions of section 336.4-210 on the 
        security interest of a collecting bank, section 336.8-321 
        sections 336.9-115 and 336.9-116 on security interests 
        in securities investment property and section 336.9-113 on a 
        security interest arising under the article on sales, a security 
        interest is not enforceable against the debtor or third parties 
        with respect to the collateral and does not attach unless: 
           (a) the collateral is in the possession of the secured 
        party pursuant to agreement, the collateral is investment 
        property and the secured party has control pursuant to 
        agreement, or the debtor has signed a security agreement which 
        contains a description of the collateral and, in addition, when 
        the security interest covers crops growing or to be grown or 
        timber to be cut, a description of the land concerned; 
           (b) value has been given; and 
           (c) the debtor has rights in the collateral. 
           (2) A security interest attaches when it becomes 
        enforceable against the debtor with respect to the collateral.  
        Attachment occurs as soon as all of the events specified in 
        subsection (1) have taken place unless explicit agreement 
        postpones the time of attaching. 
           (3) Unless otherwise agreed a security agreement gives the 
        secured party the rights to proceeds provided by section 
        336.9-306. 
           (4) A transaction, although subject to this article, is 
        also subject to Minnesota Statutes, Sections 48.153 to 48.157; 
        Chapters 52, 53, and 56; and Sections 168.66 to 168.77, 222.13 
        to 222.16, and 334.01 to 334.06, and in the case of conflict 
        between the provisions of this article and any such statute, the 
        provisions of such statute control.  Failure to comply with any 
        applicable statute has only the effect which is specified 
        therein. 
           Sec. 7.  Minnesota Statutes 1994, section 336.9-301, is 
        amended to read: 
           336.9-301 [PERSONS WHO TAKE PRIORITY OVER UNPERFECTED 
        SECURITY INTERESTS; RIGHT OF "LIEN CREDITOR."] 
           (1) Except as otherwise provided in subsection (2), an 
        unperfected security interest is subordinate to the rights of 
           (a) persons entitled to priority under section 336.9-312; 
           (b) a person who becomes a lien creditor before the 
        security interest is perfected; 
           (c) in the case of goods, instruments, documents, and 
        chattel paper, a person who is not a secured party and who is a 
        transferee in bulk or other buyer not in ordinary course of 
        business, or is a buyer of farm products in the ordinary course 
        of business, to the extent that the person gives value and 
        receives delivery of the collateral without knowledge of the 
        security interest and before it is perfected; 
           (d) in the case of accounts and, general intangibles, and 
        investment property, a person who is not a secured party and who 
        is a transferee to the extent that the person gives value 
        without knowledge of the security interest and before it is 
        perfected. 
           (2) If the secured party files with respect to a purchase 
        money security interest before or within 20 days after the 
        debtor receives possession of the collateral, the secured party 
        takes priority over the rights of a transferee in bulk or of a 
        lien creditor which arise between the time the security interest 
        attaches and the time of filing. 
           (3) A "lien creditor" means a creditor who has acquired a 
        lien on the property involved by attachment, levy or the like 
        and includes an assignee for benefit of creditors from the time 
        of assignment, and a trustee in bankruptcy from the date of the 
        filing of the petition or a receiver in equity from the time of 
        appointment. 
           (4) A person who becomes a lien creditor while a security 
        interest is perfected takes subject to the security interest 
        only to the extent that it secures advances made before the 
        person becomes a lien creditor or within 45 days thereafter or 
        made without knowledge of the lien or pursuant to a commitment 
        entered into without knowledge of the lien. 
           Sec. 8.  Minnesota Statutes 1994, section 336.9-302, is 
        amended to read: 
           336.9-302 [WHEN FILING IS REQUIRED TO PERFECT SECURITY 
        INTEREST; SECURITY INTERESTS TO WHICH FILING PROVISIONS OF THIS 
        ARTICLE DO NOT APPLY.] 
           (1) A financing statement must be filed to perfect all 
        security interest except the following: 
           (a) A security interest in collateral in possession of the 
        secured party under section 336.9-305; 
           (b) A security interest temporarily perfected in 
        instruments, certificated securities, or documents without 
        delivery under section 336.9-304 or in proceeds for a 20 day 
        period under section 336.9-306; 
           (c) A security interest created by an assignment of a 
        beneficial interest in a trust or a decedent's estate; 
           (d) A purchase money security interest in consumer goods; 
        but filing is required for a motor vehicle required to be 
        registered; and fixture filing is required for priority over 
        conflicting interests in fixtures to the extent provided in 
        section 336.9-313; 
           (e) An assignment of accounts which does not alone or in 
        conjunction with other assignments to the same assignee transfer 
        a significant part of the outstanding accounts of the assignor; 
           (f) A security interest of a collecting bank (section 
        336.4-210) or in securities (section 336.8-321) or arising under 
        the article on sales (see section 336.9-113) or covered in 
        subsection (3) of this section; 
           (g) An assignment for the benefit of all the creditors of 
        the transferor, and subsequent transfers by the assignee 
        thereunder; 
           (h) A security interest in investment property which is 
        perfected without filing under section 336.9-115 or 336.9-116. 
           (2) If a secured party assigns a perfected security 
        interest, no filing under this article is required in order to 
        continue the perfected status of the security interest against 
        creditors of and transferees from the original debtor. 
           (3) The filing of a financing statement otherwise required 
        by this article is not necessary or effective to perfect a 
        security interest in property subject to the following statutes 
        or treaties; except that to the extent such statutes or treaties 
        are silent on a specific matter, the provisions of this article 
        shall govern: 
           (a) a statute or treaty of the United States which provides 
        for a national or international registration or a national or 
        international certificate of title or which specifies a place of 
        filing different from that specified in this article for filing 
        of the security interest; or 
           (b) the following statutes of this state; 
           (i) Sections 168A.01 to 168A.31 and 86B.820 to 86B.920; but 
        during any period in which collateral is inventory held for sale 
        by a person who is in the business of selling goods of that 
        kind, the filing provisions of this article (part 4) apply to a 
        security interest in that collateral created by the person as a 
        debtor; or 
           (ii) Sections 300.11 to 300.115. 
           (c) a certificate of title statute of another jurisdiction 
        under the law of which indication of a security interest on the 
        certificate is required as a condition of perfection (subsection 
        (2) of section 336.9-103). 
           (4) Compliance with a statute or treaty described in 
        subsection (3) is equivalent to the filing of a financing 
        statement under this article, and a security interest in 
        property subject to the statute or treaty can be perfected only 
        by compliance therewith except as provided in section 336.9-103 
        on multiple state transactions.  A security interest perfected 
        by compliance with such a statute or treaty is governed by this 
        article in all respects not inconsistent with the provisions of 
        the statute or treaty under which it was perfected, provided 
        that this article shall not be deemed inconsistent if it 
        provides for a more extensive duration of effectiveness. 
           Sec. 9.  Minnesota Statutes 1994, section 336.9-304, is 
        amended to read: 
           336.9-304 [PERFECTION OF SECURITY INTEREST IN INSTRUMENTS, 
        DOCUMENTS, AND GOODS COVERED BY DOCUMENTS; PERFECTION BY 
        PERMISSIVE FILING; TEMPORARY PERFECTION WITHOUT FILING OR 
        TRANSFER OF POSSESSION.] 
           (1) A security interest in chattel paper or negotiable 
        documents may be perfected by filing.  A security interest in 
        money or instruments (other than certificated securities or 
        instruments which constitute part of chattel paper) can be 
        perfected only by the secured party's taking possession, except 
        as provided in subsections (4) and (5) of this section and 
        subsections (2) and (3) of section 336.9-306 on proceeds. 
           (2) During the period that goods are in the possession of 
        the issuer of a negotiable document therefor, a security 
        interest in the goods is perfected by perfecting a security 
        interest in the document, and any security interest in the goods 
        otherwise perfected during such period is subject thereto. 
           (3) A security interest in goods in the possession of a 
        bailee other than one who has issued a negotiable document 
        therefor is perfected by issuance of a document in the name of 
        the secured party or by the bailee's receipt of notification of 
        the secured party's interest or by filing as to the goods. 
           (4) A security interest in instruments (other than 
        certificated securities), certificated securities, or negotiable 
        documents is perfected without filing or the taking of 
        possession for a period of 21 days from the time it attaches to 
        the extent that it arises for new value given under a written 
        security agreement. 
           (5) A security interest remains perfected for a period of 
        21 days without filing where a secured party having a perfected 
        security interest in an instrument (other than a certificated 
        security), a certificated security, a negotiable document, or 
        goods in possession of a bailee other than one who has issued a 
        negotiable document therefor: 
           (a) makes available to the debtor the goods or documents 
        representing the goods for the purpose of ultimate sale or 
        exchange or for the purpose of loading, unloading, storing, 
        shipping, transshipping, manufacturing, processing or otherwise 
        dealing with them in a manner preliminary to their sale or 
        exchange but priority between conflicting security interests in 
        the goods is subject to subsection (3) of section 336.9-312; or 
           (b) delivers the instrument or certificated security to the 
        debtor for the purpose of ultimate sale or exchange or of 
        presentation, collection, renewal, or registration of transfer. 
           (6) After the 21 day period in subsections (4) and (5) 
        perfection depends upon compliance with applicable provisions of 
        this article. 
           Sec. 10.  Minnesota Statutes 1994, section 336.9-305, is 
        amended to read: 
           336.9-305 [WHEN POSSESSION BY SECURED PARTY PERFECTS 
        SECURITY INTEREST WITHOUT FILING.] 
           A security interest in letters of credit and advices of 
        credit (subsection (2) (a) of section 336.5-116), goods, 
        instruments (other than certificated securities), money, 
        negotiable documents, or chattel paper may be perfected by the 
        secured party's taking possession of the collateral.  If such 
        collateral other than goods covered by a negotiable document is 
        held by a bailee, the secured party is deemed to have possession 
        from the time the bailee receives notification of the secured 
        party's interest.  A security interest is perfected by 
        possession from the time possession is taken without relation 
        back and continues only so long as possession is retained, 
        unless otherwise specified in this article.  The security 
        interest may be otherwise perfected as provided in this article 
        before or after the period of possession by the secured party. 
           Sec. 11.  Minnesota Statutes 1994, section 336.9-306, is 
        amended to read: 
           336.9-306 ["PROCEEDS"; SECURED PARTY'S RIGHTS ON 
        DISPOSITION OF COLLATERAL.] 
           (1) "Proceeds" includes whatever is received upon the sale, 
        exchange, collection or other disposition of collateral or 
        proceeds.  Insurance payable by reason of loss or damage to the 
        collateral is proceeds, except to the extent that it is payable 
        to a person other than a party to the security agreement.  Any 
        payments or distributions made with respect to investment 
        property collateral are proceeds.  Money, checks, deposit 
        accounts, and the like, are "cash proceeds."  All other proceeds 
        are "noncash proceeds." 
           (2) Except where this article otherwise provides, a 
        security interest continues in collateral notwithstanding sale, 
        exchange or other disposition thereof unless the disposition was 
        authorized by the secured party in the security agreement or 
        otherwise, and also continues in any identifiable proceeds 
        including collections received by the debtor. 
           (3) The security interest in proceeds is a continuously 
        perfected security interest if the interest in the original 
        collateral was perfected but it ceases to be a perfected 
        security interest and becomes unperfected 20 days after receipt 
        of the proceeds by the debtor unless 
           (a) a filed financing statement covers the original 
        collateral and the proceeds are collateral in which a security 
        interest may be perfected by filing in the office or offices 
        where the financing statement has been filed and, if the 
        proceeds are acquired with cash proceeds, the description of 
        collateral in the financing statement indicates the types of 
        property constituting the proceeds; or 
           (b) a filed financing statement covers the original 
        collateral and the proceeds are identifiable cash proceeds; or 
           (c) the original collateral was investment property and the 
        proceeds are identifiable cash proceeds; or 
           (d) the security interest in the proceeds is perfected 
        before the expiration of the 20 day period. 
           Except as provided in this section, a security interest in 
        proceeds can be perfected only by the methods or under the 
        circumstances permitted in this article for original collateral 
        of the same type. 
           (4) In the event of insolvency proceedings instituted by or 
        against a debtor, a secured party with a perfected security 
        interest in proceeds has a perfected security interest only in 
        the following proceeds: 
           (a) in identifiable noncash proceeds and in separate 
        deposit accounts containing only proceeds; 
           (b) in identifiable cash proceeds in the form of money 
        which is neither commingled with other money nor deposited in a 
        deposit account prior to the insolvency proceedings; 
           (c) in identifiable cash proceeds in the form of checks and 
        the like which are not deposited in a deposit account prior to 
        the insolvency proceedings; and 
           (d) in all cash and deposit accounts of the debtor, in 
        which proceeds have been commingled with other funds, but the 
        perfected security interest under this paragraph (d) is 
           (i) subject to any right of setoff; and 
           (ii) limited to an amount not greater than the amount of 
        any cash proceeds received by the debtor within 20 days before 
        the institution of the insolvency proceedings less the sum of 
        (I) the payments to the secured party on account of cash 
        proceeds received by the debtor during such period and (II) the 
        cash proceeds received by the debtor during such period to which 
        the secured party is entitled under paragraphs (a) to (c) of 
        this subsection (4). 
           (5) If a sale of goods results in an account or chattel 
        paper which is transferred by the seller to a secured party, and 
        if the goods are returned to or are repossessed by the seller or 
        the secured party, the following rules determine priorities: 
           (a) If the goods were collateral at the time of sale for an 
        indebtedness of the seller which is still unpaid, the original 
        security interest attaches again to the goods and continues as a 
        perfected security interest if it was perfected at the time when 
        the goods were sold.  If the security interest was originally 
        perfected by a filing which is still effective, nothing further 
        is required to continue the perfected status; in any other case, 
        the secured party must take possession of the returned or 
        repossessed goods or must file. 
           (b) An unpaid transferee of the chattel paper has a 
        security interest in the goods against the transferor.  Such 
        security interest is prior to a security interest asserted under 
        paragraph (a) to the extent that the transferee of the chattel 
        paper was entitled to priority under section 336.9-308. 
           (c) An unpaid transferee of the account has a security 
        interest in the goods against the transferor.  Such security 
        interest is subordinate to a security interest asserted under 
        paragraph (a). 
           (d) A security interest of an unpaid transferee asserted 
        under paragraph (b) or (c) must be perfected for protection 
        against creditors of the transferor and purchasers of the 
        returned or repossessed goods. 
           Sec. 12.  Minnesota Statutes 1994, section 336.9-309, is 
        amended to read: 
           336.9-309 [PROTECTION OF PURCHASERS OF INSTRUMENTS, 
        DOCUMENTS, AND SECURITIES.] 
           Nothing in this article limits the rights of a holder in 
        due course of a negotiable instrument (section 336.3-302) or a 
        holder to whom a negotiable document of title has been duly 
        negotiated (section 336.7-501) or a bona fide protected 
        purchaser of a security (section 336.8-302 336.8-303) and the 
        holders or purchasers take priority over an earlier security 
        interest even though perfected.  Filing under this article does 
        not constitute notice of the security interest to the holders or 
        purchasers. 
           Sec. 13.  Minnesota Statutes 1994, section 336.9-312, is 
        amended to read: 
           336.9-312 [PRIORITIES AMONG CONFLICTING SECURITY INTERESTS 
        IN THE SAME COLLATERAL.] 
           (1) The rules of priority stated in other sections of this 
        part and in the following sections shall govern when 
        applicable:  section 336.4-210 with respect to the security 
        interests of collecting banks in items being collected, 
        accompanying documents and proceeds; section 336.9-103 on 
        security interests related to other jurisdictions; section 
        336.9-114 on consignments; section 336.9-115 on security 
        interests in investment property. 
           (2) A perfected security interest in crops for new value 
        given to enable the debtor to produce the crops during the 
        production season and given not more than three months before 
        the crops become growing crops by planting or otherwise takes 
        priority over an earlier perfected security interest to the 
        extent that such earlier interest secures obligations due more 
        than six months before the crops become growing crops by 
        planting or otherwise, even though the person giving new value 
        had knowledge of the earlier security interest. 
           (3) A perfected purchase money security interest in 
        inventory has priority over a conflicting security interest in 
        the same inventory and also has priority in identifiable cash 
        proceeds received on or before the delivery of the inventory to 
        a buyer if 
           (a) the purchase money security interest is perfected at 
        the time the debtor receives possession of the inventory; and 
           (b) the purchase money secured party gives notification in 
        writing to the holder of the conflicting security interest if 
        the holder had filed a financing statement covering the same 
        types of inventory (i) before the date of the filing made by the 
        purchase money secured party, or (ii) before the beginning of 
        the 21 day period where the purchase money security interest is 
        temporarily perfected without filing or possession (subsection 
        (5) of section 336.9-304); and 
           (c) the holder of the conflicting security interest 
        receives the notification within five years before the debtor 
        receives possession of the inventory; and 
           (d) the notification states that the person giving the 
        notice has or expects to acquire a purchase money security 
        interest in inventory of the debtor, describing such inventory 
        by item or type. 
           (4) A purchase money security interest in collateral other 
        than inventory has priority over a conflicting security interest 
        in the same collateral or its proceeds if the purchase money 
        security interest is perfected at the time the debtor receives 
        possession of the collateral or within 20 days thereafter. 
           (5) In all cases not governed by other rules stated in this 
        section (including cases of purchase money security interests 
        which do not qualify for the special priorities set forth in 
        subsections (3) and (4) of this section), priority between 
        conflicting security interests in the same collateral shall be 
        determined according to the following rules: 
           (a) Conflicting security interests rank according to 
        priority in time of filing or perfection.  Priority dates from 
        the time a filing is first made covering the collateral or the 
        time the security interest is first perfected, whichever is 
        earlier, provided that there is no period thereafter when there 
        is neither filing nor perfection. 
           (b) so long as conflicting security interests are 
        unperfected, the first to attach has priority. 
           (6) For the purposes of subsection (5) a date of filing or 
        perfection as to collateral is also a date of filing or 
        perfection as to proceeds. 
           (7) If future advances are made while a security interest 
        is perfected by filing, the taking of possession, or under 
        section 336.8-321 on securities 336.9-115 or 336.9-116 on 
        investment property, the security interest has the same priority 
        for the purposes of subsection (5) with respect to the future 
        advances as it does with respect to the first advance.  If a 
        commitment is made before or while the security interest is so 
        perfected, the security interest has the same priority with 
        respect to advances made pursuant thereto.  In other cases a 
        perfected security interest has priority from the date the 
        advance is made. 
                                   ARTICLE 3 
               Conforming Amendments to Articles 1, 4, 5, and 10
           Section 1.  Minnesota Statutes 1994, section 336.1-105, is 
        amended to read: 
           336.1-105 [TERRITORIAL APPLICATION OF THE CHAPTER; PARTIES' 
        POWER TO CHOOSE APPLICABLE LAW.] 
           (1) Except as provided hereafter in this section, when a 
        transaction bears a reasonable relation to this state and also 
        to another state or nation the parties may agree that the law 
        either of this state or of such other state or nation shall 
        govern their rights and duties.  Failing such agreement this 
        chapter applies to transactions bearing an appropriate relation 
        to this state. 
           (2) Where one of the following provisions of this chapter 
        specifies the applicable law, that provision governs and a 
        contrary agreement is effective only to the extent permitted by 
        the law (including the conflict of laws rules) so specified: 
           Rights of creditors against sold goods.  Section 336.2-402. 
           Applicability of the article on leases.  Sections 
        336.2A-105 and 336.2A-106.  
           Applicability of the article on bank deposits and 
        collections.  Section 336.4-102. 
           Governing law in the article on funds transfers.  Section 
        336.4A-507. 
           Applicability of the article on investment securities. 
        Section 336.8-106 336.8-110. 
           Perfection provisions of the article on secured 
        transactions.  Section 336.9-103. 
           Sec. 2.  Minnesota Statutes 1994, section 336.1-206, is 
        amended to read: 
           336.1-206 [STATUTE OF FRAUDS FOR KINDS OF PERSONAL PROPERTY 
        NOT OTHERWISE COVERED.] 
           (1) Except in the cases described in subsection (2) of this 
        section a contract for the sale of personal property is not 
        enforceable by way of action or defense beyond $5,000 in amount 
        or value of remedy unless there is some writing which indicates 
        that a contract for sale has been made between the parties at a 
        defined or stated price, reasonably identifies the subject 
        matter, and is signed by the party against whom enforcement is 
        sought or by that party's authorized agent.  
           (2) Subsection (1) of this section does not apply to 
        contracts for the sale of goods (section 336.2-201) nor of 
        securities (section 336.8-319 336.8-113) nor to security 
        agreements (section 336.9-203).  
           Sec. 3.  Minnesota Statutes 1994, section 336.4-104, is 
        amended to read: 
           336.4-104 [DEFINITIONS AND INDEX OF DEFINITIONS.] 
           (a) In this article, unless the context otherwise requires: 
           (1) "Account" means any deposit or credit account with a 
        bank, including a demand, time, savings, passbook, share draft, 
        or like account, other than an account evidenced by a 
        certificate of deposit; 
           (2) "Afternoon" means the period of a day between noon and 
        midnight; 
           (3) "Banking day" means that part of any day, excluding 
        Saturday, Sunday, and holidays, on which a bank is open to the 
        public for carrying on substantially all of its banking 
        functions; 
           (4) "Clearinghouse" means an association of banks or other 
        payors regularly clearing items; 
           (5) "Customer" means a person having an account with a bank 
        or for whom a bank has agreed to collect items, including a bank 
        that maintains an account at another bank; 
           (6) "Documentary draft" means a draft to be presented for 
        acceptance or payment if specified documents, certificated 
        securities (section 336.8-102) or instructions for 
        uncertificated securities (section 336.8-308 336.8-102), or 
        other certificates, statements, or the like are to be received 
        by the drawee or other payor before acceptance or payment of the 
        draft; 
           (7) "Draft" means a draft as defined in section 336.3-104 
        or an item, other than an instrument, that is an order; 
           (8) "Drawee" means a person ordered in a draft to make 
        payment; 
           (9) "Item" means an instrument or a promise or order to pay 
        money handled by a bank for collection or payment.  The term 
        does not include a payment order governed by article 4A or a 
        credit or debit card slip; 
           (10) "Midnight deadline" with respect to a bank is midnight 
        on its next banking day following the banking day on which it 
        receives the relevant item or notice or from which the time for 
        taking action commences to run, whichever is later; 
           (11) "Settle" means to pay in cash, by clearinghouse 
        settlement, in a charge or credit or by remittance, or otherwise 
        as agreed.  A settlement may be either provisional or final; 
           (12) "Suspends payments" with respect to a bank means that 
        it has been closed by order of the supervisory authorities, that 
        a public officer has been appointed to take it over, or that it 
        ceases or refuses to make payments in the ordinary course of 
        business. 
           (b) Other definitions applying to this article and the 
        sections in which they appear are: 
           "Agreement for electronic presentment," section 336.4-110 
           "Bank," section 336.4-105 
           "Collecting bank," section 336.4-105 
           "Depositary bank," section 336.4-105 
           "Intermediary bank," section 336.4-105 
           "Payor bank," section 336.4-105 
           "Presenting bank," section 336.4-105 
           "Presentment notice," section 336.4-110 
           (c) The following definitions in other articles apply to 
        this article: 
           "Acceptance," section 336.3-409 
           "Alteration," section 336.3-407 
           "Cashier's check," section 336.3-104 
           "Certificate of deposit," section 336.3-104 
           "Certified check," section 336.3-409 
           "Check," section 336.3-104 
           "Good faith," section 336.3-103 
           "Holder in due course," section 336.3-302 
           "Instrument," section 336.3-104 
           "Notice of dishonor," section 336.3-503 
           "Order," section 336.3-103 
           "Ordinary care," section 336.3-103 
           "Person entitled to enforce," section 336.3-301 
           "Presentment," section 336.3-501 
           "Promise," section 336.3-103 
           "Prove," section 336.3-103 
           "Teller's check," section 336.3-104 
           "Unauthorized signature," section 336.3-403 
           (d) In addition, article 1 contains general definitions and 
        principles of construction and interpretation applicable 
        throughout this article. 
           Sec. 4.  Minnesota Statutes 1994, section 336.5-114, is 
        amended to read: 
           336.5-114 [ISSUER'S DUTY AND PRIVILEGE TO HONOR; RIGHT TO 
        REIMBURSEMENT.] 
           (1) An issuer must honor a draft or demand for payment 
        which complies with the terms of the relevant credit regardless 
        of whether the goods or documents conform to the underlying 
        contract for sale or other contract between the customer and the 
        beneficiary.  The issuer is not excused from honor of such a 
        draft or demand by reason of an additional general term that all 
        documents must be satisfactory to the issuer, but an issuer may 
        require that specified documents must be satisfactory to it. 
           (2) Unless otherwise agreed when documents appear on their 
        face to comply with the terms of a credit but a required 
        document does not in fact conform to the warranties made on 
        negotiation or transfer of a document of title (section 
        336.7-507) or of a certificated security (section 336.8-306 
        336.8-108) or is forged or fraudulent or there is fraud in the 
        transaction: 
           (a) the issuer must honor the draft on demand for payment 
        if honor is demanded by a negotiating bank or other holder of 
        the draft or demand which has taken the draft or demand under 
        the credit and under circumstances which would make it a holder 
        in due course (section 336.3-302) and in an appropriate case 
        would make it a person to whom a document of title has been duly 
        negotiated (section 336.7-502) or a bona fide purchaser of a 
        certificated security (section 336.8-302); and 
           (b) in all other cases as against its customer, an issuer 
        acting in good faith may honor the draft or demand for payment 
        despite notification from the customer of fraud, forgery or 
        other defect not apparent on the face of the documents but a 
        court of appropriate jurisdiction may enjoin such honor. 
           (3) Unless otherwise agreed an issuer which has duly 
        honored a draft or demand for payment is entitled to immediate 
        reimbursement of any payment made under the credit and to be put 
        in effectively available funds not later than the day before 
        maturity of any acceptance made under the credit. 
           (4) When a credit provides for payment by the issuer on 
        receipt of notice that the required documents are in the 
        possession of a correspondent or other agent of the issuer 
           (a) any payment made on receipt of such notice is 
        conditional; and 
           (b) the issuer may reject documents which do not comply 
        with the credit if it does so within three banking days 
        following its receipt of the documents; and 
           (c) in the event of such rejection, the issuer is entitled 
        by chargeback or otherwise to return of the payment made. 
           (5) In the case covered by subsection (4) failure to reject 
        documents within the time specified in subparagraph (b) 
        constitutes acceptance of the documents and makes the payment 
        final in favor of the beneficiary. 
           Sec. 5.  Minnesota Statutes 1994, section 336.10-104, is 
        amended to read: 
           336.10-104 [LAWS NOT REPEALED.] 
           (1) The article on documents of title (article 7) does not 
        repeal or modify any laws prescribing the form or contents of 
        documents of title or the services or facilities to be afforded 
        by bailees, or otherwise regulating bailees' businesses in 
        respects not specifically dealt with herein; but the fact that 
        such laws are violated does not affect the status of a document 
        of title which otherwise complies with the definition of a 
        document of title (section 336.1-201).  
           (2) This chapter does not repeal Minnesota Statutes 1961, 
        Sections 520.21 to 520.31, cited as the uniform act for the 
        simplification of fiduciary security transfers, and if in any 
        respect there is any inconsistency between that act and the 
        article of this chapter on investment securities (article 8) the 
        provisions of the former act shall control. 
           Presented to the governor May 19, 1995 
           Signed by the governor May 22, 1995, 7:33 p.m.