Sec. 42a-8-108. Warranties in direct holding.
Sec. 42a-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) of this section.
(i) Except as otherwise provided in subsection (g) of this section, a broker acting
for a customer makes to the issuer and to a purchaser the warranties provided in subsections (a) to (f), inclusive, of this section. 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) of this
section, 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.
(P.A. 79-435, S. 7; P.A. 98-93, S. 1, 15.)
History: P.A. 98-93 entirely replaced former provisions re registration of pledge and release of uncertificated securities
with provisions re warranties in direct holding, a restatement in part of Sec. 42a-8-306, revised to 1997, effective July
1, 1998.