400.8-503. Property interest of entitlement holder in financial asset held by securities intermediary.
Property interest of entitlement holder in financial asset held bysecurities intermediary.
400.8-503. (a) To the extent necessary for a securitiesintermediary to satisfy all security entitlements with respect to aparticular financial asset, all interests in that financial asset held bythe securities intermediary are held by the securities intermediary for theentitlement holders, are not property of the securities intermediary, andare not subject to claims of creditors of the securities intermediary,except as otherwise provided in section 400.8-511.
(b) An entitlement holder's property interest with respect to aparticular financial asset under subsection (a) is a pro rata propertyinterest in all interests in that financial asset held by the securitiesintermediary, without regard to the time the entitlement holder acquiredthe security entitlement or the time the securities intermediary acquiredthe interest in that financial asset.
(c) An entitlement holder's property interest with respect to aparticular financial asset under subsection (a) may be enforced against thesecurities intermediary only by exercise of the entitlement holder's rightsunder sections 400.8-505 through 400.8-508.
(d) An entitlement holder's property interest with respect to aparticular financial asset under subsection (a) may be enforced against apurchaser of the financial asset or interest therein only if:
(1) Insolvency proceedings have been initiated by or against thesecurities intermediary;
(2) The securities intermediary does not have sufficient interests inthe financial asset to satisfy the security entitlements of all of itsentitlement holders to that financial asset;
(3) The securities intermediary violated its obligations undersection 400.8-504 by transferring the financial asset or interest thereinto the purchaser; and
(4) The purchaser is not protected under subsection (e).
The trustee or other liquidator, acting on behalf of all entitlementholders having security entitlements with respect to a particular financialasset, may recover the financial asset, or interest therein, from thepurchaser. If the trustee or other liquidator elects not to pursue thatright, an entitlement holder whose security entitlement remains unsatisfiedhas the right to recover its interest in the financial asset from thepurchaser.
(e) An action based on the entitlement holder's property interestwith respect to a particular financial asset under subsection (a), whetherframed in conversion, replevin, constructive trust, equitable lien or othertheory, may not be asserted against any purchaser of a financial asset orinterest therein who gives value, obtains control, and does not act incollusion with the securities intermediary in violating the securitiesintermediary's obligations under section 400.8-504.
(L. 1997 S.B. 6)