41-08-08. (8-108) Warranties in direct holding

41-08-08. (8-108) Warranties in direct holding

1. 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:

a. The certificate is genuine and has not been materially altered;

b. The transferor or endorser does not know of any fact that might impair the validity

of the security;

c. There is no adverse claim to the security;

d. The transfer does not violate any restriction on transfer;

e. 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

f. The transfer is otherwise effective and rightful.

2. A person who originates an instruction for registration of transfer of an uncertificated

security to a purchaser for value warrants to the purchaser that:

a. 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;

b. The security is valid;

c. There is no adverse claim to the security; and

d. At the time the instruction is presented to the issuer:

(1) The purchaser will be entitled to the registration of transfer;

(2) The transfer will be registered by the issuer free from all liens, security

interests, restrictions, and claims other than those specified in the

instruction;

(3) The transfer will not violate any restriction on transfer; and

(4) The requested transfer will otherwise be effective and rightful.

3. 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:

a. The uncertificated security is valid;

b. There is no adverse claim to the security;

c. The transfer does not violate any restriction on transfer; and

d. The transfer is otherwise effective and rightful.

4. A person who endorses a security certificate warrants to the issuer that:

a. There is no adverse claim to the security; and

b. The endorsement is effective.

5. A person who originates an instruction for registration of transfer of an uncertificated

security warrants to the issuer that:

a. The instruction is effective; and

b. At the time the instruction is presented to the issuer the purchaser will be entitled

to the registration of transfer.

6. 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.

7. 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.

8. 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 7.

9. Except as otherwise provided in subsection 7, a broker acting for a customer makes to

the issuer and a purchaser the warranties provided in subsections 1 through 6. 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

es only the

warranties of an agent under subsection 7.

9. Except as otherwise provided in subsection 7, a broker acting for a customer makes to

the issuer and a purchaser the warranties provided in subsections 1 through 6. 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 1 or 2, 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.