Registration for Securities Investments

Commercial Code, Division 8, Chapter 4, deals with registration involving investment securities.  Section 8401 provides that, 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 is required to register the transfer as requested if the seven specified conditions are met.

In addition, 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.

Section 8402 authorizes an issuer to require the five specified assurances that each necessary endorsement or each instruction is genuine and authorized. An issuer may elect to require reasonable assurance beyond that specified in this section. The phrases “guaranty of the signature” and “appropriate evidence of appointment or incumbency.”

Section 8403 specifies that 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.

In addition, 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. In specified cases, the issuer must promptly communicate to the person who initiated the demand at the address provided in the demand and the person who presented the security for registration of transfer or initiated the instruction requesting registration of transfer a notification stating all of three specified items.

The period 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. 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, do either of the two specified acts.

Section 8404 specifies that 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 in any of the four specified circumstances. An issuer that is liable for wrongful registration of transfer on demand is required to provide the person entitled to the security with a like certificated or uncertificated security. 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.

Section 8405 specifies that, 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 is required to issue a new certificate if the owner does all of the specified acts. If, after the issue of a new security certificate, a protected purchaser of the original certificate presents it for registration of transfer, the issuer must register the transfer unless an overissue would result. 

Section 8406 says that, 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 or a claim to a new security certificate.

Section 8407 provides that 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.