HB 1248

 26.804.9  101st Legislative Session  1248
                                      2026 South Dakota Legislature
                                                 House Bill 1248
 Introduced by: Representative Auch
1 An Act to amend provisions of the Uniform Commercial Code.
2 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA:
3 Section 1. That § 57A-8-110 be AMENDED:
457A-8-110. (a) The local law of the issuer's jurisdiction, as specified in subsection
5    (d), governs:
6    (1)     The validity of a security;
7    (2)     The rights and duties of the issuer with respect to registration of transfer;
8    (3)     The effectiveness of registration of transfer by the issuer;
9    (4)     Whether the issuer owes any duties to an adverse claimant to a security; and
10    (5)     Whether an adverse claim can be asserted against a person to whom transfer of a
11certificated or uncertificated security is registered or a person who obtains control
12of an uncertificated security.
13(b) The local law of the securities intermediary's jurisdiction, as specified in
14    subsection (e), this state governs:
15    (1)     Acquisition of a security entitlement from the securities intermediary;
16    (2)     The rights and duties of the securities intermediary and entitlement holder arising
17out of a security entitlement;
18    (3)     Whether the securities intermediary owes any duties to an adverse claimant to a
19security entitlement; and
20    (4)     Whether an adverse claim can be asserted against a person who acquires a security
21entitlement from the securities intermediary or a person who purchases a security
22entitlement or interest therein from an entitlement holder.
23(c) The local law of the jurisdiction in which a security certificate is located at the
24    time of delivery governs whether an adverse claim can be asserted against a person to
25    whom the security certificate is delivered.
                                                                                Underscores indicate new language.
                                                                              Overstrikes indicate deleted language.
 26.804.9  2  1248
1(d) "Issuer's jurisdiction" means the jurisdiction under which the issuer of the
2    security is organized or, if permitted by the law of that jurisdiction, the law of another
3    jurisdiction specified by the issuer. An issuer organized under the law of this State may
4    specify the law of another jurisdiction as the law governing the matters specified in
5    subsection (a)(2) through (5).
6(e) The following rules determine a "securities intermediary's jurisdiction" for
7    purposes of this section:
8    (1)     If an agreement between the securities intermediary and its entitlement holder
9governing the securities account expressly provides that a particular jurisdiction is
10the securities intermediary's jurisdiction for purposes of this part, this article, or
11this chapter, that jurisdiction is the securities intermediary's jurisdiction.
12    (2)     If paragraph (1) does not apply and an agreement between the securities
13intermediary and its entitlement holder governing the securities account expressly
14provides that the agreement is governed by the law of a particular jurisdiction, that
15jurisdiction is the securities intermediary's jurisdiction.
16    (3)     If neither paragraph (1) nor paragraph (2) applies and an agreement between the
17securities intermediary and its entitlement holder governing the securities account
18expressly provides that the securities account is maintained at an office in a
19particular jurisdiction, that jurisdiction is the securities intermediary's jurisdiction.
20    (4)     If none of the preceding paragraphs applies, the securities intermediary's
21jurisdiction is the jurisdiction in which the office identified in an account statement
22as the office serving the entitlement holder's account is located.
23    (5)     If none of the preceding paragraphs applies, the securities intermediary's
24jurisdiction is the jurisdiction in which the chief executive office of the securities
25intermediary is located.
26    (f) A securities intermediary's jurisdiction is not determined by the physical location of
27certificates representing financial assets, or by the jurisdiction in which is organized
28the issuer of the financial asset with respect to which an entitlement holder has a
29security entitlement, or by the location of facilities for data processing or other
30record keeping concerning the account.
31(g) The local law of the issuer's jurisdiction or the securities intermediary's
32    jurisdiction governs a matter or transaction specified in subsection (a) or (b), even if the
33    matter or transaction does not bear any relation to the jurisdiction.
34 Section 2. That § 57A-8-503 be AMENDED:
                                                                                  Underscores indicate new language.
                                                                                Overstrikes indicate deleted language.
 26.804.9  3  1248
157A-8-503. (a) To the extent necessary for a securities intermediary to satisfy all
2    security entitlements with respect to a particular financial asset, all interests in that
3    financial asset held by the securities intermediary are held by the securities intermediary
4    for the entitlement holders, are not property of the securities intermediary, and are not
5    subject to claims of creditors of the securities intermediary, except as otherwise provided
6    in § 57A-8-511.
7(b) An entitlement holder's property interest with respect to a particular financial
8    asset under subsection (a) is a pro rata property interest in all interests in that financial
9    asset held by the securities intermediary, without regard to the time the entitlement
10    holder acquired the security entitlement or the time the securities intermediary acquired
11    the interest in that financial asset.
12(c) An entitlement holder's property interest with respect to a particular financial
13    asset under subsection (a) may be enforced against the securities intermediary only by
14    exercise of the entitlement holder's rights under §§ 57A-8-505 to 57A-8-508, inclusive.
15(d) An entitlement holder's property interest with respect to a particular financial
16    asset under subsection (a) may be enforced against a purchaser of the financial asset or
17    interest therein only if:
18    (1)     Insolvency proceedings have been initiated by or against the securities
19intermediary;
20    (2)     The securities intermediary does not have sufficient interests in the financial asset
21to satisfy the security entitlements of all of its entitlement holders to that financial
22asset;
23    (3)     The securities intermediary violated its obligations under § 57A-8-504 by
24transferring the financial asset or interest therein to the purchaser; and
25    (4)     The purchaser is not protected under subsection (e).
26The trustee or other liquidator, acting on behalf of all entitlement holders having
27    security entitlements with respect to a particular financial asset, may recover the financial
28    asset, or interest therein, from the purchaser. If the trustee or other liquidator elects not
29    to pursue that right, an entitlement holder whose security entitlement remains unsatisfied
30    has the right to recover its interest in the financial asset from the purchaser.
31(e) An action based on the entitlement holder's property interest with respect to a
32    particular financial asset under subsection (a), whether framed in conversion, replevin,
33    constructive trust, equitable lien, or other theory, may not be asserted against any
34    purchaser of a financial asset or interest therein who gives value, obtains control, and
                                                                                 Underscores indicate new language.
                                                                               Overstrikes indicate deleted language.
 26.804.9  4  1248
1    does not act in collusion with the securities intermediary in violating the securities
2    intermediary's obligations under § 57A-8-504.
3 Section 3. That § 57A-8-511 be AMENDED:
457A-8-511. (a) Except as otherwise provided in subsections (b) and (c), ifIf a
5    securities intermediary does not have sufficient interests in a particular financial asset to
6    satisfy both its obligations to entitlement holders who have security entitlements to that
7    financial asset and its obligation to a creditor of the securities intermediary who has a
8    security interest in that financial asset, the claims of entitlement holders, other than the
9    creditor, have priority over the claim of the creditor.
10(b) A claim of a creditor of a securities intermediary who has a security interest in
11    a financial asset held by a securities intermediary has priority over claims of the securities
12    intermediary's entitlement holders who have security entitlements with respect to that
13    financial asset if the creditor has control over the financial asset.
14(c) If a clearing corporation does not have sufficient financial assets to satisfy both
15    its obligations to entitlement holders who have security entitlements with respect to a
16    financial asset and its obligation to a creditor of the clearing corporation who has a security
17    interest in that financial asset, the claim of the creditor has priority over the claims of
18    entitlement holders.
19 Section 4. That § 57A-9-305 be AMENDED:
2057A-9-305. (a) Except as otherwise provided in subsection (c), the following rules
21    apply:
22    (1)      While a security certificate is located in a jurisdiction, the local law of that
23jurisdiction governs perfection, the effect of perfection or nonperfection, and the
24priority of a security interest in the certificated security represented thereby.;
25    (2)      The local law of the issuer's jurisdiction as specified in § 57A-8-110(d) governs
26perfection, the effect of perfection or nonperfection, and the priority of a security
27interest in an uncertificated security.;
28    (3)      The local law of the securities intermediary's jurisdiction as specified in § 57A-8-
29110(e) this state governs perfection, the effect of perfection or nonperfection, and
30the priority of a security interest in a security entitlement or securities account.;
31and
                                                                                 Underscores indicate new language.
                                                                               Overstrikes indicate deleted language.
 26.804.9  5  1248
1    (4)     The local law of the commodity intermediary's jurisdiction governs perfection, the
2effect of perfection or nonperfection, and the priority of a security interest in a
3commodity contract or commodity account.
4    (5)     Paragraphs (2), (3), and (4) apply even if the transaction does not bear any
5relation to the jurisdiction.
6(b) The following rules determine a commodity intermediary's jurisdiction for
7    purposes of this part:
8    (1)     If an agreement between the commodity intermediary and commodity customer
9governing the commodity account expressly provides that a particular jurisdiction
10is the commodity intermediary's jurisdiction for purposes of this part, this chapter,
11or the Uniform Commercial Code, that jurisdiction is the commodity intermediary's
12jurisdiction.;
13    (2)     If paragraph (1) does not apply and an agreement between the commodity
14intermediary and commodity customer governing the commodity account
15expressly provides that the agreement is governed by the law of a particular
16jurisdiction, that jurisdiction is the commodity intermediary's jurisdiction.;
17    (3)     If neither paragraph (1) nor paragraph (2) applies and an agreement between the
18commodity intermediary and commodity customer governing the commodity
19account expressly provides that the commodity account is maintained at an office
20in a particular jurisdiction, that jurisdiction is the commodity intermediary's
21jurisdiction.;
22    (4)     If none of the preceding paragraphs applies, the commodity intermediary's
23jurisdiction is the jurisdiction in which the office identified in an account statement
24as the office serving the commodity customer's account is located.;
25    (5)     If none of the preceding paragraphs applies, the commodity intermediary's
26jurisdiction is the jurisdiction in which the chief executive office of the commodity
27intermediary is located.; and
28(c) The local law of the jurisdiction in which the debtor is located governs:
29    (1)     perfection of a security interest in investment property by filing;
30    (2)     automatic perfection of a security interest in investment property created by a
31broker or securities intermediary; and
32    (3)     automatic perfection of a security interest in a commodity contract or commodity
33account created by a commodity intermediary.
                                                                                Underscores indicate new language.
                                                                              Overstrikes indicate deleted language.