Printable Format84-8-510. Rights of purchaser of security entitlement from entitlement holder. (a) In a case not covered by the priority rules in article 9 or the rules stated in subsection (c), an action based on an adverse claim to a financial asset or security entitlement, whether framed in conversion, replevin, constructive trust, equitable lien or other theory, may not be asserted against a person who purchases a security entitlement, or an interest therein, from an entitlement holder if the purchaser gives value, does not have notice of the adverse claim and obtains control.
(b) If an adverse claim could not have been asserted against an entitlement holder under K.S.A. 84-8-502, and amendments thereto, the adverse claim cannot be asserted against a person who purchases a security entitlement, or an interest therein, from the entitlement holder.
(c) In a case not covered by the priority rules in article 9, a purchaser for value of a security entitlement, or an interest therein, who obtains control has priority over a purchaser of a security entitlement, or an interest therein, who does not obtain control. Except as otherwise provided in subsection (d), purchasers who have control rank according to priority in time of:
(1) The purchaser's becoming the person for whom the securities account, in which the security entitlement is carried, is maintained, if the purchaser obtained control under K.S.A. 84-8-106(d)(1), and amendments thereto;
(2) the securities intermediary's agreement to comply with the purchaser's entitlement orders with respect to security entitlements carried or to be carried in the securities account in which the security entitlement is carried, if the purchaser obtained control under K.S.A. 84-8-106(d)(2), and amendments thereto;
(3) if the purchaser obtained control through another person under K.S.A. 84-8-106(d)(3), and amendments thereto, the time on which priority would be based under this subsection if the other person were the secured party.
(d) A securities intermediary as purchaser has priority over a conflicting purchaser who has control unless otherwise agreed by the securities intermediary.
History: L. 1996, ch. 202, § 77; L. 2000, ch. 142, § 153; July 1, 2001.
KANSAS COMMENT, 1996
This section is new and is identical to the Official Text. It departs from the former law of 84-8-304 and 84-8-305. This section protects certain purchasers of security entitlements or interests in them, primarily secured parties, who take control (as defined in 84-8-106) of the entitlement. It is related to 84-8-502 which protects certain purchasers who acquire security entitlements (as defined in 84-8-501(b)) by being registered or acquiring the financial asset. Both sections are specific applications of the general principal of protecting bona fide purchasers for value.
A person who purchases either a financial asset or a security entitlement, or an interest in either, for value without notice, and who obtains control of the entitlement (usually by agreement with the entitlement holder who has granted the purchaser an interest) is protected from adverse claimants. Under 84-8-106, control is taking possession of the security or being placed in charge of the financial asset.
Subsection (b) provides for shelter, which will be useful if the purchaser does not qualify for protection. The section will protect voluntary transferees from purchasers of the entitlement for value, without notice and who obtained control. The shelter would protect donees and successor secured parties. By its terms, however, it does not appear to protect remote purchasers. In addition, because purchaser is a defined term (84-1-201(32) and (33)) which includes only voluntary transferees, other transferees, such as levying creditors would not be protected by shelter.
Statutory shelter is also contained in 84-8-303(b), dealing with protected purchasers of securities. 84-8-116 provides that a securities intermediary that acquires a security entitlement does so for value, meeting that part of the requirement. 84-8-502 does not explicitly provide for shelter for persons acquiring security entitlements.