1.1 A bill for an act
1.2 relating to commerce; modifying choice of law provisions in the Uniform
1.3 Commercial Code; amending Minnesota Statutes 2024, sections 336.8-110;
1.4 336.8-503; 336.8-511; 336.9-305.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.6 Section 1. Minnesota Statutes 2024, section 336.8-110, is amended to read:
1.7 336.8-110 APPLICABILITY; CHOICE OF LAW.
1.8 (a) The local law of the issuer's jurisdiction, as specified in subsection (d), governs:
1.9 (1) the validity of a security;
1.10 (2) the rights and duties of the issuer with respect to registration of transfer;
1.11 (3) the effectiveness of registration of transfer by the issuer;
1.12 (4) whether the issuer owes any duties to an adverse claimant to a security; and
1.13 (5) whether an adverse claim can be asserted against a person to whom transfer of a
1.14certificated or uncertificated security is registered or a person who obtains control of an
1.15uncertificated security.
1.16 (b) The local law of the securities intermediary's jurisdiction, as specified in subsection
1.17(e), this state governs:
1.18 (1) acquisition of a security entitlement from the securities intermediary;
1.19 (2) the rights and duties of the securities intermediary and entitlement holder arising out
1.20of a security entitlement;
1Section 1.
25-02572 as introduced02/12/25 REVISOR RSI/HL
SENATE
STATE OF MINNESOTA
S.F. No. 2265NINETY-FOURTH SESSION
(SENATE AUTHORS: LUCERO)
OFFICIAL STATUSD-PGDATE
Introduction and first reading03/06/2025
Referred to Commerce and Consumer Protection 2.1 (3) whether the securities intermediary owes any duties to an adverse claimant to a
2.2security entitlement; and
2.3 (4) whether an adverse claim can be asserted against a person who acquires a security
2.4entitlement from the securities intermediary or a person who purchases a security entitlement
2.5or interest therein from an entitlement holder.
2.6 (c) The local law of the jurisdiction in which a security certificate is located at the time
2.7of delivery governs whether an adverse claim can be asserted against a person to whom the
2.8security certificate is delivered.
2.9 (d) "Issuer's jurisdiction" means the jurisdiction under which the issuer of the security
2.10is organized or, if permitted by the law of that jurisdiction, the law of another jurisdiction
2.11specified by the issuer. An issuer organized under the law of this state may specify the law
2.12of another jurisdiction as the law governing the matters specified in subsection (a)(2) through
2.13(5).
2.14 (e) The following rules determine a "securities intermediary's jurisdiction" for purposes
2.15of this section:
2.16 (1) If an agreement between the securities intermediary and its entitlement holder
2.17governing the securities account expressly provides that a particular jurisdiction is the
2.18securities intermediary's jurisdiction for purposes of this part, this article, or Laws 2000,
2.19chapter 399, that jurisdiction is the securities intermediary's jurisdiction.
2.20 (2) If paragraph (1) does not apply and an agreement between the securities intermediary
2.21and its entitlement holder governing the securities account expressly provides that the
2.22agreement is governed by the law of a particular jurisdiction, that jurisdiction is the securities
2.23intermediary's jurisdiction.
2.24 (3) If neither paragraph (1) nor (2) applies and an agreement between the securities
2.25intermediary and its entitlement holder governing the securities account expressly provides
2.26that the securities account is maintained at an office in a particular jurisdiction, that
2.27jurisdiction is the securities intermediary's jurisdiction.
2.28 (4) If none of the preceding paragraphs apply, the securities intermediary's jurisdiction
2.29is the jurisdiction in which the office identified in an account statement as the office serving
2.30the entitlement holder's account is located.
2.31 (5) If none of the preceding paragraphs apply, the securities intermediary's jurisdiction
2.32is the jurisdiction in which the chief executive office of the securities intermediary is located.
2Section 1.
25-02572 as introduced02/12/25 REVISOR RSI/HL 3.1 (f) A securities intermediary's jurisdiction is not determined by the physical location of
3.2certificates representing financial assets, or by the jurisdiction in which is organized the
3.3issuer of the financial asset with respect to which an entitlement holder has a security
3.4entitlement, or by the location of facilities for data processing or other record keeping
3.5concerning the account.
3.6 (g) The local law of the issuer's jurisdiction or the securities intermediary's jurisdiction
3.7governs a matter or transaction specified in subsection (a) or (b) even if the matter or
3.8transaction does not bear any relation to the jurisdiction.
3.9 Sec. 2. Minnesota Statutes 2024, section 336.8-503, is amended to read:
3.10 336.8-503 PROPERTY INTEREST OF ENTITLEMENT HOLDER IN FINANCIAL
3.11ASSET HELD BY SECURITIES INTERMEDIARY.
3.12 (a) To the extent necessary for a securities intermediary to satisfy all security entitlements
3.13with respect to a particular financial asset, all interests in that financial asset held by the
3.14securities intermediary are held by the securities intermediary for the entitlement holders,
3.15are not property of the securities intermediary, and are not subject to claims of creditors of
3.16the securities intermediary, except as otherwise provided in section 336.8-511.
3.17 (b) An entitlement holder's property interest with respect to a particular financial asset
3.18under subsection (a) is a pro rata property interest in all interests in that financial asset held
3.19by the securities intermediary, without regard to the time the entitlement holder acquired
3.20the security entitlement or the time the securities intermediary acquired the interest in that
3.21financial asset.
3.22 (c) An entitlement holder's property interest with respect to a particular financial asset
3.23under subsection (a) may be enforced against the securities intermediary only by exercise
3.24of the entitlement holder's rights under sections 336.8-505 through 336.8-508.
3.25 (d) An entitlement holder's property interest with respect to a particular financial asset
3.26under subsection (a) may be enforced against a purchaser of the financial asset or interest
3.27therein only if:
3.28 (1) insolvency proceedings have been initiated by or against the securities intermediary;
3.29 (2) the securities intermediary does not have sufficient interests in the financial asset to
3.30satisfy the security entitlements of all of its entitlement holders to that financial asset;
3.31 (3) the securities intermediary violated its obligations under section 336.8-504 by
3.32transferring the financial asset or interest therein to the purchaser; and
3Sec. 2.
25-02572 as introduced02/12/25 REVISOR RSI/HL 4.1 (4) the purchaser is not protected under subsection (e).
4.2The trustee or other liquidator, acting on behalf of all entitlement holders having security
4.3entitlements with respect to a particular financial asset, may recover the financial asset, or
4.4interest therein, from the purchaser. If the trustee or other liquidator elects not to pursue
4.5that right, an entitlement holder whose security entitlement remains unsatisfied has the right
4.6to recover its interest in the financial asset from the purchaser.
4.7 (e) An action based on the entitlement holder's property interest with respect to a
4.8particular financial asset under subsection (a), whether framed in conversion, replevin,
4.9constructive trust, equitable lien, or other theory, may not be asserted against any purchaser
4.10of a financial asset or interest therein who gives value, obtains control, and does not act in
4.11collusion with the securities intermediary in violating the securities intermediary's obligations
4.12under section 336.8-504.
4.13 Sec. 3. Minnesota Statutes 2024, section 336.8-511, is amended to read:
4.14 336.8-511 PRIORITY AMONG SECURITY INTERESTS AND ENTITLEMENT
4.15HOLDERS.
4.16 (a) Except as otherwise provided in subsections (b) and (c), If a securities intermediary
4.17does not have sufficient interests in a particular financial asset to satisfy both its obligations
4.18to entitlement holders who have security entitlements to that financial asset and its obligation
4.19to a creditor of the securities intermediary who has a security interest in that financial asset,
4.20the claims of entitlement holders, other than the creditor, have priority over the claim of the
4.21creditor.
4.22 (b) A claim of a creditor of a securities intermediary who has a security interest in a
4.23financial asset held by a securities intermediary has priority over claims of the securities
4.24intermediary's entitlement holders who have security entitlements with respect to that
4.25financial asset if the creditor has control over the financial asset.
4.26 (c) If a clearing corporation does not have sufficient financial assets to satisfy both its
4.27obligations to entitlement holders who have security entitlements with respect to a financial
4.28asset and its obligation to a creditor of the clearing corporation who has a security interest
4.29in that financial asset, the claim of the creditor has priority over the claims of entitlement
4.30holders.
4Sec. 3.
25-02572 as introduced02/12/25 REVISOR RSI/HL 5.1 Sec. 4. Minnesota Statutes 2024, section 336.9-305, is amended to read:
5.2 336.9-305 LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY
5.3INTERESTS IN INVESTMENT PROPERTY.
5.4 (a) Governing law: general rules. Except as otherwise provided in subsection (c), the
5.5following rules apply:
5.6 (1) While a security certificate is located in a jurisdiction, the local law of that jurisdiction
5.7governs perfection, the effect of perfection or nonperfection, and the priority of a security
5.8interest in the certificated security represented thereby.
5.9 (2) The local law of the issuer's jurisdiction as specified in section 336.8-110(d), governs
5.10perfection, the effect of perfection or nonperfection, and the priority of a security interest
5.11in an uncertificated security.
5.12 (3) The local law of the securities intermediary's jurisdiction as specified in section
5.13336.8-110(e), this state governs perfection, the effect of perfection or nonperfection, and
5.14the priority of a security interest in a security entitlement or securities account.
5.15 (4) The local law of the commodity intermediary's jurisdiction governs perfection, the
5.16effect of perfection or nonperfection, and the priority of a security interest in a commodity
5.17contract or commodity account.
5.18 (5) Paragraphs (2), (3), and (4) apply even if the transaction does not bear any relation
5.19to the jurisdiction.
5.20 (b) Commodity intermediary's jurisdiction. The following rules determine a commodity
5.21intermediary's jurisdiction for purposes of this part:
5.22 (1) If an agreement between the commodity intermediary and commodity customer
5.23governing the commodity account expressly provides that a particular jurisdiction is the
5.24commodity intermediary's jurisdiction for purposes of this part, this article, or this chapter,
5.25that jurisdiction is the commodity intermediary's jurisdiction.
5.26 (2) If paragraph (1) does not apply and an agreement between the commodity intermediary
5.27and commodity customer governing the commodity account expressly provides that the
5.28agreement is governed by the law of a particular jurisdiction, that jurisdiction is the
5.29commodity intermediary's jurisdiction.
5.30 (3) If neither paragraph (1) nor paragraph (2) applies and an agreement between the
5.31commodity intermediary and commodity customer governing the commodity account
5Sec. 4.
25-02572 as introduced02/12/25 REVISOR RSI/HL 6.1expressly provides that the commodity account is maintained at an office in a particular
6.2jurisdiction, that jurisdiction is the commodity intermediary's jurisdiction.
6.3 (4) If none of the preceding paragraphs applies, the commodity intermediary's jurisdiction
6.4is the jurisdiction in which the office identified in an account statement as the office serving
6.5the commodity customer's account is located.
6.6 (5) If none of the preceding paragraphs applies, the commodity intermediary's jurisdiction
6.7is the jurisdiction in which the chief executive office of the commodity intermediary is
6.8located.
6.9 (c) When perfection governed by law of jurisdiction where debtor located. The local
6.10law of the jurisdiction in which the debtor is located governs:
6.11 (1) perfection of a security interest in investment property by filing;
6.12 (2) automatic perfection of a security interest in investment property created by a broker
6.13or securities intermediary; and
6.14 (3) automatic perfection of a security interest in a commodity contract or commodity
6.15account created by a commodity intermediary.
6Sec. 4.
25-02572 as introduced02/12/25 REVISOR RSI/HL