North Dakota 2025-2026 Regular Session

North Dakota Senate Bill SB2364 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1		-	25.0840.~~03000~~
	1	+	25.0840.02000
2	2		Sixty-ninth
3	3		Legislative Assembly
4	4		of North Dakota
5	5		Introduced by
6	6		Senators Enget, Boehm, Paulson, Clemens
7	7		Representatives Hendrix, S. Olson
8		-	A BILL for an Act to provide for a legislative management study relating to the property rights of
9		-	entitlement holders in Uniform Commercial Code transactions.
	8	+	A BILL for an Act to amend and reenact section 41-08-10, subsection 1 of section 41-08-43,
	9	+	section 41-08-51, and subsection 1 of section 41-09-25 of the North Dakota Century Code,
	10	+	relating to choice of law, the property interest in a financial asset held by a securities
	11	+	intermediary, priority among security interests and entitlement holders, and the law governing
	12	+	perfection and priority of security interests in investment property.
10	13		BE IT ENACTED BY THE LEGISLATIVE ASSEMBLY OF NORTH DAKOTA:
11		-	SECTION 1. LEGISLATIVE MANAGEMENT STUDY - UNIFORM COMMERCIAL CODE
12		-	PROPERTY RIGHTS. During the 2025-26 interim, the legislative management shall consider
13		-	studying the property rights of entitlement holders in Uniform Commercial Code transactions,
14		-	along with the jurisdiction for disputes between entitlement holders and securities
15		-	intermediaries. The study must review the provisions of the Uniform Commercial Code,
16		-	including a review of article 8, in relation to state law, federal law, and the law's interaction as it
17		-	relates to ownership of personal property. The study must seek input from relevant
18		-	stakeholders, including securities intermediaries. The legislative management shall report its
19		-	findings and recommendations, together with any legislation necessary to implement the
20		-	recommendations, to the seventieth legislative assembly.
21		-	Page No. 1 25.0840.03000
22		-	ENGROSSED SENATE BILL NO. 2364
23		-	FIRST ENGROSSMENT
	14	+	SECTION 1. AMENDMENT. Section 41-08-10 of the North Dakota Century Code is
	15	+	amended and reenacted as follows:
	16	+	41-08-10. (8-110) Applicability - Choice of law.
	17	+	1.The local law of the issuer's jurisdiction, as specified in subsection 4, governs:
	18	+	a.The validity of a security;
	19	+	b.The rights and duties of the issuer with respect to registration of transfer;
	20	+	c.The effectiveness of registration of transfer by the issuer;
	21	+	d.Whether the issuer owes any duties to an adverse claimant to a security; and
	22	+	e.Whether an adverse claim can be asserted against a person to whom transfer of
	23	+	a certificated or uncertificated security is registered or a person who obtains
	24	+	control of an uncertificated security.
	25	+	2.The local law of the securities intermediary's jurisdiction, as specified in
	26	+	subsection 5,law of this state governs:
	27	+	a.Acquisition of a security entitlement from the securities intermediary;
	28	+	b.The rights and duties of the securities intermediary and entitlement holder arising
	29	+	out of a security entitlement;
	30	+	c.Whether the securities intermediary owes any duties to an adverse claimant to a
	31	+	security entitlement; and
	32	+	Page No. 1 25.0840.02000
	33	+	SENATE BILL NO. 2364
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	60	+	d.Whether an adverse claim can be asserted against a person who acquires a
	61	+	security entitlement from the securities intermediary or a person who purchases a
	62	+	security entitlement or interest therein from an entitlement holder.
	63	+	3.The local law of the jurisdiction in which a security certificate is located at the time of
	64	+	delivery governs whether an adverse claim can be asserted against a person to whom
	65	+	the security certificate is delivered.
	66	+	4."Issuer's jurisdiction" means the jurisdiction under which the issuer of the security is
	67	+	organized or, if permitted by the law of that jurisdiction, the law of another jurisdiction
	68	+	specified by the issuer. An issuer organized under the law of this state may specify the
	69	+	law of another jurisdiction as the law governing the matters specified in subdivisions b
	70	+	through e of subsection 1.
	71	+	5.The following rules determine a "securities intermediary's jurisdiction" for purposes of
	72	+	this section:
	73	+	a.If an agreement between the securities intermediary and its entitlement holder
	74	+	governing the securities account expressly provides that a particular jurisdiction
	75	+	is the securities intermediary's jurisdiction for purposes of this part, this chapter,
	76	+	or this title, that jurisdiction is the securities intermediary's jurisdiction.
	77	+	b.If subdivision a does not apply and an agreement between the securities
	78	+	intermediary and its entitlement holder governing the securities account
	79	+	expressly provides that the agreement is governed by the law of a particular
	80	+	jurisdiction, that jurisdiction is the securities intermediary's jurisdiction.
	81	+	c.If neither subdivision a nor b applies and an agreement between the securities
	82	+	intermediary and its entitlement holder governing the securities account
	83	+	expressly provides that the securities account is maintained at an office in a
	84	+	particular jurisdiction, that jurisdiction is the securities intermediary's jurisdiction.
	85	+	d.If none of the preceding subdivisions applies, the securities intermediary's
	86	+	jurisdiction is the jurisdiction in which the office identified in an account statement
	87	+	as the office serving the entitlement holder's account is located.
	88	+	e.If none of the preceding subdivisions applies, the securities intermediary's
	89	+	jurisdiction is the jurisdiction in which the chief executive office of the securities
	90	+	intermediary is located.
	91	+	Page No. 2 25.0840.02000
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	124	+	6.A securities intermediary's jurisdiction is not determined by the physical location of
	125	+	certificates representing financial assets, or by the jurisdiction in which is organized
	126	+	the issuer of the financial asset with respect to which an entitlement holder has a
	127	+	security entitlement, or by the location of facilities for data processing or other
	128	+	recordkeeping concerning the account.
	129	+	7.The local law of the issuer's jurisdiction or the securities intermediary's jurisdiction
	130	+	governs a matter or transaction specified in subsection 1 or 2 even if the matter or
	131	+	transaction does not bear any relation to the jurisdiction.
	132	+	SECTION 2. AMENDMENT. Subsection 1 of section 41-08-43 of the North Dakota Century
	133	+	Code is amended and reenacted as follows:
	134	+	1.To the extent necessary for a securities intermediary to satisfy all security entitlements
	135	+	with respect to a particular financial asset, all interests in that financial asset held by
	136	+	the securities intermediary are held by the securities intermediary for the entitlement
	137	+	holders, are not property of the securities intermediary, and are not subject to claims of
	138	+	creditors of the securities intermediary, except as otherwise provided in section
	139	+	41-08-51.
	140	+	SECTION 3. AMENDMENT. Section 41-08-51 of the North Dakota Century Code is
	141	+	amended and reenacted as follows:
	142	+	41-08-51. (8-511) Priority among security interests and entitlement holders.
	143	+	1.Except as otherwise provided in subsections 2 and 3, ifIf a securities intermediary does
	144	+	not have sufficient interests in a particular financial asset to satisfy both its obligations to
	145	+	entitlement holders who have security entitlements to that financial asset and its obligation to a
	146	+	creditor of the securities intermediary who has a security interest in that financial asset, the
	147	+	claims of entitlement holders, other than the creditor, have priority over the claim of the creditor.
	148	+	2.A claim of a creditor of a securities intermediary who has a security interest in a
	149	+	financial asset held by a securities intermediary has priority over claims of the
	150	+	securities intermediary's entitlement holders who have security entitlements with
	151	+	respect to that financial asset if the creditor has control over the financial asset.
	152	+	3.If a clearing corporation does not have sufficient financial assets to satisfy both its
	153	+	obligations to entitlement holders who have security entitlements with respect to a
	154	+	financial asset and its obligation to a creditor of the clearing corporation who has a
	155	+	Page No. 3 25.0840.02000
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	188	+	security interest in that financial asset, the claim of the creditor has priority over the
	189	+	claims of entitlement holders.
	190	+	SECTION 4. AMENDMENT. Subsection 1 of section 41-09-25 of the North Dakota Century
	191	+	Code is amended and reenacted as follows:
	192	+	1.Except as otherwise provided in subsection 3, the following rules apply:
	193	+	a.While a security certificate is located in a jurisdiction, the local law of that
	194	+	jurisdiction governs perfection, the effect of perfection or nonperfection, and the
	195	+	priority of a security interest in the certificated security represented thereby.
	196	+	b.The local law of the issuer's jurisdiction as specified in subsection 4 of section
	197	+	41-08-10 governs perfection, the effect of perfection or nonperfection, and the
	198	+	priority of a security interest in an uncertificated security.
	199	+	c.The local law of the securities intermediary's jurisdiction as specified in
	200	+	subsection 5 of section 41-08-10this state governs perfection, the effect of
	201	+	perfection or nonperfection, and the priority of a security interest in a security
	202	+	entitlement or securities account.
	203	+	d.The local law of the commodity intermediary's jurisdiction governs perfection, the
	204	+	effect of perfection or nonperfection, and the priority of a security interest in a
	205	+	commodity contract or commodity account.
	206	+	e.Subdivisions b, c, and d apply even if the transaction does not bear any relation
	207	+	to the jurisdiction.
	208	+	Page No. 4 25.0840.02000
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