25.621.16 100th Legislative Session 1122
2025 South Dakota Legislature
House Bill 1122
Introduced by: Representative Auch
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An Act to amend provisions of the Uniform Commercial Code. 1
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA: 2
Section 1. That § 57A-8-110 be AMENDED: 3
57A-8-110. (a) The local law of the issuer's jurisdiction, as specified in subsection 4
(d), governs: 5
(1) The validity of a security; 6
(2) The rights and duties of the issuer with respect to registration of transfer; 7
(3) The effectiveness of registration of transfer by the issuer; 8
(4) Whether the issuer owes any duties to an adverse claimant to a security; and 9
(5) Whether an adverse claim can be asserted against a person to whom transfer of a 10
certificated or uncertificated security is registered or a person who obtains control 11
of an uncertificated security. 12
(b) The local law of the securities intermediary's entitlement holder's jurisdiction, 13
as specified in subsection (e), governs: 14
(1) Acquisition of a security entitlement from the securities intermediary; 15
(2) The rights and duties of the securities intermediary and entitlement holder 16
arising out of a security entitlement; 17
(3) Whether the securities intermediary owes any duties to an adverse claimant to 18
a security entitlement; and 19
(4) Whether an adverse claim can be asserted against a person who acquires a 20
security entitlement from the securities intermediary or a person who purchases a security 21
entitlement or interest therein from an entitlement holder governs the rights of the 22
entitlement holder to make a claim for a security entitlement. 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. 26 25.621.16 2 1122
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(d) "Issuer's jurisdiction" means the jurisdiction under which the issuer of the 1
security is organized or, if permitted by the law of that jurisdiction, the law of another 2
jurisdiction specified by the issuer. An issuer organized under the law of this State may 3
specify the law of another jurisdiction as the law governing the matters specified in 4
subsection (a)(2) through (5). 5
(e) The following rules determine a "securities intermediary's jurisdiction" for 6
purposes of this section: 7
(1) If an agreement between the securities intermediary and its entitlement holder 8
governing the securities account expressly provides that a particular jurisdiction is 9
the securities intermediary's jurisdiction for purposes of this part, this article, or 10
this chapter, that jurisdiction is the securities intermediary's jurisdiction. 11
(2) If paragraph (1) does not apply and an agreement between the securities 12
intermediary and its entitlement holder governing the securities account expressly 13
provides that the agreement is governed by the law of a particular jurisdiction, that 14
jurisdiction is the securities intermediary's jurisdiction. 15
(3) If neither paragraph (1) nor paragraph (2) applies and an agreement between the 16
securities intermediary and its entitlement holder governing the securities account 17
expressly provides that the securities account is maintained at an office in a 18
particular jurisdiction, that jurisdiction is the securities intermediary's jurisdiction. 19
(4) If none of the preceding paragraphs applies, the securities intermediary's 20
jurisdiction is the jurisdiction in which the office identified in an account statement 21
as the office serving the entitlement holder's account is located. 22
(5) If none of the preceding paragraphs applies, the securities intermediary's 23
jurisdiction is the jurisdiction in which the chief executive office of the securities 24
intermediary is located. 25
(f) A securities intermediary's jurisdiction is not determined by the physical location 26
of certificates representing financial assets, or by the jurisdiction in which is organized the 27
issuer of the financial asset with respect to which an entitlement holder has a security 28
entitlement, or by the location of facilities for data processing or other record keeping 29
concerning the account. 30
(g) The local law of the issuer's jurisdiction or the securities intermediary's 31
jurisdiction governs a matter or transaction specified in subsection (a) or (b) even if the 32
matter or transaction does not bear any relation to the jurisdiction. 33
Section 2. That § 57A-8-503 be AMENDED: 34 25.621.16 3 1122
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57A-8-503. (a) To the extent necessary for a securities intermediary to satisfy all 1
security entitlements with respect to a particular financial asset, all interests in that 2
financial asset held by the securities intermediary are held by the securities intermediary 3
for the entitlement holders, are not property of the securities intermediary, and are not 4
subject to claims of creditors of the securities intermediary, except as otherwise provided 5
in § 57A-8-511. 6
(b) An entitlement holder's property interest with respect to a particular financial 7
asset under subsection (a) is a pro rata property interest in all interests in that financial 8
asset held by the securities intermediary, without regard to the time the entitlement 9
holder acquired the security entitlement or the time the securities intermediary acquired 10
the interest in that financial asset. 11
(c) An entitlement holder's property interest with respect to a particular financial 12
asset under subsection (a) may be enforced against the securities intermediary only by 13
exercise of the entitlement holder's rights under §§ 57A-8-505 to 57A-8-508, inclusive. 14
(d) An entitlement holder's property interest with respect to a particular financial 15
asset under subsection (a) may be enforced against a purchaser of the financial asset or 16
interest therein only if: 17
(1) Insolvency proceedings have been initiated by or against the securities 18
intermediary; 19
(2) The securities intermediary does not have sufficient interests in the financial asset 20
to satisfy the security entitlements of all of its entitlement holders to that financial 21
asset; 22
(3) The securities intermediary violated its obligations under § 57A-8-504 by 23
transferring the financial asset or interest therein to the purchaser; and 24
(4) The purchaser is not protected under subsection (e). 25
The trustee or other liquidator, acting on behalf of all entitlement holders having 26
security entitlements with respect to a particular financial asset, may recover the financial 27
asset, or interest therein, from the purchaser. If the trustee or other liquidator elects not 28
to pursue that right, an entitlement holder whose security entitlement remains unsatisfied 29
has the right to recover its interest in the financial asset from the purchaser. 30
(e) An action based on the entitlement holder's property interest with respect to a 31
particular financial asset under subsection (a), whether framed in conversion, replevin, 32
constructive trust, equitable lien, or other theory, may not be asserted against any 33
purchaser of a financial asset or interest therein who gives value, obtains control, and 34 25.621.16 4 1122
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does not act in collusion with the securities intermediary in violating the securities 1
intermediary's obligations under § 57A-8-504. 2
Section 3. That § 57A-8-511 be AMENDED: 3
57A-8-511. (a) Except as otherwise provided in subsections (b) and (c), if If a 4
securities intermediary does not have sufficient interests in a particular financial asset to 5
satisfy both its obligations to entitlement holders who have security entitlements to that 6
financial asset and its obligation to a creditor of the securities intermediary who has a 7
security interest in that financial asset, the claims of entitlement holders, other than the 8
creditor, have priority over the claim of the creditor. 9
(b) A claim of a creditor of a securities intermediary who has a security interest in 10
a financial asset held by a securities intermediary has priority over claims of the securities 11
intermediary's entitlement holders who have security entitlements with respect to that 12
financial asset if the creditor has control over the financial asset. 13
(c) If a clearing corporation does not have sufficient financial assets to satisfy both 14
its obligations to entitlement holders who have security entitlements with respect to a 15
financial asset and its obligation to a creditor of the clearing corporation who has a security 16
interest in that financial asset, the claim of the creditor has priority over the claims of 17
entitlement holders. 18
Section 4. That § 57A-9-305 be AMENDED: 19
57A-9-305. (a) Except as otherwise provided in subsection (c), the following rules 20
apply: 21
(1) While a security certificate is located in a jurisdiction, the local law of that 22
jurisdiction governs perfection, the effect of perfection or nonperfection, and the 23
priority of a security interest in the certificated security represented thereby. 24
(2) The local law of the issuer's jurisdiction as specified in § 57A-8-110(d) governs 25
perfection, the effect of perfection or nonperfection, and the priority of a security 26
interest in an uncertificated security. 27
(3) The local law of the securities intermediary's jurisdiction as specified in § 57A-8-28
110(e) governs perfection, the effect of perfection or nonperfection, and the 29
priority of a security interest in a security entitlement or securities account. 30
(4) The local law of the commodity intermediary's entitlement holder's jurisdiction 31
governs perfection, the effect of perfection or nonperfection, and the priority of a 32
security interest in a commodity contract or commodity account. 33 25.621.16 5 1122
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(5) Paragraphs (2), (3), and (4) apply even if the transaction does not bear any 1
relation to the jurisdiction. 2
(b) The following rules determine a commodity intermediary's entitlement holder's 3
jurisdiction for purposes of this part: 4
(1) If an agreement between the commodity intermediary and commodity customer 5
governing the commodity account expressly provides that a particular jurisdiction 6
is the commodity intermediary's jurisdiction for purposes of this part, this chapter, 7
or the Uniform Commercial Code, that jurisdiction is the commodity intermediary's 8
jurisdiction. 9
(2) If paragraph (1) does not apply and an agreement between the commodity 10
intermediary and commodity customer governing the commodity account 11
expressly provides that the agreement is governed by the law of a particular 12
jurisdiction, that jurisdiction is the commodity intermediary's jurisdiction. 13
(3) If neither paragraph (1) nor paragraph (2) applies and an agreement between the 14
commodity intermediary and commodity customer governing the commodity 15
account expressly provides that the commodity account is maintained at an office 16
in a particular jurisdiction, that jurisdiction is the commodity intermediary's 17
jurisdiction. 18
(4) If none of the preceding paragraphs applies, the commodity intermediary's 19
jurisdiction is the jurisdiction in which the office identified in an account statement 20
as the office serving the commodity customer's account is located. 21
(5) If none of the preceding paragraphs applies, the commodity intermediary's 22
jurisdiction is the jurisdiction in which the chief executive office of the commodity 23
intermediary is located. 24
(c) The local law of the jurisdiction in which the debtor is located governs: 25
(1) perfection of a security interest in investment property by filing; 26
(2) automatic perfection of a security interest in investment property created by a 27
broker or securities intermediary; and 28
(3) automatic perfection of a security interest in a commodity contract or commodity 29
account created by a commodity intermediary. 30