Wisconsin 2025-2026 Regular Session

Wisconsin Senate Bill SB123 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	2025 - 2026 LEGISLATURE
2	2	LRB-0061/1
3	3	ARG:amn
4	4	2025 SENATE BILL 123
5	5	March 14, 2025 - Introduced by Senators JACQUE, NASS and WANGGAARD,
6	6	cosponsored by Representatives ARMSTRONG, BEHNKE, DITTRICH, GUNDRUM,
7	7	KREIBICH, MURSAU and WICHGERS. Referred to Committee on Financial
8	8	Institutions and Sporting Heritage.
9	9
10	10	*AUTHORS SUBJECT TO CHANGE*
11	11	AN ACT to repeal 408.110 (2) (a), (b), (c) and (d), 408.110 (5) and (6), 408.511 (2)
12	12	and (3) and 409.305 (1) (c); to renumber and amend 408.110 (2) (intro.) and
13	13	408.511 (1); to amend 408.503 (1) of the statutes; relating to: investment
14	14	securities under the Uniform Commercial Code.
15	15	Analysis by the Legislative Reference Bureau
16	16	This bill makes changes to the Uniform Commercial Code (UCC), as adopted
17	17	in this state, related to jurisdiction and creditor claims involving assets held in a
18	18	customer[s brokerage account that are not held directly in the customer[s name,
19	19	commonly referred to as securities held in Xstreet nameY in the customer[s account.
20	20	Under current law, the UCC provides guiding rules for both creditor-debtor
21	21	relationships involving a security interest in collateral and transactions that
22	22	involve investment securities. These latter rules govern such matters as proper
23	23	endorsement of securities being transferred, persons who have authority to make
24	24	such transfers, and rights of creditors in these securities. These rules frequently
25	25	distinguish between a security held directly by the owner and represented by a
26	26	security certificate (certificated security), a security held directly by the owner and
27	27	represented only by a book entry instead of a security certificate (uncertificated
28	28	security), and a security not held directly by the owner but instead held directly by
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32	32	4 2025 - 2026 Legislature
33	33	SENATE BILL 123
34	34	- 2 - LRB-0061/1
35	35	ARG:amn
36	36	a broker or bank in an aggregated account in which the owner[s interest is
37	37	represented by a book entry (security entitlement).
38	38	Under current law, a person generally acquires a security entitlement if 1) a
39	39	securities broker-dealer, bank, or securities clearing corporation (securities
40	40	intermediary) credits a financial asset (security), by book entry, to the person[s
41	41	securities account; 2) the securities intermediary holds the security for the person;
42	42	and 3) the security is not held in the person[s name or directly by the person. The
43	43	person who acquires the security entitlement, as identified in the securities
44	44	intermediary[s records, is the Xentitlement holder,Y and the security entitlement
45	45	constitutes the rights and property interest in the security. In addition to holding
46	46	securities for its customers, certain securities intermediaries, such as broker-
47	47	dealers, may hold securities for their own account.
48	48	Generally, under current law, the interests in a security held by a securities
49	49	intermediary for entitlement holders are not property of the securities
50	50	intermediary and are not subject to the claims of the securities intermediary[s
51	51	creditors. The entitlement holders of the security have a prorated property interest
52	52	in the aggregate holdings of the security. The securities intermediary has a duty to
53	53	maintain the security in a quantity corresponding to the aggregate of all security
54	54	entitlements it established for its entitlement holders and may not grant to any
55	55	creditor a security interest in the security unless agreed to by an entitlement
56	56	holder. With an exception (discussed below), if a securities intermediary does not
57	57	have sufficient interests in a security to satisfy its obligations to entitlement
58	58	holders and to its own creditors, the claims of the entitlement holders have priority
59	59	over the claims of the creditors.
60	60	Current law allows an entitlement holder and a securities intermediary to
61	61	modify their relative rights and obligations. A securities intermediary and an
62	62	entitlement holder may enter into a creditor-debtor relationship in which the
63	63	securities intermediary takes a security interest in the security entitlement when
64	64	the entitlement holder buys the security on credit through the securities
65	65	intermediary. The security interest secures the obligation to pay for the security,
66	66	and the entitlement holder may grant its interest in the securities entitlement to
67	67	the securities intermediary, giving the securities intermediary control. Also, the
68	68	rights and obligations of a clearing corporation and its participants may be
69	69	governed by the clearing corporation[s rules, and a security interest may arise
70	70	automatically during settlement of a transaction involving a certificated security.
71	71	Current law specifies rules governing priority among conflicting security
72	72	interests in a security, including that a secured party having control of a security
73	73	has priority over a secured party that does not have control of the security. A
74	74	security interest held by a securities intermediary in a security entitlement has
75	75	priority over a conflicting security interest held by another secured party. If a
76	76	securities intermediary[s creditor has control over a security held by the securities
77	77	intermediary and the creditor has a security interest in the security, the creditor[s
78	78	claim has priority over claims of the securities intermediary[s entitlement holders, 2025 - 2026 Legislature
79	79	SENATE BILL 123
80	80	- 3 - LRB-0061/1
81	81	ARG:amn
82	82	SECTION 1
83	83	except that, if the securities intermediary is a clearing corporation, it need not have
84	84	control over the security. This is an exception to the general rule that a securities
85	85	intermediary[s entitlement holders have priority in claims to a security over the
86	86	security intermediary[s creditors.
87	87	The bill eliminates this exception, providing an entitlement holder with
88	88	priority in claims to a security even if the entitlement holder has purchased the
89	89	security on margin and provided the securities intermediary with a security
90	90	interest in the security.
91	91	Current law also specifies that the law of the securities intermediary[s
92	92	jurisdiction (as described below) governs all of the following: 1) acquisition of a
93	93	security entitlement from the securities intermediary; 2) the rights and duties of
94	94	the securities intermediary and entitlement holder arising out of a security
95	95	entitlement; 3) whether the securities intermediary owes any duty to an adverse
96	96	claimant to a security entitlement; 4) whether an adverse claim can be asserted
97	97	against a person who acquires a security entitlement from the securities
98	98	intermediary or a person who purchases a security entitlement from an
99	99	entitlement holder; and 5) perfection and priority of a security interest in a security
100	100	entitlement. Specific principles dictate in which state a securities intermediary[s
101	101	jurisdiction lies, including that an agreement between the securities intermediary
102	102	and the entitlement holder on the subject will control or, in the absence of an
103	103	agreement, the securities intermediary[s jurisdiction lies in the state of the office
104	104	identified on the entitlement holder[s account statement.
105	105	The bill eliminates all of these jurisdictional provisions and instead provides
106	106	that the law of the entitlement holder[s jurisdiction governs.
107	107	The people of the state of Wisconsin, represented in senate and assembly, do
108	108	enact as follows:
109	109	SECTION 1. 408.110 (2) (intro.) of the statutes is renumbered 408.110 (2) and
110	110	amended to read:
111	111	408.110 (2) The local law of the securities intermediary[s entitlement holder[s
112	112	jurisdiction, as specified in sub. (5), governs:.
113	113	SECTION 2. 408.110 (2) (a), (b), (c) and (d) of the statutes are repealed.
114	114	SECTION 3. 408.110 (5) and (6) of the statutes are repealed.
115	115	SECTION 4. 408.503 (1) of the statutes is amended to read:
116	116	408.503 (1) To the extent necessary for a securities intermediary to satisfy all
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125	125	SENATE BILL 123
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127	127	ARG:amn
128	128	SECTION 4
129	129	security entitlements with respect to a particular financial asset, all interests in
130	130	that financial asset held by the securities intermediary are held by the securities
131	131	intermediary for the entitlement holders, are not property of the securities
132	132	intermediary, and are not subject to claims of creditors of the securities
133	133	intermediary, except as otherwise provided in s. 408.511.
134	134	SECTION 5. 408.511 (1) of the statutes is renumbered 408.511 and amended to
135	135	read:
136	136	408.511 Priority among security interests and entitlement holders.
137	137	Except as otherwise provided in subs. (2) and (3), if If a securities intermediary does
138	138	not have sufficient interests in a particular financial asset to satisfy both its
139	139	obligations to entitlement holders who have security entitlements to that financial
140	140	asset and its obligation to a creditor of the securities intermediary who has a
141	141	security interest in that financial asset, the claims of entitlement holders, other
142	142	than the creditor, have priority over the claim of the creditor.
143	143	SECTION 6. 408.511 (2) and (3) of the statutes are repealed.
144	144	SECTION 7. 409.305 (1) (c) of the statutes is repealed.
145	145	SECTION 8. Initial applicability.
146	146	(1) This act first applies to security interests perfected on the effective date of
147	147	this subsection.
148	148	SECTION 9. Effective date.
149	149	(1) This act takes effect on the first day of the 4th month beginning after
150	150	publication.
151	151	(END)
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