KRS 355.8-108: Warranties in direct holding.

(1) A person who transfers a certificated security to a purchaser for value warrants to

the purchaser, and an indorser, if the transfer is by indorsement, warrants to any

subsequent purchaser, that:

(a) The certificate is genuine and has not been materially altered;

(b) The transferor or indorser does not know of any fact that might impair the

validity of the security;

(c) There is no adverse claim to the security;

(d) The transfer does not violate any restriction on transfer;

(e) If the transfer is by indorsem ent, the indorsement is made by an appropriate

person, or if the indorsement is by an agent, the agent has actual authority to

act on behalf of the appropriate person; and

(f) The transfer is otherwise effective and rightful.

(2) A person who originates an instruction for registration of transfer of an

uncertificated security to a purchaser for value warrants to the purchaser that:

(a) The instruction is made by an appropriate person, or if the instruction is by an

agent, the agent has actual authority to act on behalf of the appropriate person;

(b) The security is valid;

(c) There is no adverse claim to the security; and

(d) At the time the instruction is presented to the issuer:

1. The purchaser will be entitled to the registration of transfer;

2. The transfer will be registered by the issuer free from all liens, security

interests, restrictions, and claims other than those specified in the

instruction;

3. The transfer will not violate any restriction on transfer; and

4. The requested transfer will otherwise be effective and rightful.

(3) A person who transfers an uncertificated security to a purchaser for value and does

not originate an instruction in connection with the transfer warrants that:

(a) The uncertificated security is valid;

(b) There is no adverse claim to the security;

(c) The transfer does not violate any restriction on transfer; and

(d) The transfer is otherwise effective and rightful.

(4) A person who indorses a security certificate warrants to the issuer that:

(a) There is no adverse claim to the security; and

(b) The indorsement is effective.

(5) A person who originates an instruction for registration of transfer of an

uncertificated security warrants to the issuer that:

(a) The instruction is effective; and

(b) At the time the instr uction is presented to the issuer the purchaser will be

entitled to the registration of transfer.

(6) A person who presents a certificated security for registration of transfer or for

payment or exchange warrants to the issuer that the person is entitled t o the

registration, payment, or exchange, but a purchaser for value and without notice of

adverse claims to whom transfer is registered warrants only that the person has no

knowledge of any unauthorized signature in a necessary indorsement.

(7) If a person acts as agent of another in delivering a certificated security to a

purchaser, the identity of the principal was known to the person to whom the

certificate was delivered, and the certificate delivered by the agent was received by

the agent from the princ ipal or received by the agent from another person at the

direction of the principal, the person delivering the security certificate warrants only

that the delivering person has authority to act for the principal and does not know of

any adverse claim to the certificated security.

(8) A secured party who redelivers a security certificate received, or after payment and

on order of the debtor delivers the security certificate to another person, makes only

the warranties of an agent under subsection (7) of this section.

(9) Except as otherwise provided in subsection (7) of this section, a broker acting for a

customer makes to the issuer and a purchaser the warranties provided in subsections

(1) to (6) of this section. A broker that delivers a security certificat e to its customer,

or causes its customer to be registered as the owner of an uncertificated security,

makes to the customer the warranties provided in subsection (1) or (2) of this

section, and has the rights and privileges of a purchaser under this secti on. The

warranties of and in favor of the broker acting as an agent are in addition to

applicable warranties given by and in favor of the customer.