KRS 355.8-503: Property interest of entitlement holder in financial asset held by

securities intermediary.

(1) To the extent necessary for a securities intermediary to satisfy all security

entitlements with respect to a particular financial asset, all interests in that financial

asset held by the securities intermediary are held by the securities intermediary for

the entitlement holders, are not property of the securities intermediary, and are not

subject to claims of creditors of the securities intermediary, excep t as otherwise

provided in KRS 355.8-511.

(2) An entitlement holder's property interest with respect to a particular financial asset

under subsection (1) of this section is a pro rata property interest in all interests in

that financial asset held by the s ecurities intermediary, without regard to the time

the entitlement holder acquired the security entitlement or the time the securities

intermediary acquired the interest in that financial asset.

(3) An entitlement holder's property interest with respect to a particular financial asset

under subsection (1) of this section may be enforced against the securities

intermediary only by exercise of the entitlement holder's rights under KRS 355.8 -

505 to 355.8-508.

(4) An entitlement holder's property interest with respect to a particular financial asset

under subsection (1) of this section may be enforced against a purchaser of the

financial asset or interest therein only if:

(a) Insolvency proceedings have been initiated by or against the securities

intermediary;

(b) The securities intermediary does not have sufficient interests in the financial

asset to satisfy the security entitlements of all of its entitlement holders to that

financial asset;

(c) The securities intermediary violated its obligations under KRS 355. 8-504 by

transferring the financial asset or interest therein to the purchaser; and

(d) The purchaser is not protected under subsection (5) of this section.

The trustee or other liquidator, acting on behalf of all entitlement holders having

security entit lements with respect to a particular financial asset, may recover the

financial asset, or interest therein, from the purchaser. If the trustee or other

liquidator elects not to pursue that right, an entitlement holder whose security

entitlement remains uns atisfied has the right to recover its interest in the financial

asset from the purchaser.

(5) An action based on the entitlement holder's property interest with respect to a

particular financial asset under subsection (1) of this section, whether framed in

conversion, replevin, constructive trust, equitable lien, or other theory, may not be

asserted against any purchaser of a financial asset or interest therein who gives

value, obtains control, and does not act in collusion with the securities intermediary

in violating the securities intermediary's obligations under KRS 355.8-504.