KRS 355.9-409: Restrictions on assignment of letter-of-credit rights ineffective.

(1) A term in a letter of credit or a rule of law, statute, regulation, custom, or practice

applicable to the letter of credit which prohibits, restricts, or requires the consent of

an applicant, issuer, or nominated person to a beneficiary's assignment of or

creation of a security interest in a letter -of-credit right is ineffective to the extent

that the term or rule of law, statute, regulation, custom, or practice:

(a) Would impair the creation, attachment, or perfection of a security interest in

the letter-of-credit right; or

(b) Provides that the assignment or the creation, attachment, or perfection of the

security interest may give rise to a default, breach, right of recoupment, claim,

defense, termination, right of termination, or remedy under the letter -of-credit

right.

(2) To the extent that a term in a letter of credit is ineffective under subsection (1) of

this section but would be effective under law other than this article or a custom or

practice applicable to the letter of credit, to the transfer of a right to draw or

otherwise demand performance under the letter of credit, or to the assignment of a

right to proceeds of the letter of credit, the creation, attachment, or perfection of a

security interest in the letter-of-credit right:

(a) Is not enforc eable against the applicant, issuer, nominated person, or

transferee beneficiary;

(b) Imposes no duties or obligations on the applicant, issuer, nominated person, or

transferee beneficiary; and

(c) Does not require the applicant, issuer, nominated person, or transferee

beneficiary to recognize the security interest, pay or render performance to the

secured party, or accept payment or other performance from the secured party.

(3) Subsection (1) of this section does not apply to the following statutes and to

administrative regulations promulgated under the authority of those statutes: KRS

304.2-260, KRS 304.24 -420, Subtitle 33 of KRS Chapter 304, and Subtitle 37 of

KRS Chapter 304.