N.Y. Uniform Commercial Code Law § 3-206: Effect of Restrictive Indorsement

Section 3--206. Effect of Restrictive Indorsement.

(1) No restrictive indorsement prevents further transfer or

negotiation of the instrument.

(2) An intermediary bank, or a payor bank which is not the depositary

bank, is neither given notice nor otherwise affected by a restrictive

indorsement of any person except the bank's immediate transferor or the

person presenting for payment.

(3) Except for an intermediary bank, any transferee under an

indorsement which is conditional or includes the words "for collection",

"for deposit", "pay any bank", or like terms (subparagraphs (a) and (c)

of Section 3--205) must pay or apply any value given by him for or on

the security of the instrument consistently with the indorsement and to

the extent that he does so he becomes a holder for value. In addition

such transferee is a holder in due course if he otherwise complies with

the requirements of Section 3--302 on what constitutes a holder in due

course.

(4) The first taker under an indorsement for the benefit of the

indorser or another person (subparagraph (d) of Section 3--205) must pay

or apply any value given by him for or on the security of the instrument

consistently with the indorsement and to the extent that he does so he

becomes a holder for value. In addition such taker is a holder in due

course if he otherwise complies with the requirements of Section 3--302

on what constitutes a holder in due course. A later holder for value is

neither given notice nor otherwise affected by such restrictive

indorsement unless he has knowledge that a fiduciary or other person has

negotiated the instrument in any transaction for his own benefit or

otherwise in breach of duty (subsection (2) of Section 3--304).