N.Y. Uniform Commercial Code Law § 8-108: Warranties in Direct Holding

Section 8--108. Warranties in Direct Holding.

(a) 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:

(1) the certificate is genuine and has not been materially

altered;

(2) the transferor or indorser does not know of any fact that

might impair the validity of the security;

(3) there is no adverse claim to the security;

(4) the transfer does not violate any restriction on transfer;

(5) if the transfer is by indorsement, 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

(6) the transfer is otherwise effective and rightful.

(b) A person who originates an instruction for registration of

transfer of an uncertificated security to a purchaser for value warrants

to the purchaser that:

(1) 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;

(2) the security is valid;

(3) there is no adverse claim to the security; and

(4) at the time the instruction is presented to the issuer:

(i) the purchaser will be entitled to the registration of

transfer;

(ii) the transfer will be registered by the issuer free from

all liens, security interests, restrictions, and claims

other than those specified in the instruction;

(iii) the transfer will not violate any restriction on

transfer; and

(iv) the requested transfer will otherwise be effective and

rightful.

(c) 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:

(1) the uncertificated security is valid;

(2) there is no adverse claim to the security;

(3) the transfer does not violate any restriction on transfer;

and

(4) the transfer is otherwise effective and rightful.

(d) A person who indorses a security certificate warrants to the

issuer that:

(1) there is no adverse claim to the security; and

(2) the indorsement is effective.

(e) A person who originates an instruction for registration of

transfer of an uncertificated security warrants to the issuer that:

(1) the instruction is effective; and

(2) at the time the instruction is presented to the issuer the

purchaser will be entitled to the registration of transfer.

(f) 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 to 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.

(g) 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 principal 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.

(h) 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 (g).

(i) Except as otherwise provided in subsection (g), a broker acting

for a customer makes to the issuer and a purchaser the warranties

provided in subsections (a) through (f). A broker that delivers a

security certificate 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 (a) or (b), and has the

rights and privileges of a purchaser under this section. 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.