{"data":{"id":"us-ky/krs-355.8-202","jurisdiction":"us-ky","citation":"KRS 355.8-202","heading":"Issuer's responsibility and defenses -- Notice of defect of defense.","body":"(1) Even against a purchaser for value and without notice, the terms of a certificated\nsecurity include terms stated on the certificate and terms made part of the security\nby reference on the certificate to another instrument, indenture, or document or to a\nconstitution, statute, ordinance, rule, regulation, order, or the like, to the extent the\nterms referred to do not conflict with terms stated on the certificate. A reference\nunder this subsection does not of itself charge a purchaser for value with notice of  a\ndefect going to the validity of the security, even if the certificate expressly states\nthat a person accepting it admits notice. The terms of an uncertificated security\ninclude those stated in any instrument, indenture, or document or in a constitution,\nstatute, ordinance, rule, regulation, order, or the like, pursuant to which the security\nis issued.\n(2) The following rules apply if an issuer asserts that a security is not valid:\n(a) A security other than one issued by a government or governmental\nsubdivision, agency, or instrumentality, even though issued with a defect\ngoing to its validity, is valid in the hands of a purchaser for value and without\nnotice of the particular defect unless the defect involves a violation of a\nconstitutional provision. In that case, the security is valid in the hands of a\npurchaser for value and without notice of the defect, other than one who takes\nby original issue.\n(b) Paragraph (a) of this subsection applies to an issuer that is a government or\ngovernmental subdivision,  agency, or instrumentality only if there has been\nsubstantial compliance with the legal requirements governing the issue or the\nissuer has received a substantial consideration for the issue as a whole or for\nthe particular security and a stated purpose of  the issue is one for which the\nissuer has power to borrow money or issue the security.\n(3) Except as otherwise provided in KRS 355.8 -205, lack of genuineness of a\ncertificated security is a complete defense, even against a purchaser for value and\nwithout notice.\n(4) All other defenses of the issuer of a security, including nondelivery and conditional\ndelivery of a certificated security, are ineffective against a purchaser for value who\nhas taken the certificated security without notice of the particular defense.\n(5) This section does not affect the right of a party to cancel a contract for a security\n\"when, as and if issued\" or \"when distributed\" in the event of a material change in\nthe character of the security that is the subject of the contract or in the  plan or\narrangement pursuant to which the security is to be issued or distributed.\n(6) If a security is held by a securities intermediary against whom an entitlement holder\nhas a security entitlement with respect to the security, the issuer may not assert  any\ndefense that the issuer could not assert if the entitlement holder held the security\ndirectly.","path":[],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=33679","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:58:46Z","sha256":"736e38d4e4050f3f31ae4d29c22c3970b13c68d574280a6eeb7a135824f21e39","source_id":"us-ky","stale":false,"prev":"us-ky/krs-355.8-201","next":"us-ky/krs-355.8-203"},"notice":"GroundRules: Original legal text. Not legal advice."}