AS Title 45, Chapter 8: Investment Securities

Article 1. Short Title and General Matters. Chapter 08. Investment Securities. Sec. 45.08.101. Short title. This chapter may be cited as Uniform Commercial Code — Investment Securities. Sec. 45.08.102. Definitions. (a) In this chapter, (1) “adverse claim” means a claim that a claimant has a property interest in a financial asset and that it is a violation of the rights of the claimant for another person to hold, transfer, or deal with the financial asset; (2) “bearer form,” as applied to a certificated security, means a form in which the security is payable to the bearer of the security certificate according to its terms but not by reason of an endorsement; (3) “broker” means a person defined as a broker or dealer under the federal securities laws, but without excluding a bank acting in that capacity; (4) “certificated security” means a security that is represented by a certificate; (5) “clearing corporation” means (A) a person who is registered as a “clearing agency” under the federal securities laws; (B) a federal reserve bank; or (C) any other person who provides clearance or settlement services with respect to financial assets that would require it to register as a clearing agency under the federal securities laws but for an exclusion or exemption from the registration requirement, if its activities as a clearing corporation, including promulgation of rules, are subject to regulation by a federal or state governmental authority; (6) “communicate” means to (A) send a signed writing; or (B) transmit information by any mechanism agreed upon by the persons transmitting and receiving the information; (7) “endorsement” means a signature that alone or accompanied by other words is made on a security certificate in registered form or on a separate document for the purpose of assigning, transferring, or redeeming the security or granting a power to assign, transfer, or redeem it; (8) “entitlement holder” means a person identified in the records of a securities intermediary as the person having a security entitlement against the securities intermediary; if a person acquires a security entitlement by virtue of AS 45.08.501 (a)(2) or (3), that person is the entitlement holder; (9) “entitlement order” means a notification communicated to a securities intermediary directing transfer or redemption of a financial asset to which the entitlement holder has a security entitlement; (10) “financial asset,” except as otherwise provided in AS 45.08.103 , means (A) a security; (B) an obligation of a person or a share, participation, or other interest in a person or in property or an enterprise of a person, that is, or is of a type, dealt in or traded on financial markets, or that is recognized in any area in which it is issued or dealt in as a medium for investment; or (C) any property that is held by a securities intermediary for another person in a securities account if the securities intermediary has expressly agreed with the other person that the property is to be treated as a financial asset under this chapter; as context requires, the term means either the interest itself or the means by which a person's claim to it is evidenced, including a certificated or uncertificated security, a security certificate, or a security entitlement; (11) [Repealed, § 113 ch 44 SLA 2009.] (12) “instruction” means a notification communicated to the issuer of an uncertificated security that directs that the transfer of the security be registered or that the security be redeemed; (13) “registered form,” as applied to a certificated security, means a form in which (A) the security certificate specifies a person entitled to the security; and (B) a transfer of the security may be registered upon books maintained for that purpose by or on behalf of the issuer, or the security certificate states that a transfer of the security may be registered upon books maintained for that purpose by or on behalf of the issuer; (14) “securities intermediary” means (A) a clearing corporation; or (B) a person, including a bank or broker, that in the ordinary course of its business maintains securities accounts for others and is acting in that capacity; (15) “security,” except as otherwise provided in AS 45.08.103 , means an obligation of an issuer or a share, participation, or other interest in an issuer or in property or an enterprise of an issuer, if the obligation, share, participation, or interest (A) is represented by a security certificate in bearer or registered form, or if the transfer of the obligation, share, participation, or interest may be registered upon books maintained for that purpose by or on behalf of the issuer; (B) is one of a class or series or by its terms is divisible into a class or series of shares, participations, obligations, or interests; and (C) is, or is of a type, dealt in or traded on securities exchanges or securities markets, or is a medium for investment and the terms of the obligation, share, participation, or interest expressly provide that the obligation, share, participation, or interest is a security governed by this chapter; (16) “security certificate” means a certificate representing a security; (17) “security entitlement” means the rights and property interest of an entitlement holder with respect to a financial asset specified in AS 45.08.501 — 45.08.511; (18) “uncertificated security” means a security that is not represented by a certificate. (b) Other definitions applying to this chapter and the sections in which they appear are (1) “appropriate person” ( AS 45.08.107 ); (2) “control” ( AS 45.08.106 ); (3) “delivery” ( AS 45.08.301 ); (4) “investment company security” ( AS 45.08.103 ); (5) “issuer” ( AS 45.08.201 ); (6) “overissue” ( AS 45.08.210 ); (7) “protected purchaser” ( AS 45.08.303 ); (8) “securities account” ( AS 45.08.501 ). (c) In addition, AS 45.01 contains general definitions and principles of construction and interpretation applicable throughout this chapter. (d) The characterization of a person, business, or transaction for purposes of this chapter does not determine the characterization of the person, business, or transaction for purposes of another law, regulation, or rule. Sec. 45.08.103. Rules for determining whether certain obligations and interests are securities or financial assets. (a) A share or similar equity interest issued by a corporation, business trust, joint stock company, or similar entity is a security. (b) An investment company security is a security. (c) An interest in a partnership or limited liability company is not a security unless it is dealt in or traded on securities exchanges or in securities markets, its terms expressly provide that it is a security governed by this chapter, or it is an investment company security. However, an interest in a partnership or limited liability company is a financial asset if it is held in a securities account. (d) A writing that is a security certificate is governed by this chapter and not by AS 45.03 , even though it also meets the requirements of AS 45.03 . However, a negotiable instrument governed by AS 45.03 is a financial asset if it is held in a securities account. (e) An option or similar obligation issued by a clearing corporation to its participants is not a security but is a financial asset. (f) A commodity contract, as defined in AS 45.29.102 (a), is not a security or a financial asset. (g) A document of title is not a financial asset unless AS 45.08.102 (a)(10)(C) applies. (h) In this section, “investment company security” means a share or similar equity interest issued by an entity that is registered as an investment company under federal investment company laws, an interest in a unit investment trust that is registered as an investment company under federal investment company laws, or a face-amount certificate issued by a face-amount certificate company that is registered as an investment company under federal investment company laws; “investment company security” does not include an insurance policy or endowment policy or annuity contract issued by an insurance company. Sec. 45.08.104. Acquisition of security or financial asset or interest in security or financial asset. (a) A person acquires a security or an interest in a security under this chapter if the person (1) is a purchaser to whom a security is delivered under AS 45.08.301 ; or (2) acquires a security entitlement to the security under AS 45.08.501 . (b) A person acquires a financial asset other than a security or an interest in a financial asset other than a security, under this chapter if the person acquires a security entitlement to the financial asset. (c) A person who acquires a security entitlement to a security or other financial asset has the rights specified in AS 45.08.501 — 45.08.511, but is a purchaser of a security, security entitlement, or other financial asset held by the securities intermediary only to the extent provided in AS 45.08.503 . (d) Unless the context shows that a different meaning is intended, a person who is required by other law, regulation, rule, or agreement to transfer, deliver, present, surrender, exchange, or otherwise put in the possession of another person a security or financial asset satisfies that requirement by causing the other person to acquire an interest in the security or financial asset under (a) or (b) of this section. Sec. 45.08.105. Notice of adverse claim. (a) A person has notice of an adverse claim if (1) the person knows of the adverse claim; (2) the person is aware of facts sufficient to indicate that there is a significant probability that the adverse claim exists and deliberately avoids information that would establish the existence of the adverse claim; or (3) the person has a duty, imposed by statute or regulation, to investigate whether an adverse claim exists, and the investigation required would establish the existence of the adverse claim. (b) Having knowledge that a financial asset or interest in a financial asset is or has been transferred by a representative does not impose a duty of inquiry into the rightfulness of a transaction and is not notice of an adverse claim. However, a person who knows that a representative has transferred a financial asset or interest in a financial asset in a transaction that is, or whose proceeds are being used, for the individual benefit of the representative or otherwise in breach of duty has notice of an adverse claim. (c) An act or event that creates a right to immediate performance of the principal obligation represented by a security certificate or sets a date on or after which the certificate is to be presented or surrendered for redemption or exchange does not itself constitute notice of an adverse claim except in the case of a transfer more than (1) one year after a date set for presentment or surrender for redemption or exchange; or (2) six months after a date set for payment of money against presentation or surrender of the certificate, if money was available for payment on that date. (d) A purchaser of a certificated security has notice of an adverse claim if the security certificate (1) whether in bearer or registered form, has been endorsed “for collection” or “for surrender” or for some other purpose not involving transfer; or (2) is in bearer form and has on it an unambiguous statement that it is the property of a person other than the transferor, but the mere writing of a name on the certificate does not constitute this statement. (e) Filing of a financing statement under AS 45.29 is not notice of an adverse claim to a financial asset. Sec. 45.08.106. Control. (a) A purchaser has control of a certificated security in bearer form if the certificated security is delivered to the purchaser. (b) A purchaser has control of a certificated security in registered form if the certificated security is delivered to the purchaser, and the certificate is (1) endorsed to the purchaser or in blank by an effective endorsement; or (2) registered in the name of the purchaser, upon original issue or registration of transfer by the issuer. (c) A purchaser has control of an uncertificated security if (1) the uncertificated security is delivered to the purchaser; or (2) the issuer has agreed that the issuer will comply with instructions originated by the purchaser without further consent by the registered owner. (d) A purchaser has control of a security entitlement if (1) the purchaser becomes the entitlement holder; (2) the securities intermediary has agreed that the securities intermediary will comply with entitlement orders originated by the purchaser without further consent by the entitlement holder; or (3) another person has control of the security entitlement on behalf of the purchaser or, having previously acquired control of the security entitlement, acknowledges that it has control on behalf of the purchaser. (e) If an interest in a security entitlement is granted by the entitlement holder to the entitlement holder's own securities intermediary, the securities intermediary has control. (f) A purchaser who has satisfied the requirements of (c) or (d) of this section has control even if the registered owner in the case of (c) of this section or the entitlement holder in the case of (d) of this section retains the right to make substitutions for the uncertificated security or security entitlement, to originate instructions or entitlement orders to the issuer or securities intermediary, or otherwise to deal with the uncertificated security or security entitlement. (g) An issuer or a securities intermediary may not enter into an agreement described in (c)(2) or (d)(2) of this section without the consent of the registered owner or entitlement holder, but an issuer or a securities intermediary is not required to enter into an agreement even though the registered owner or entitlement holder directs the issuer or securities intermediary to enter into the agreement. An issuer or securities intermediary that has entered into an agreement is not required to confirm the existence of the agreement to another party unless requested to do so by the registered owner or entitlement holder. In this subsection, “agreement” means an agreement described in (c)(2) or (d)(2) of this section. Sec. 45.08.107. Whether endorsement, instruction, or entitlement order is effective. (a) An endorsement, instruction, or entitlement order is effective if (1) it is made by the appropriate person; (2) it is made by a person who has power under the law of agency to transfer the security or financial asset on behalf of the appropriate person, including, in the case of an instruction or entitlement order, a person who has control under AS 45.08.106 (c)(2) or (d)(2); or (3) the appropriate person has ratified it or is otherwise precluded from asserting its ineffectiveness. (b) An endorsement, instruction, or entitlement order made by a representative is effective even if (1) the representative has failed to comply with a controlling instrument or with the law of the state having jurisdiction of the representative relationship, including a law requiring the representative to obtain court approval of the transaction; or (2) the representative's action in making the endorsement, instruction, or entitlement order or using the proceeds of the transaction is otherwise a breach of duty. (c) If a security is registered in the name of or specially endorsed to a person described as a representative, or if a securities account is maintained in the name of a person described as a representative, an endorsement, instruction, or entitlement order made by the person is effective even though the person no longer serves in the described capacity. (d) Effectiveness of an endorsement, instruction, or entitlement order is determined as of the date the endorsement, instruction, or entitlement order is made, and an endorsement, instruction, or entitlement order does not become ineffective by reason of any later change of circumstances. (e) In this chapter, “appropriate person” means (1) with respect to an endorsement, the person specified by a security certificate or by an effective special endorsement to be entitled to the security; (2) with respect to an instruction, the registered owner of an uncertificated security; (3) with respect to an entitlement order, the entitlement holder; (4) if the person designated in (1), (2), or (3) of this subsection is deceased, the designated person's successor taking under other law or the designated person's personal representative acting for the estate of the decedent; or (5) if the person designated in (1), (2), or (3) of this subsection lacks capacity, the designated person's guardian, conservator, or other similar representative who has power under other law to transfer the security or financial asset. Sec. 45.08.108. Warranties in direct holding. (a) A person who transfers a certificated security to a purchaser for value warrants to the purchaser, and an endorser, if the transfer is by endorsement, warrants to any subsequent purchaser, that (1) the certificate is genuine and has not been materially altered; (2) the transferor or endorser does not know of a 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 endorsement, the endorsement is made by an appropriate person, or if the endorsement 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; (A) the purchaser will be entitled to the registration of transfer; (B) the transfer will be registered by the issuer free from all liens, security interests, restrictions, and claims other than those specified in the instruction; (C) the transfer will not violate any restriction on transfer; and (D) 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 endorses a security certificate warrants to the issuer that (1) there is no adverse claim to the security; and (2) the endorsement 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 does not have knowledge of an unauthorized signature in a necessary endorsement. (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 an 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 (g) of this section. (i) Except as otherwise provided in (g) of this section, a broker acting for a customer makes to the issuer and a purchaser the warranties provided in (a) — (f) of this section. 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 (a) or (b) of this section, 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. Sec. 45.08.109. Warranties in indirect holding. (a) A person who originates an entitlement order to a securities intermediary warrants to the securities intermediary that (1) the entitlement order is made by an appropriate person, or if the entitlement order is by an agent, the agent has actual authority to act on behalf of the appropriate person; and (2) there is no adverse claim to the security entitlement. (b) A person who delivers a security certificate to a securities intermediary for credit to a securities account or originates an instruction with respect to an uncertificated security directing that the uncertificated security be credited to a securities account makes to the securities intermediary the warranties specified in AS 45.08.108 (a) or (b). (c) If a securities intermediary delivers a security certificate to its entitlement holder or causes its entitlement holder to be registered as the owner of an uncertificated security, the securities intermediary makes to the entitlement holder the warranties specified in AS 45.08.108 (a) or (b). Sec. 45.08.110. Applicability; choice of law. (a) The local law of the issuer's jurisdiction, as specified in (f) of this section, governs (1) the validity of a security; (2) the rights and duties of the issuer with respect to registration of transfer; (3) the effectiveness of registration of transfer by the issuer; (4) whether the issuer owes a duty to an adverse claimant to a security; and (5) whether an adverse claim can be asserted against a person to whom transfer of a certificated or uncertificated security is registered or a person who obtains control of an uncertificated security. (b) The local law of the securities intermediary's jurisdiction, as specified in (e) of this section, governs (1) acquisition of a security entitlement from the securities intermediary; (2) the rights and duties of the securities intermediary and entitlement holder arising out of a security entitlement; (3) whether the securities intermediary owes a duty to an adverse claimant to a security entitlement; and (4) whether an adverse claim can be asserted against a person who acquires a security entitlement from the securities intermediary or a person who purchases a security entitlement or interest in a security entitlement from an entitlement holder. (c) The local law of the jurisdiction in which a security certificate is located at the time of delivery governs whether an adverse claim can be asserted against a person to whom the security certificate is delivered. (d) The following rules determine a securities intermediary's jurisdiction for purposes of this section: (1) if an agreement between the securities intermediary and its entitlement holder governing the securities account expressly provides that a particular jurisdiction is the securities intermediary's jurisdiction for purposes of AS 45.08.101 — 45.08.116, this chapter, or this code, that jurisdiction is the securities intermediary's jurisdiction; (2) if (1) of this subsection does not apply and an agreement between the securities intermediary and its entitlement holder governing the securities account expressly provides that the agreement is governed by the law of a particular jurisdiction, that jurisdiction is the securities intermediary's jurisdiction; (3) if neither (1) nor (2) of this subsection applies and an agreement between the securities intermediary and its entitlement holder governing the securities account expressly provides that the securities account is maintained at an office in a particular jurisdiction, that jurisdiction is the securities intermediary's jurisdiction; (4) if none of the preceding paragraphs of this subsection applies, the securities intermediary's jurisdiction is the jurisdiction in which the office identified in an account statement as the office serving the entitlement holder's account is located; (5) if none of the preceding paragraphs of this subsection applies, the securities intermediary's jurisdiction is the jurisdiction in which the chief executive office of the securities intermediary is located. (e) A securities intermediary's jurisdiction is not determined by the physical location of certificates representing financial assets, by the jurisdiction in which is organized the issuer of the financial asset with respect to which an entitlement holder has a security entitlement, or by the location of facilities for data processing or other record keeping concerning the account. (f) In this chapter, “issuer's jurisdiction” means the jurisdiction under which the issuer of the security is organized or, if permitted by the law of that jurisdiction, the law of another jurisdiction specified by the issuer. An issuer organized under the law of this state may specify the law of another jurisdiction as the law governing the matters specified in (a)(2) — (5) of this section. Sec. 45.08.111. Clearing corporation rules. A rule adopted by a clearing corporation governing rights and obligations among the clearing corporation and its participants in the clearing corporation is effective even if the rule conflicts with this chapter and affects another party who does not consent to the rule. Sec. 45.08.112. Creditor's legal process. (a) The interest of a debtor in a certificated security may be reached by a creditor only by actual seizure of the security certificate by the officer making the attachment or levy, except as otherwise provided in (d) of this section. However, a certificated security for which the certificate has been surrendered to the issuer may be reached by a creditor by legal process upon the issuer. (b) The interest of a debtor in an uncertificated security may be reached by a creditor only by legal process upon the issuer at its chief executive office in the United States, except as otherwise provided in (d) of this section. (c) The interest of a debtor in a security entitlement may be reached by a creditor only by legal process upon the securities intermediary with whom the debtor's securities account is maintained, except as otherwise provided in (d) of this section. (d) The interest of a debtor in a certificated security for which the certificate is in the possession of a secured party, or in an uncertificated security registered in the name of a secured party, or a security entitlement maintained in the name of a secured party, may be reached by a creditor by legal process upon the secured party. (e) A creditor whose debtor is the owner of a certificated security, uncertificated security, or security entitlement is entitled to aid from a court of competent jurisdiction, by injunction or otherwise, in reaching the certificated security, uncertificated security, or security entitlement or in satisfying the claim by means allowed at law or in equity in regard to property that cannot readily be reached by other legal process. Sec. 45.08.113. Statute of frauds inapplicable. A contract or modification of a contract for the sale or purchase of a security is enforceable whether or not there is a writing signed or record authenticated by a party against whom enforcement is sought, even if the contract or modification is not capable of performance within one year of its making. Sec. 45.08.114. Evidentiary rules concerning certificated securities. The following rules apply in an action on a certificated security against the issuer: (1) unless specifically denied in the pleadings, each signature on a security certificate or in a necessary endorsement is admitted; (2) if the effectiveness of a signature is put in issue, the burden of establishing effectiveness is on the party claiming under the signature, but the signature is presumed to be genuine or authorized; (3) if signatures on a security certificate are admitted or established, production of the certificate entitles a holder to recover on it unless the defendant establishes a defense or a defect going to the validity of the security; (4) if it is shown that a defense or defect exists, the plaintiff has the burden of establishing that the plaintiff or some person under whom the plaintiff claims is a person against whom the defense or defect cannot be asserted. Sec. 45.08.115. Securities intermediary and others not liable to adverse claimant. A securities intermediary that has transferred a financial asset under an effective entitlement order, or a broker or other agent or bailee that has dealt with a financial asset at the direction of its customer or principal, is not liable to a person having an adverse claim to the financial asset, unless the securities intermediary, broker, other agent, or bailee (1) took the action after it had been served with an injunction, restraining order, or other legal process enjoining it from doing so, issued by a court of competent jurisdiction, and had a reasonable opportunity to act on the injunction, restraining order, or other legal process; (2) acted in collusion with the wrongdoer in violating the rights of the adverse claimant; or (3) in the case of a security certificate that has been stolen, acted with notice of the adverse claim. Sec. 45.08.116. Securities intermediary as purchaser for value. A securities intermediary that receives a financial asset and establishes a security entitlement to the financial asset in favor of an entitlement holder is a purchaser for value of the financial asset. A securities intermediary that acquires a security entitlement to a financial asset from another securities intermediary acquires the security entitlement for value if the securities intermediary acquiring the security entitlement establishes a security entitlement to the financial asset in favor of an entitlement holder. Article 2. Issue — Issuer. Sec. 45.08.201. “Issuer”. (a) With respect to obligations on or defenses to a security, “issuer” includes a person who (1) places or authorizes the placing of the person's name on a security certificate, other than as authenticating trustee, registrar, transfer agent, or the like, to evidence a share, participation, or other interest in the person's property or in an enterprise, or to evidence the person's duty to perform an obligation represented by the certificate; (2) creates shares, participations, or other interests in that person's property or in an enterprise, or undertakes obligations, if the shares, participations, interests, or obligations are uncertificated securities; (3) directly or indirectly creates fractional interests in the person's rights or property, if the fractional interests are represented by security certificates; or (4) becomes responsible for, or in place of, another person described as an issuer in this section. (b) With respect to obligations on or defenses to a security, a guarantor is an issuer to the extent of the guarantor's guarantee, whether or not the guarantor's obligation is noted on a security certificate. (c) With respect to registration of a transfer, “issuer” means a person on whose behalf transfer books are maintained. Sec. 45.08.202. Issuer's responsibility and defenses; notice of defect or defense. (a) Even against a purchaser for value and without notice, the terms of a certificated security include terms stated on the certificate and terms made part of the security by reference on the certificate to another instrument, indenture, or document or to a constitution, statute, ordinance, rule, regulation, order, or the like, to the extent the terms referred to do not conflict with terms stated on the certificate. A reference under this subsection does not of itself charge a purchaser for value with notice of a defect going to the validity of the security, even if the certificate expressly states that a person accepting it admits notice. The terms of an uncertificated security include those stated in an instrument, indenture, or document or in a constitution, statute, ordinance, rule, regulation, order, or the like, under which the security is issued. (b) The following rules apply if an issuer asserts that a security is not valid: (1) a security other than one issued by a government or governmental subdivision, agency, or instrumentality, even though issued with a defect going to its validity, is valid in the hands of a purchaser for value and without notice of the particular defect unless the defect involves a violation of a constitutional provision; in that case, the security is valid in the hands of a purchaser for value and without notice of the defect, other than one who takes by original issue; (2) paragraph (1) of this subsection applies to an issuer that is a government or governmental subdivision, agency, or instrumentality only if there has been substantial compliance with the legal requirements governing the issue or the issuer has received a substantial consideration for the issue as a whole or for the particular security and a stated purpose of the issue is one for which the issuer has power to borrow money or issue the security. (c) Except as otherwise provided in AS 45.08.205 , lack of genuineness of a certificated security is a complete defense, even against a purchaser for value and without notice. (d) All other defenses of the issuer of a security, including nondelivery and conditional delivery of a certificated security, are ineffective against a purchaser for value who has taken the certificated security without notice of the particular defense. (e) This section does not affect the right of a party to cancel a contract for a security “when, as, and if issued” or a “when distributed” in the event of a material change in the character of the security that is the subject of the contract or in the plan or arrangement under which the security is to be issued or distributed. (f) If a security is held by a securities intermediary against whom an entitlement holder has a security entitlement with respect to the security, the issuer may not assert a defense that the issuer could not assert if the entitlement holder held the security directly. Sec. 45.08.203. Staleness as notice of defects or defenses. (a) After an act or event, other than a call that has been revoked, creating a right to immediate performance of the principal obligation represented by a certificated security or setting a date on or after which the security is to be presented or surrendered for redemption or exchange, a purchaser is charged with notice of any defect in the security's issue or defense of the issuer, if the act or event (1) requires the payment of money, the delivery of certificated securities, the registration of transfer of uncertificated securities, or any of these on presentation or surrender of the security certificate, the money or securities are available on the date set for payment or exchange, and the purchaser takes the security more than one year after that date; or (2) is not covered by (1) of this subsection and the purchaser takes the security more than two years after the date set for surrender or presentation or the date on which performance became due. (b) [Repealed, § 68 ch 17 SLA 1996.] Sec. 45.08.204. Effect of issuer's restriction on transfer. A restriction on transfer of a security imposed by the issuer, even though otherwise lawful, is ineffective against a person without knowledge of the restriction unless the security (1) is certificated and the restriction is noted conspicuously on the security certificate; or (2) is uncertificated and the registered owner has been notified of the restriction. Sec. 45.08.205. Effect of unauthorized signature on security certificate. An unauthorized signature placed on a security certificate before or in the course of issue is ineffective, but the signature is effective in favor of a purchaser for value of the certificated security if the purchaser is without notice of the lack of authority and the signing has been done by (1) an authenticating trustee, registrar, transfer agent, or other person entrusted by the issuer with the signing of the security certificate or of similar security certificates, or the immediate preparation for signing of any of them; or (2) an employee of the issuer, or of a person listed in (1) of this section, entrusted with responsible handling of the security certificate. Sec. 45.08.206. Completion or alteration of certificated security. (a) If a security certificate contains the signatures necessary to its issue or transfer but is incomplete in another respect, (1) a person may complete it by filling in the blanks as authorized; and (2) even if the blanks are incorrectly filled in, the security certificate as completed is enforceable by a purchaser who takes it for value and without notice of the incorrectness. (b) A complete security certificate that has been improperly altered, even if fraudulently, remains enforceable, but only according to its original terms. (c) [Repealed, § 68 ch 17 SLA 1996.] (d) [Repealed, § 68 ch 17 SLA 1996.] Sec. 45.08.207. Rights and duties of issuer with respect to registered owners. (a) Before due presentment for registration of transfer of a certificated security in registered form or of an instruction requesting registration of transfer of an uncertificated security, the issuer or indenture trustee may treat the registered owner as the person exclusively entitled to vote, to receive notifications, and otherwise to exercise all the rights and powers of an owner. (b) [Repealed, § 68 ch 17 SLA 1996.] (c) [Repealed, § 68 ch 17 SLA 1996.] (d) [Repealed, § 68 ch 17 SLA 1996.] (e) [Repealed, § 68 ch 17 SLA 1996.] (f) [Repealed, § 68 ch 17 SLA 1996.] (g) This chapter does not affect the liability of the registered owner of a security for calls, assessments, or the like. Sec. 45.08.208. Effect of signature of authenticating trustee, registrar, or transfer agent. (a) A person signing a security certificate as authenticating trustee, registrar, transfer agent, or the like, warrants to a purchaser for value of the certificated security, if the purchaser is without notice of the particular defect, that (1) the certificate is genuine; (2) the person's own participation in the issue of the security is within the person's capacity and within the scope of the authority received by the person from the issuer; and (3) the person has reasonable grounds to believe that the certificated security is in the form and within the amount the issuer is authorized to issue. (b) Unless otherwise agreed, a person signing under (a) of this section does not assume responsibility for the validity of the security in other respects. Sec. 45.08.209. Issuer's lien. A lien in favor of an issuer upon a certificated security is valid against a purchaser only if the right of the issuer to the lien is noted conspicuously on the security certificate. Sec. 45.08.210. Overissue. (a) Except as otherwise provided in (b) and (c) of this section, the provisions of AS 45.08.201 — 45.08.210 that validate a security or compel its issue or reissue do not apply to the extent that validation, issue, or reissue would result in overissue. (b) If an identical security not constituting an overissue is reasonably available for purchase, a person entitled to issue or validation may compel the issuer to purchase the security and deliver it if certificated or register its transfer if uncertificated, against surrender of any security certificate the person holds. (c) If a security is not reasonably available for purchase, a person entitled to issue or validation may recover from the issuer the price the person or the last purchaser for value paid for it with interest from the date of the person's demand. (d) In this section, “overissue” means the issue of securities in excess of the amount the issuer has corporate power to issue, but an overissue does not occur if appropriate action has cured the overissue. Article 3. Purchase. Sec. 45.08.301. Delivery. (a) Delivery of a certificated security to a purchaser occurs when (1) the purchaser acquires possession of the security certificate; (2) another person, other than a securities intermediary, either acquires possession of the security certificate on behalf of the purchaser or, having previously acquired possession of the certificate, acknowledges that it holds for the purchaser; or (3) a securities intermediary acting on behalf of the purchaser acquires possession of the security certificate, only if the certificate is in registered form and is (A) registered in the name of the purchaser; (B) payable to the order of the purchaser; or (C) specially endorsed to the purchaser by an effective endorsement and has not been endorsed to the securities intermediary or in blank. (b) Delivery of an uncertificated security to a purchaser occurs when (1) the issuer registers the purchaser as the registered owner, upon original issue or registration of transfer; or (2) another person, other than a securities intermediary, either becomes the registered owner of the uncertificated security on behalf of the purchaser or, having previously become the registered owner, acknowledges that it holds for the purchaser. Sec. 45.08.302. Rights of purchaser. (a) Except as otherwise provided in (b) and (c) of this section, a purchaser of a certificated or uncertificated security acquires all rights in the security that the transferor had or had power to transfer. (b) A purchaser of a limited interest acquires rights only to the extent of the interest purchased. (c) A purchaser of a certificated security who as a previous holder had notice of an adverse claim does not improve its position by taking from a protected purchaser. Sec. 45.08.303. Protected purchaser. (a) In this chapter, “protected purchaser” means a purchaser of a certificated or uncertificated security, or of an interest in the security, who gives value, does not have notice of an adverse claim to the security, and obtains control of the certificated or uncertificated security. (b) In addition to acquiring the rights of a purchaser, a protected purchaser also acquires the interest in the security free of any adverse claim. Sec. 45.08.304. Endorsement. (a) An endorsement may be in blank or special. An endorsement in blank includes an endorsement to bearer. A special endorsement specifies to whom a security is to be transferred or who has power to transfer it. A holder may convert a blank endorsement to a special endorsement. (b) An endorsement purporting to be only of part of a security certificate representing units intended by the issuer to be separately transferable is effective to the extent of the endorsement. (c) An endorsement, whether special or in blank, does not constitute a transfer until delivery of the certificate on which it appears or, if the endorsement is on a separate document, until delivery of both the document and the certificate. (d) If a security certificate in registered form has been delivered to a purchaser without a necessary endorsement, the purchaser may become a protected purchaser only when the endorsement is supplied. However, against a transferor, a transfer is complete upon delivery and the purchaser has a specifically enforceable right to have any necessary endorsement supplied. (e) An endorsement of a security certificate in bearer form may give notice of an adverse claim to the certificate, but it does not otherwise affect a right to registration that the holder possesses. (f) Unless otherwise agreed, a person making an endorsement assumes only the obligations provided in AS 45.08.108 and not an obligation that the security will be honored by the issuer. Sec. 45.08.305. Instruction. (a) If an instruction has been originated by an appropriate person but is incomplete in another respect, any person may complete the instruction as authorized and the issuer may rely on the instruction as completed, even though the instruction has been completed incorrectly. (b) Unless otherwise agreed, a person initiating an instruction assumes only the obligations imposed by AS 45.08.108 and not an obligation that the security will be honored by the issuer. Sec. 45.08.306. Effect of guaranteeing signature, endorsement, or instruction. (a) A person who guarantees a signature of an endorser of a security certificate warrants that at the time of signing (1) the signature was genuine; (2) the signer was an appropriate person to endorse, or if the signature is by an agent, the agent had actual authority to act on behalf of the appropriate person; and (3) the signer had legal capacity to sign. (b) A person who guarantees a signature of the originator of an instruction warrants that at the time of signing (1) the signature was genuine; (2) the signer was an appropriate person to originate the instruction, or if the signature is by an agent, the agent had actual authority to act on behalf of the appropriate person, if the person specified in the instruction as the registered owner was, in fact, the registered owner, but the signature guarantor does not make a warranty that the person specified in the instruction as the registered owner was, in fact, the registered owner; and (3) the signer had legal capacity to sign. (c) A person who specially guarantees the signature of an originator of an instruction makes the warranties of a signature guarantor under (b) of this section and also warrants that at the time the instruction is presented to the issuer (1) the person specified in the instruction as the registered owner of the uncertificated security will be the registered owner; and (2) the transfer of the uncertificated security requested in the instruction will be registered by the issuer free from all liens, security interests, restrictions, and claims other than those specified in the instruction. (d) A guarantor under (a) and (b) of this section or a special guarantor under (c) of this section does not otherwise warrant the rightfulness of the transfer. (e) A person who guarantees an endorsement of a security certificate makes the warranties of a signature guarantor under (a) of this section and also warrants the rightfulness of the transfer in all respects. (f) A person who guarantees an instruction requesting the transfer of an uncertificated security makes the warranties of a special signature guarantor under (c) of this section and also warrants the rightfulness of the transfer in all respects. (g) An issuer may not require a special guarantee of signature, a guarantee of endorsement, or a guarantee of instruction as a condition to registration of transfer. (h) The warranties under this section are made to a person taking or dealing with the security in reliance on the guarantee, and the guarantor is liable to the person for loss resulting from their breach.

An endorser or originator of an instruction whose signature, endorsement, or instruction has been guaranteed is liable to a guarantor for loss suffered by the guarantor as a result of breach of the warranties of the guarantor. Sec. 45.08.307. Purchaser's right to requisites for registration of transfer. Unless otherwise agreed, the transferor of a security on due demand shall supply the purchaser with proof of authority to transfer or with any other requisite necessary to obtain registration of the transfer of the security, but if the transfer is not for value, a transferor does not need to comply unless the purchaser pays the necessary expenses. If the transferor fails within a reasonable time to comply with the demand, the purchaser may reject or rescind the transfer. Secs. 45.08.308 — 45.08.321. [Repealed, § 68 ch 17 SLA 1996.] Article 4. Registration. Sec. 45.08.401. Duty of issuer to register transfer. (a) If a certificated security in registered form is presented to the issuer with a request to register transfer or an instruction is presented to the issuer with a request to register transfer of an uncertificated security, the issuer shall register the transfer as requested if (1) under the terms of the security the person seeking registration of transfer is eligible to have the security registered in the person's name; (2) the endorsement or instruction is made by the appropriate person or by an agent who has actual authority to act on behalf of the appropriate person; (3) reasonable assurance is given under AS 45.08.402 that the endorsement or instruction is genuine and authorized; (4) applicable law relating to the collection of taxes has been complied with; (5) the transfer does not violate a restriction on transfer imposed by the issuer under AS 45.08.204 ; (6) a demand that the issuer not register transfer has not become effective under AS 45.08.403 , or the issuer has complied with AS 45.08.403 (b) but legal process or indemnity bond is not obtained under AS 45.08.403 (d); and (7) the transfer is in fact rightful or is to a protected purchaser. (b) If an issuer is under a duty to register a transfer of a security, the issuer is liable to a person presenting a certificated security or an instruction for registration or to the person's principal for loss resulting from an unreasonable delay in registration or failure or refusal to register the transfer. Sec. 45.08.402. Assurance that endorsements and instructions are effective. (a) An issuer may require the following assurance that each necessary endorsement or each instruction is genuine and authorized: (1) in all cases, a guarantee of the signature of the person making an endorsement or originating an instruction including, in the case of an instruction, reasonable assurance of identity; (2) if the endorsement is made or the instruction is originated by an agent, appropriate assurance of actual authority to sign; (3) if the endorsement is made or the instruction is originated by a fiduciary under AS 45.08.107 (e)(4) or (5), appropriate evidence of appointment or incumbency; (4) if there is more than one fiduciary, reasonable assurance that all who are required to sign have done so; and (5) if the endorsement is made or the instruction is originated by a person not covered by another provision of this subsection, assurance appropriate to the case corresponding as nearly as may be to the provisions of this subsection. (b) [Repealed, § 68 ch 17 SLA 1996.] (c) An issuer may elect to require reasonable assurance beyond that specified in this section. (d) In this section, (1) “appropriate evidence of appointment or incumbency” means (A) in the case of a fiduciary appointed or qualified by a court, a certificate issued by or under the direction or supervision of the court or an officer of the court and dated within 60 days before the date of presentation for transfer; or (B) in any other case, a copy of a document showing the appointment or a certificate issued by or on behalf of a person reasonably believed by the issuer to be responsible or, in the absence of that document or certificate, other evidence the issuer reasonably considers to be appropriate; (2) “guarantee of the signature” means a guarantee signed by or on behalf of a person reasonably believed by the issuer to be responsible; an issuer may adopt standards with respect to responsibility if the standards are not manifestly unreasonable. Sec. 45.08.403. Demand that issuer not register transfer. (a) A person who is an appropriate person to make an endorsement or originate an instruction may demand that the issuer not register transfer of a security by communicating to the issuer a notification that identifies the registered owner and the issue of which the security is a part and provides an address for communications directed to the person making the demand. The demand is effective only if it is received by the issuer at a time and in a manner affording the issuer reasonable opportunity to act on it. (b) If a certificated security in registered form is presented to an issuer with a request to register transfer or an instruction is presented to an issuer with a request to register transfer of an uncertificated security after a demand that the issuer not register transfer has become effective, the issuer shall promptly communicate to the person who initiated the demand at the address provided in the demand and to the person who presented the security for registration of transfer or initiated the instruction requesting registration of transfer a notification stating that (1) the certificated security has been presented for registration of transfer or the instruction for registration of transfer of the uncertificated security has been received; (2) a demand that the issuer not register transfer had previously been received; and (3) the issuer will withhold registration of transfer for a period of time stated in the notification in order to provide the person who initiated the demand an opportunity to obtain legal process or an indemnity bond. (c) The period described in (b)(3) of this section may not exceed 30 days after the date of communication of the notification. A shorter period may be specified by the issuer if it is not manifestly unreasonable. (d) An issuer is not liable to a person who initiated a demand that the issuer not register transfer for loss the person suffers as a result of registration of a transfer under an effective endorsement or instruction if the person who initiated the demand does not, within the time stated in the issuer's communication, either (1) obtain an appropriate restraining order, injunction, or other process from a court of competent jurisdiction enjoining the issuer from registering the transfer; or (2) file with the issuer an indemnity bond, sufficient in the issuer's judgment to protect the issuer and any transfer agent, registrar, or other agent of the issuer involved from a loss the issuer, transfer agent, registrar, or other agent of the issuer may suffer by refusing to register the transfer. (e) This section does not relieve an issuer from liability for registering transfer under an endorsement or instruction that was not effective. Sec. 45.08.404. Wrongful registration. (a) Except as otherwise provided in AS 45.08.406 , an issuer is liable for wrongful registration of transfer if the issuer has registered a transfer of a security to a person not entitled to the security and the transfer was registered (1) under an ineffective endorsement or instruction; (2) after a demand that the issuer not register transfer became effective under AS 45.08.403 (a) and the issuer did not comply with AS 45.08.403 (b); (3) after the issuer had been served with an injunction, restraining order, or other legal process enjoining it from registering the transfer, issued by a court of competent jurisdiction, and the issuer had a reasonable opportunity to act on the injunction, restraining order, or other legal process; or (4) by an issuer acting in collusion with the wrongdoer. (b) An issuer that is liable for wrongful registration of transfer under (a) of this section on demand shall provide the person entitled to the security with a like certificated or uncertificated security, and payments or distributions that the person did not receive as a result of the wrongful registration. If an overissue would result, the issuer's liability to provide the person with a like security is governed by AS 45.08.210 . (c) Except as otherwise provided in (a) of this section or in a law relating to the collection of taxes, an issuer is not liable to an owner or other person suffering loss as a result of the registration of a transfer of a security if registration was made under an effective endorsement or instruction. Sec. 45.08.405. Lost, destroyed, and stolen certificated securities. (a) [Repealed, § 68 ch 17 SLA 1996.] (b) If the owner of a certificated security, whether in registered or bearer form, claims that the certificate has been lost, destroyed, or wrongfully taken, the issuer shall issue a new certificate if the owner (1) so requests before the issuer has notice that the certificate has been acquired by a protected purchaser; (2) files with the issuer a sufficient indemnity bond; and (3) satisfies other reasonable requirements imposed by the issuer. (c) If, after the issue of a new security certificate, a protected purchaser of the original certificate presents the original certificate for registration of transfer, the issuer shall register the transfer unless an overissue would result. In that case, the issuer's liability is governed by AS 45.08.210 . In addition to rights on the indemnity bond, an issuer may recover the new certificate from a person to whom it was issued or a person taking under that person, except a protected purchaser. Sec. 45.08.406. Obligation to notify issuer of lost, destroyed, or wrongfully taken security certificate. If a security certificate has been lost, apparently destroyed, or wrongfully taken, the owner fails to notify the issuer of the loss, destruction, or taking within a reasonable time after the owner has notice of the loss, destruction, or taking, and the issuer registers a transfer of the security before receiving notification, the owner may not assert against the issuer a claim for registering the transfer under AS 45.08.404 or a claim to a new security certificate under AS 45.08.405 . Sec. 45.08.407. Authenticating trustee, transfer agent, and registrar. A person acting as authenticating trustee, transfer agent, registrar, or other agent for an issuer in the registration of a transfer of its securities, in the issue of new security certificates or uncertificated securities, or in the cancellation of surrendered security certificates has the same obligation to the holder or owner of a certificated or uncertificated security with regard to the particular functions performed as the issuer has in regard to those functions. Sec. 45.08.408. Statements of uncertificated securities. [Repealed, § 68 ch 17 SLA 1996.] Article 5. Security Entitlements. Sec. 45.08.501. Acquisition of security entitlement from securities intermediary; securities account. (a) Except as otherwise provided in (b) and (c) of this section, a person acquires a security entitlement if a securities intermediary (1) indicates by book entry that a financial asset has been credited to the person's securities account; (2) receives a financial asset from the person or acquires a financial asset for the person and, in either case, accepts the asset for credit to the person's securities account; or (3) becomes obligated under another law, regulation, or rule to credit a financial asset to the person's securities account. (b) If a condition of (a) of this section has been met, a person has a security entitlement even if the securities intermediary does not itself hold the financial asset. (c) If a securities intermediary holds a financial asset for another person, and the financial asset is registered in the name of, payable to the order of, or specially endorsed to the other person, and has not been endorsed to the securities intermediary or in blank, the other person is treated as holding the financial asset directly rather than as having a security entitlement with respect to the financial asset. (d) Issuance of a security is not establishment of a security entitlement. (e) In this chapter, “securities account” means an account to which a financial asset is or may be credited in accordance with an agreement under which the person maintaining the account undertakes to treat the person for whom the account is maintained as entitled to exercise the rights that comprise the financial asset. Sec. 45.08.502. Assertion of adverse claim against entitlement holder. An action based on an adverse claim to a financial asset, whether framed in conversion, replevin, constructive trust, equitable lien, or other theory, may not be asserted against a person who acquires a security entitlement under AS 45.08.501 for value and without notice of the adverse claim. Sec. 45.08.503. Property interest of entitlement holder in financial asset held by securities intermediary. (a) 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, except as otherwise provided in AS 45.08.511 . (b) An entitlement holder's property interest with respect to a particular financial asset under (a) of this section is a pro rata property interest in all interests in that financial asset held by the securities 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. (c) An entitlement holder's property interest with respect to a particular financial asset under (a) of this section may not be enforced against the securities intermediary unless the interest is enforced by exercising the entitlement holder's rights under AS 45.08.505 — 45.08.508. (d) An entitlement holder's property interest with respect to a particular financial asset under (a) of this section may not be enforced against a purchaser of the financial asset or of an interest in the financial asset, unless (1) insolvency proceedings have been initiated by or against the securities intermediary; (2) the securities intermediary does not have sufficient interests in the financial asset to satisfy the security entitlements of all of the intermediary's entitlement holders to that financial asset; (3) the securities intermediary violated the intermediary's obligations under AS 45.08.504 by transferring the financial asset or interest in the financial asset to the purchaser; and (4) the purchaser is not protected under (f) of this section. (e) Under (d) of this section, the trustee or other liquidator, acting on behalf of all entitlement holders having security entitlements with respect to a particular financial asset, may recover the financial asset, or the interest in the financial asset, from the purchaser; if the trustee or other liquidator elects not to pursue this right of recovery, an entitlement holder whose security entitlement remains unsatisfied has the right to recover the entitlement holder's interest in the financial asset from the purchaser. (f) An action based on the entitlement holder's property interest with respect to a particular financial asset under (a) of this section, whether framed in conversion, replevin, constructive trust, equitable lien, or other theory, may not be asserted against a purchaser of a financial asset or an interest in a financial asset who gives value, obtains control, and does not act in collusion with the securities intermediary in violating the securities intermediary's obligations under AS 45.08.504 . Sec. 45.08.504. Duty of securities intermediary to maintain financial asset. (a) A securities intermediary shall promptly obtain and maintain a financial asset in a quantity corresponding to the aggregate of all security entitlements the securities intermediary has established in favor of the securities intermediary's entitlement holders with respect to that financial asset. The securities intermediary may maintain those financial assets directly or through one or more other securities intermediaries. (b) Except to the extent otherwise agreed by its entitlement holder, a securities intermediary may not grant a security interest in a financial asset the securities intermediary is obligated to maintain under (a) of this section. (c) A securities intermediary satisfies the duty in (a) of this section if (1) the securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or (2) in the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to obtain and maintain the financial asset. (d) This section does not apply to a clearing corporation if the clearing corporation is the obligor of an option or similar obligation to which the entitlement holders of the clearing corporation have security entitlements. Sec. 45.08.505. Duty of securities intermediary with respect to payments and distributions. (a) A securities intermediary shall take action to obtain a payment or distribution made by the issuer of a financial asset. A securities intermediary satisfies the duty if (1) the securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or (2) in the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to attempt to obtain the payment or distribution. (b) A securities intermediary is obligated to the securities intermediary's entitlement holder for a payment or distribution made by the issuer of a financial asset if the payment or distribution is received by the securities intermediary. Sec. 45.08.506. Duty of securities intermediary to exercise rights as directed by entitlement holder. A securities intermediary shall exercise rights with respect to a financial asset if directed by an entitlement holder to exercise the rights. A securities intermediary satisfies the duty if (1) the securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or (2) in the absence of agreement, the securities intermediary either places the entitlement holder in a position to exercise the rights directly or exercises due care in accordance with reasonable commercial standards to follow the direction of the entitlement holder. Sec. 45.08.507. Duty of securities intermediary to comply with entitlement order. (a) A securities intermediary shall comply with an entitlement order if the entitlement order is originated by the appropriate person, the securities intermediary has had reasonable opportunity to assure itself that the entitlement order is genuine and authorized, and the securities intermediary has had reasonable opportunity to comply with the entitlement order. A securities intermediary satisfies the duty if (1) the securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or (2) in the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to comply with the entitlement order. (b) If a securities intermediary transfers a financial asset under an ineffective entitlement order, the securities intermediary shall reestablish a security entitlement in favor of the person entitled to the entitlement order, and pay or credit payments or distributions that the person did not receive as a result of the wrongful transfer. If the securities intermediary does not reestablish a security entitlement, the securities intermediary is liable to the entitlement holder for damages. Sec. 45.08.508. Duty of securities intermediary to change entitlement holder's position to other form of security holding. A securities intermediary shall act at the direction of an entitlement holder to change a security entitlement into another available form of holding for which the entitlement holder is eligible or to cause the financial asset to be transferred to a securities account of the entitlement holder with another securities intermediary. A securities intermediary satisfies the duty if (1) the securities intermediary acts as agreed upon by the entitlement holder and the securities intermediary; or (2) in the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to follow the direction of the entitlement holder. Sec. 45.08.509. Specification of duties of securities intermediary by other statute, regulation, or rule; manner of performance of duties of securities intermediary and exercise of rights of entitlement holder. (a) If the substance of a duty imposed upon a securities intermediary by AS 45.08.504 — 45.08.508 is the subject of other statute, regulation, or rule, compliance with that statute, regulation, or rule satisfies the duty. (b) To the extent that specific standards for the performance of the duties of a securities intermediary or the exercise of the rights of an entitlement holder are not specified by other statute, regulation, or rule or by agreement between the securities intermediary and entitlement holder, the securities intermediary shall perform the duties of the securities intermediary and the entitlement holder shall exercise the rights of the entitlement holder in a commercially reasonable manner. (c) The obligation of a securities intermediary to perform the duties imposed by AS 45.08.504 — 45.08.508 is subject to the rights of the securities intermediary (1) arising out of a security interest under a security agreement with the entitlement holder or otherwise; and (2) under other law, regulation, rule, or agreement to withhold performance of the duties of the securities intermediary as a result of unfulfilled obligations of the entitlement holder to the securities intermediary. (d) AS 45.08.504 — 45.08.508 do not require a securities intermediary to take action that is prohibited by other statute, regulation, or rule. Sec. 45.08.510. Rights of purchaser of security entitlement from entitlement holder. (a) In a case not covered by the priority rules in AS 45.29 or the rules stated in (c) of this section, an action based on an adverse claim to a financial asset or security entitlement, whether framed in conversion, replevin, constructive trust, equitable lien, or other theory, may not be asserted against a person who purchases a security entitlement, or an interest in a security entitlement, from an entitlement holder if the purchaser gives value, does not have notice of the adverse claim, and obtains control. (b) If an adverse claim could not have been asserted against an entitlement holder under AS 45.08.502 , the adverse claim cannot be asserted against a person who purchases a security entitlement, or an interest in a security entitlement, from the entitlement holder. (c) In a case not covered by the priority rules in AS 45.29 , a purchaser for value of a security entitlement, or an interest in a security entitlement, who obtains control has priority over a purchaser of a security entitlement, or an interest in a security entitlement, who does not obtain control. Except as otherwise provided in (d) of this section, purchasers who have control rank according to priority in time of (1) the purchaser's becoming the person for whom the securities account in which the security entitlement is carried is maintained, if the purchaser obtained control under AS 45.08.106 (d)(1); (2) the securities intermediary's agreement to comply with the purchaser's entitlement orders with respect to security entitlements carried or to be carried in the securities account in which the security entitlement is carried if the purchaser obtained control under AS 45.08.106 (d)(2); or (3) if the purchaser obtained control through another person under AS 45.08.106 (d)(3), the time on which priority would be based under this subsection if the other person were the secured party. (d) A securities intermediary as purchaser has priority over a conflicting purchaser who has control unless otherwise agreed by the securities intermediary. Sec. 45.08.511. Priority among security interests and entitlement holders. (a) Except as otherwise provided in (b) and (c) of this section, if a securities intermediary does not have sufficient interests in a particular financial asset to satisfy both the securities intermediary's obligations to entitlement holders who have security entitlements to that financial asset and the securities intermediary's obligation to a creditor of the securities intermediary who has a security interest in the financial asset, the claims of entitlement holders, other than the creditor, have priority over the claim of the creditor. (b) A claim of a creditor of a securities intermediary who has a security interest in a financial asset held by a securities intermediary has priority over claims of the securities intermediary's entitlement holders who have security entitlements with respect to the financial asset if the creditor has control over the financial asset. (c) If a clearing corporation does not have sufficient financial assets to satisfy both the clearing corporation's obligations to entitlement holders who have security entitlements with respect to a financial asset and the clearing corporation's obligation to a creditor of the clearing corporation who has a security interest in the financial asset, the claim of the creditor has priority over the claims of entitlement holders.