§ 28:8–508. 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.

(Apr. 9, 1997, D.C. Law 11-240, § 2, 44 DCR 1087.)

Prior Codifications

1981 Ed., § 28:8-508.

Uniform Commercial Code Comment

1. This section states another aspect of the duties of securities intermediaries that make up security entitlements—the obligation of the securities intermediary to change an entitlement holder’s position into any other form of holding for which the entitlement holder is eligible or to transfer the entitlement holder’s position to an account at another intermediary. This section does not state unconditionally that the securities intermediary is obligated to turn over a certificate to the customer or to cause the customer to be registered on the books of the issuer, because the customer may not be eligible to hold the security directly. For example, municipal bonds are now commonly issued in “book-entry only” form, in which the only entity that the issuer will register on its own books is a depository.

If security certificates in registered form are issued for the security, and individuals are eligible to have the security registered in their own name, the entitlement holder can request that the intermediary deliver or cause to be delivered to the entitlement holder a certificate registered in the name of the entitlement holder or a certificate indorsed in blank or specially indorsed to the entitlement holder. If security certificates in bearer form are issued for the security, the entitlement holder can request that the intermediary deliver or cause to be delivered a certificate in bearer form. If the security can be held by individuals directly in uncertificated form, the entitlement holder can request that the security be registered in its name. The specification of this duty does not determine the pricing terms of the agreement in which the duty arises.

2. The same “agreement/due care” formula is used in this section as in the other Part 5 sections on the duties of intermediaries. So too, the rules of Section 8-509 apply to the Section 8-508 duty.

Definitional Cross References “Agreement”. Section 1-201(3).

“Entitlement holder”. Section 8-102(a)(7).

“Financial asset”. Section 8-102(a)(9).

“Securities intermediary”. Section 8-102(a)(14).

“Security entitlement”. Section 8-102(a)(17).