Okla. Stat. tit. 12A § 8-404

Current through Laws 2024, c. 378.

Section 8-404 - Wrongful Registration

(a) Except as otherwise provided in Section 8-406 of this title, 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 it, and the transfer was registered:

(1) pursuant to an ineffective indorsement or instruction;

(2) after a demand that the issuer not register transfer became effective under subsection (a) of Section 8-403 of this title and the issuer did not comply with subsection (b) of Section 8-403 of this title;

(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 subsection (a) of this section on demand shall provide the person entitled to the security with a like certificated or uncertificated security, and any 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 Section 8-210 of this title.

(c) Except as otherwise provided in subsection (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 pursuant to an effective indorsement or instruction.

Okla. Stat. tit. 12A, § 8-404

Added by Laws 1961, p. 161, § 8-404. Amended by Laws 1984, HB 1800, c. 76, § 42, eff. 11/1/1984; Amended by Laws 1995, SB 522, c. 242, § 37, eff. 2/1/1996.

Oklahoma Code Comment

Section 8-404 addresses matters set forth in pre-revision Sections 8-403 and 8- 404 .

Pre-revision Section 8-403 (Issuer's Duty as to Adverse Claims) has been deleted in its entirety. This is consistent with revised Article 8's intent to simplify the issuer's responsibility by relieving it of the obligation to deal with every conceivable adverse claim contained in documents or otherwise received by the issuer in connection with a request for transfer. Section 8- 404, retitled "Wrongful Registration," has been reworded and simplified. While the Section retains the principle that an issuer is liable for registering a transfer if the indorsement or instruction was not made by the proper person, it no longer requires an issuer to inquire into apparent adverse claims. Rather, the burden is now put on adverse claimants who wish to prevent the issuer from registering the transfer to obtain a court order to that effect. Further, for liability to arise, the issuer must have made the transfer after being served with such a court order. See UCC § 8-404(a)(3) and Official Revision Note 6.

Sub section 8-404(c) changes prior law on the liability of an issuer who acts on an instruction that was effective, but nevertheless improper. Under pre-revision Article 8, issuers were not required to seek out information from which they could determine whether a fiduciary was acting properly; however, the issuer was liable if it registered a transfer with notice that the fiduciary was acting improperly. Subsection (c) provides that an issuer is not liable for wrongful registration if it acts on an effective indorsement or instruction, even though the issuer may have notice of adverse claims, so long as the issuer has not been served with legal process and is not acting in collusion with the wrongdoer in registering the transfer. This restricted scope of liability comports with Article 8's desire to reduce the burden and resulting delay in the processing of transfers and to relieve issuers from requiring extensive documentation for fiduciary stock transfers. See also UCC § 8-402 and the Oklahoma Comment.

Finally, a critical reason for eliminating the issuer's liability for registering transfers even with notice of adverse claims is to permit expeditious transfers even with the issuer's awareness of alleged security interests held by third parties in securities. This allows creditors to obtain perfected security interests easily, but without impairing the transferability of securities.

See Reinhard v. Textron, Inc., 516 P.2d 1325 (Okla. 1973), an action to enforce a corporation's liability for improper registration of the plaintiff's stock where the plaintiff's signature was forged on transfer indorsements of shares. Under Rhode Island conflict of laws rules, the action was subject to the Oklahoma statute of limitations, making the applicable limitations period five years.

Prior Statutory Provisions:

18 Okla. Stat. §§ 1.117-1.120 (1951).

Pre-revision UCC §§ 8-403, 8-404.