Okla. Stat. tit. 12A § 8-504

Current through Laws 2024, c. 453.

Section 8-504 - Duty of Securities Intermediary to Maintain Financial Asset

(a) A securities intermediary shall promptly obtain and thereafter maintain a financial asset in a quantity corresponding to the aggregate of all security entitlements it has established in favor of its 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 any security interests in a financial asset it is obligated to maintain pursuant to subsection (a) of this section.

(c) A securities intermediary satisfies the duty in subsection (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 that is itself the obligor of an option or similar obligation to which its entitlement holders have security entitlements.

Okla. Stat. tit. 12A, § 8-504

Added by Laws 1995, SB 522, c. 242, § 44, eff. 2/1/1996.

Oklahoma Code Comment

A securities intermediary has a duty to hold financial assets corresponding to the aggregate of all security entitlements of its entitlement holders. The holding may be direct or indirect. For example, a broker may hold financial assets which include both securities and security entitlements; that is, holdings through a clearing corporation or another securities intermediary.

It is wrongful for a securities intermediary to grant security interests in positions it needs to satisfy customers' claims, except as authorized by the customers, which is common in the case of margin accounts. However, the customers do not necessarily have priority over lenders with respect to wrongfully transferred financial assets; that depends upon Sections 8-503 and 8-511.

The exact manner in which the securities intermediary discharges its duty under this Section is not specified. In some cases, the securities intermediary may by agreement disclaim responsibility for custodial risk (as with holdings of foreign securities through foreign intermediaries, where the American securities intermediary may disclaim the risk by agreement). However, such agreements must be made in good faith and a general disclaimer of the entire duty of this Section would be impermissible. In other cases, the duty is discharged by compliance with reasonable commercial standards, which includes applicable state and federal statutory law and regulations. See UCC § 8- 509(a).

Prior Statutory Provisions:

None.