bill making the investor’s home law govern account disputes

The text as introduced · 816 words

89R1008 SRA-D

By: Hayes
H.B. No. 5174

A BILL TO BE ENTITLED

AN ACT

relating to the law governing actions involving certain investment

securities and the priority and perfection of certain security

interests under the Uniform Commercial Code.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 8.110(b), Business & Commerce Code, is

amended to read as follows:

(b) Except as otherwise provided by this section, the [ The ]

local law of the entitlement holder's [ securities intermediary's ]

jurisdiction[ , as specified in Subsection (e), ] governs all other

matters [ :

[ (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 any

duties 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 therein from an entitlement holder ].

SECTION 2. Section 8.503(a), Business & Commerce Code, is

amended to read as follows:

(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 Section

8.511 ].

SECTION 3. Section 8.511, Business & Commerce Code, is

amended to read as follows:

Sec. 8.511. PRIORITY AMONG SECURITY INTERESTS AND

ENTITLEMENT HOLDERS. If [ (a) Except as otherwise provided in

Subsections (b) and (c), if ] a securities intermediary does not

have sufficient interests in a particular financial asset to

satisfy both its obligations to entitlement holders who have

security entitlements to that financial asset and its obligation to

a creditor of the securities intermediary who has a security

interest in that 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 that 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 its obligations to entitlement

holders who have security entitlements with respect to a financial

asset and its obligation to a creditor of the clearing corporation

who has a security interest in that financial asset, the claim of

the creditor has priority over the claims of entitlement holders. ]

SECTION 4. Section 9.305(a), Business & Commerce Code, is

amended to read as follows:

(a) Except as otherwise provided in Subsection (c), the

following rules apply:

(1) While a security certificate is located in a

jurisdiction, the local law of that jurisdiction governs

perfection, the effect of perfection or nonperfection, and the

priority of a security interest in the certificated security

represented thereby.

(2) The local law of the issuer's jurisdiction as

specified in Section 8.110(d) governs perfection, the effect of

perfection or nonperfection, and the priority of a security

interest in an uncertificated security.

(3) [ The local law of the securities intermediary's

jurisdiction as specified in Section 8.110(e) governs perfection,

the effect of perfection or nonperfection, and the priority of a

security interest in a security entitlement or securities account.

[ (4) ] The local law of the commodity intermediary's

jurisdiction governs perfection, the effect of perfection or

nonperfection, and the priority of a security interest in a

commodity contract or commodity account.

SECTION 5. Sections 8.110(e) and (f), Business & Commerce

Code, are repealed.

SECTION 6. The changes in law made to Section 8.110,

Business & Commerce Code, apply only to an action filed or

proceeding commenced on or after the effective date of this Act. An

action filed or proceeding commenced before the effective date of

this Act is governed by the law in effect immediately before the

effective date of this Act, and that law is continued in effect for

that purpose.

SECTION 7. The changes in law made by this Act to Sections

8.511 and 9.305(a), Business & Commerce Code, apply only to a

security interest that attaches on or after the effective date of

this Act. A security interest that attaches before the effective

date of this Act is governed by the law in effect immediately before

the effective date of this Act, and that law is continued in effect

for that purpose.

SECTION 8. This Act takes effect September 1, 2025.