PART VCapital Structure (continued)
Security Certificates and Transfers (continued)
Marginal note:Constructive ownership of security
120 (1) A purchaser is the owner of a security held for the purchaser by a securities broker, but a purchaser is not a holder except in the cases referred to in paragraphs 119(b) and (c).
Marginal note:Ownership of part of fungible bulk
(2) If a security is part of a fungible bulk, a purchaser of the security is the owner of the proportionate interest in the fungible bulk.
Marginal note:Notice to securities broker of adverse claim
(3) Notice of an adverse claim received by a securities broker or by a purchaser after the broker takes delivery as a holder for value is not effective against the broker or the purchaser, except that, as between the broker and the purchaser, the purchaser may demand delivery of an equivalent security in respect of which no notice of an adverse claim has been received.
Marginal note:Delivery of security
121 (1) Unless otherwise agreed, if a sale of a security is made on a stock exchange or otherwise through securities brokers,
(a) the selling customer fulfils the customer’s duty to deliver when the customer delivers the security to the selling securities broker or to a person designated by the selling securities broker or causes an acknowledgement to be made to the selling securities broker that it is held for the selling securities broker; and
(b) the selling securities broker, including a correspondent broker, acting for a selling customer fulfils the securities broker’s duty to deliver by delivering the security or a like security to the buying securities broker or to a person designated by the buying securities broker or by effecting clearance of the sale in accordance with the rules of the exchange on which the transaction took place.
Marginal note:Duty to deliver
(2) Except as otherwise provided in this section and unless otherwise agreed, a transferor’s duty to deliver a security under a contract of purchase is not fulfilled until the transferor delivers the security in negotiable form to the purchaser or to a person designated by the purchaser, or causes an acknowledgement to be made to the purchaser that the security is held for the purchaser.
Marginal note:Delivery to securities broker
(3) A sale to a securities broker purchasing for the securities broker’s own account is subject to subsection (2) and not subsection (1), unless the sale is made on a stock exchange.
Marginal note:Transfer through clearing agency
(4) If a security shown in the records of a clearing agency is evidenced by
(a) a security certificate in the custody of the clearing agency or a custodian, or a nominee of either, subject to the instructions of the clearing agency, and is in bearer form or endorsed in blank by an appropriate person or registered in the name of the clearing agency or a custodian, or of a nominee of either, or
(b) an uncertificated security registered or recorded in records maintained by or on behalf of the bank in the name of the clearing agency or a custodian, or of a nominee of either, subject to the instructions of the clearing agency,
then, in addition to other methods, a transfer or pledge of the security or any interest therein may be effected by the making of an appropriate entry in the records of the clearing agency.
Marginal note:Interest in fungible bulk
(5) Under subsections (4) to (10), entries may be in respect of like securities or interests therein as part of a fungible bulk and may refer merely to a quantity of a particular security without reference to the name of the registered owner, certificate or bond number or the like and, in appropriate cases, may be on a net basis taking into account other transfers or pledges of the same security.
Marginal note:Constructive endorsement and delivery
(6) A transfer or pledge under subsections (4) to (10) has the effect of a delivery of a security in bearer form or duly endorsed in blank representing the amount of the obligation or the number of shares or rights transferred or pledged.
(7) If a pledge or the creation of a security interest is intended, the making of entries has the effect of a taking of delivery by the pledgee or a secured party and the pledgee or secured party shall be deemed to have taken possession for all purposes.
(8) A person depositing a security certificate or an uncertificated security with a clearing agency, or a transferee or pledgee of a security under subsections (4) to (10), is a holder of the security and shall be deemed to have possession of the security so deposited, transferred or pledged, as the case may be, for all purposes.
Marginal note:Not registration
(9) A transfer or pledge under subsections (4) to (10) does not constitute a registration of transfer under sections 126 to 133.
Marginal note:Error in records
(10) That entries made in the records of the clearing agency as provided in subsection (4) are not appropriate does not affect the validity or effect of the entries nor the liabilities or obligations of the clearing agency to any person adversely affected thereby.
Marginal note:Right to reclaim possession
122 (1) A person against whom the transfer of a security is wrongful for any reason, including the person’s incapacity, may, against anyone except abona fide purchaser,
(a) reclaim possession of the security or obtain possession of any new security evidencing all or part of the same rights; or
(b) claim damages.
Marginal note:Recovery where unauthorized endorsement
(2) If the transfer of a security is wrongful by reason of an unauthorized endorsement, the owner may reclaim possession of the security or a new security even from a bona fide purchaser if the ineffectiveness of the purported endorsement is asserted against the purchaser under section 117.
(3) The right to reclaim possession of a security may be specially enforced, its transfer may be restrained and the security may be impounded pending litigation.
Marginal note:Right to requisites for registration
123 (1) Unless otherwise agreed, a transferor shall, on demand, supply a purchaser with proof of the transferor’s authority to transfer a security or with any other requisite that is necessary to obtain registration of the transfer of a security, but if the transfer is not for value, it is not necessary for a transferor to prove authority to transfer unless the purchaser pays the reasonable and necessary costs of the proof and transfer.
Marginal note:Rescission of transfer
(2) If a transferor fails to comply with a demand under subsection (1) within a reasonable time, the purchaser may reject or rescind the transfer.
Marginal note:Seizure of security
124 No seizure of a security or other interest evidenced thereby is effective until the person making the seizure obtains possession of the security.
Marginal note:No conversion if good faith delivery
125 An agent or bailee who in good faith, including observance of reasonable commercial standards if the agent or bailee is in the business of buying, selling or otherwise dealing with securities of a bank, has received securities and sold, pledged or delivered them according to the instructions of the agent’s or bailee’s principal is not liable for conversion or for participation in breach of fiduciary duty even though the principal has no right to dispose of the securities.
Marginal note:Duty to register transfer
126 (1) Subject to Part VII, where a security in registered form is presented for transfer, the issuer shall register the transfer if
(a) the security is endorsed by an appropriate person;
(b) reasonable assurance is given that the endorsement is genuine and effective;
(c) the issuer has no duty to inquire into adverse claims or has discharged any such duty;
(d) all applicable laws relating to the collection of taxes have been complied with;
(e) the transfer is rightful or is to a bona fide purchaser; and
(f) the fee, if any, referred to in subsection 85(2) has been paid.
Marginal note:Liability for delay
(2) Where an issuer has a duty to register a transfer of a security, the issuer is liable to the person presenting it for registration for any loss resulting from any unreasonable delay in registration or from the failure or refusal to register the transfer.
Marginal note:Assurance of endorsements
127 (1) An issuer may require an assurance that each necessary endorsement on a security is genuine and effective by requiring a guarantee of the signature of the person endorsing the security and by requiring
(a) if the endorsement is by an agent, reasonable assurance of authority to sign;
(b) if the endorsement is by a fiduciary, evidence of appointment or incumbency;
(c) if there is more than one fiduciary, reasonable assurance that all who are required to sign have done so; and
(d) in any other case, assurance that corresponds as closely as practicable to the foregoing.
Definition of guarantee of the signature
(2) For the purposes of subsection (1), guarantee of the signature means a guarantee signed by or on behalf of a person whom the issuer believes, on reasonable grounds, to be a responsible person.
(3) An issuer may adopt reasonable standards to determine responsible persons for the purposes of subsection (2).
Definition of evidence of appointment or incumbency
(4) For the purposes of paragraph (1)(b), evidence of appointment or incumbency means
(a) in the case of a fiduciary appointed by a court and referred to in subsection 96(1), a copy of the certified court order referred to in subsection 96(1) and dated not earlier than sixty days before the day a security is presented for transfer; or
(b) in the case of any other fiduciary, a copy of a document showing the appointment or other evidence believed by the issuer to be appropriate.
(5) An issuer may adopt reasonable standards with respect to evidence referred to in paragraph (4)(b).
Marginal note:No notice to issuer
(6) An issuer is deemed not to have notice of the contents of any document referred to in subsection (4) that is obtained by the issuer except to the extent that the contents relate directly to appointment or incumbency.
Marginal note:Notice from additional documentation
128 If an issuer, in relation to a transfer, demands assurance other than an assurance specified in subsection 127(1) and obtains a copy of a will, trust or partnership agreement or a by-law or similar document, the issuer is deemed to have notice of all matters contained therein affecting the transfer.
Marginal note:Limited duty of inquiry
129 (1) An issuer to whom a security is presented for registration has a duty to inquire into adverse claims if
(a) the issuer receives written notice of an adverse claim at a time and in a manner that provides the issuer with a reasonable opportunity to act on it before the issue of a new, reissued or re-registered security and the notice discloses the name and address of the claimant, the registered owner and the issue of which the security is a part; or
(b) the issuer is deemed to have notice of an adverse claim from a document that it obtained under section 128.
Marginal note:Discharge of duty
(2) An issuer may discharge a duty of inquiry by any reasonable means, including notifying an adverse claimant by registered mail sent to the address provided by the adverse claimant or, if no such address has been provided, to the adverse claimant’s residence or regular place of business, that a security has been presented for registration of transfer by a named person and that the transfer will be registered unless, within thirty days after the date of mailing of the notice, either
(a) the issuer is served with a restraining order or other order of a court, or
(b) the issuer is provided with an indemnity bond sufficient in the issuer’s judgment to protect the issuer and any registrar, transfer agent or other agent of the issuer from any loss that may be incurred by any of them as a result of complying with the adverse claim.
Marginal note:Inquiry into adverse claims
130 Unless an issuer is deemed to have notice of an adverse claim from a document that it obtained under section 128 or has received notice of an adverse claim under subsection 129(1), if a security presented for registration is endorsed by the appropriate person, the issuer has no duty to inquire into adverse claims and, in particular,
(a) an issuer registering a security in the name of a person who is a fiduciary or who is described as a fiduciary is not bound to inquire into the existence, extent or correct description of the fiduciary relationship and thereafter the issuer may assume without inquiry that the newly registered owner continues to be the fiduciary until the issuer receives written notice that the fiduciary is no longer acting as such with respect to the particular security;
(b) an issuer registering a transfer on an endorsement by a fiduciary has no duty to inquire into whether the transfer is made in compliance with the document or with the law of the jurisdiction governing the fiduciary relationship; and
(c) an issuer is deemed not to have notice of the contents of any court record or any registered document even if the record or document is in the issuer’s possession and even if the transfer is made on the endorsement of a fiduciary to the fiduciary specifically or to the fiduciary’s nominee.
Marginal note:Duration of notice of adverse claim
131 A written notice of adverse claim received by an issuer is effective for twelve months after the day it was received unless the notice is renewed in writing.
Marginal note:Limitation on issuer’s liability
132 (1) Except as otherwise provided in any applicable law relating to the collection of taxes, an issuer is not liable to the owner or any other person who incurs a loss as a result of the registration of a transfer of a security if
(a) the necessary endorsements were on or with the security; and
(b) the issuer had no duty to inquire into adverse claims or had discharged any such duty.
Marginal note:Duty of issuer on default
(2) If an issuer has registered a transfer of a security to a person not entitled to it, the issuer shall on demand deliver a like security to the owner unless
(a) the issuer is not liable by virtue of subsection (1);
(b) the owner is precluded by subsection 133(1) from asserting any claim; or
(c) the delivery would result in over-issue in respect of which section 97 applies.
Marginal note:Lost or stolen security
133 (1) Where a security has been lost, apparently destroyed or wrongfully taken, and the owner fails to notify the issuer of that fact by giving the issuer written notice of the owner’s adverse claim within a reasonable time after the owner knows of the loss, destruction or taking, then, if the issuer has registered a transfer of the security before receiving the notice, the owner is precluded from asserting against the issuer any claim to a new security.
Marginal note:Duty to issue new security
(2) Where the owner of a security claims that the security has been lost, destroyed or wrongfully taken, the issuer shall issue a new security in place of the original security if the owner
(a) so requests before the issuer has notice that the security has been acquired by a bona fide purchaser;
(b) provides the issuer with a sufficient indemnity bond; and
(c) satisfies any other reasonable requirements imposed by the issuer.
Marginal note:Duty to register transfer
(3) If, after the issue of a new security under subsection (2), a bona fide purchaser of the original security presents the original security for registration of transfer, the issuer shall register the transfer unless registration would result in over-issue in respect of which section 97 applies.
Marginal note:Right of issuer to recover
(4) In addition to the rights that an issuer has by reason of an indemnity bond, the issuer may recover the new security issued under subsection (2) from the person to whom it was issued or any person taking under that person other than a bona fide purchaser.
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