Also known as:certificated security · physical certificate securities
Written by attorneys · grounded in primary & secondary sources — see below
An ownership interest in a corporation or other issuer that is represented by a physical certificate.
Sources & Authorities
How it applies
Common Examples
2
Bank Loan Secured by Stock Certificates
Christopher Collins extends credit to Crown Pharmaceuticals and receives a signed security agreement covering the company's shares. Crown delivers the physical stock certificates to Christopher at closing. The delivery perfects the security interest in the shares.
Bank Dispute Over Delivered Certificates
Continental Bank receives physical stock certificates from a borrower as collateral for a loan. The certificates are placed in the bank's vault under an agreement restricting borrower access. The arrangement satisfies delivery requirements for the certificated securities.
Put it into practice
Test Yourself
9
Practice Questions4
· 8 primary sources
Select any source to read its text and confirm it supports the definition.
Uniform Acts
Casebooks
Course Outlines
Study Supplements
NBT Bank v. First National Community Bank393 F.3d 404 (2004)
Common questions
Frequently Asked
4
How is a security interest in certificated securities perfected?+
A secured party perfects by taking delivery of the certificates under Section 8-301. Delivery occurs when the secured party obtains possession of the certificates.
Supporting sources
Does filing alone perfect an interest in certificated securities?+
Filing does not perfect an interest in certificated securities. The statute requires delivery of the certificates for perfection.
Supporting sources
What rights does a protected purchaser of certificated securities receive?+
A protected purchaser who gives value, obtains control through proper delivery and endorsement, and takes without notice of adverse claims takes the securities free of prior security interests.
Supporting sources
Can a buyer of certificated securities qualify as a protected purchaser when the seller's lender filed a financing statement?+
Yes. Filing does not constitute notice that defeats protected-purchaser status. A buyer meeting the value, control, and no-notice requirements prevails over the earlier filed interest.
Supporting sources
Secured TransactionsRights of third parties; perfected and unperfected security interests; rules of priority (§ 9-301, et seq.) · Requirement of filing and steps to be taken for perfection (§§ 9-308 through 9-316; § 9-501, et seq.); assignment of security interest (§§ 9-514, 9-519)UBEFoundational