Also known as: security certificates
Written by attorneys · grounded in primary & secondary sources — see below
A certificate that represents a certificated security in bearer or registered form and that is commonly dealt in on securities exchanges or markets.
Summit Bank held an unperfected security interest in bearer bonds owned by Stella Shapiro. Stella sold the bonds to Sebastian Santos for cash. Sebastian paid the full price and immediately took physical delivery of the certificates without knowing of the bank's interest. Sebastian takes the security certificates free of the unperfected security interest.
Sterling Dynamics granted a security interest in its certificated securities to Sapphire Technologies. Sapphire took physical delivery of the security certificates under the security agreement. The security interest in the certificated securities is perfected by that delivery.
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The buyer must give value, receive delivery of the security certificate, lack actual knowledge of the security interest, and complete the transaction before the interest is perfected. All elements must be satisfied simultaneously.
Delivery of the security certificate to the secured party under the security agreement perfects the interest. The interest remains perfected until the debtor regains possession of the certificate.
No. The statute requires actual knowledge of the specific security interest. A general or remote remark about being tied up by a bank does not supply the required knowledge.