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84-8-504. 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).

(c) A securities intermediary satisfies the duty in subsection (a) 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.

History: L. 1996, ch. 202, ยง 71; July 1.


This section is new and is identical to the 1995 Official Text. The section states the duty of the securities intermediary to acquire, directly or indirectly, the financial assets for its entitlement holders. Under subsection (b), the intermediary may not encumber the financial assets of the entitlement holder unless so directed by the entitlement holder, for example, where the entitlement holder requests a purchase on margin. The securities intermediary can meet the obligation imposed by this section in accordance with an agreement with the entitlement holder, if there is an agreement, or, if there is not, in accordance with reasonable commercial standards. A securities intermediary's compliance with governing statutes, regulations or rules satisfies the duty under 84-8-509(a).

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