1. (a) If the substance of a duty imposed upon a securities intermediary by §§ 28:8-504 through 28:8-508 is the subject of other statute, regulation, or rule, compliance with that statute, regulation, or rule satisfies the duty.
2. (b) To the extent that specific standards for the performance of the duties of a securities intermediary or the exercise of the rights of an entitlement holder are not specified by other statute, regulation, or rule or by agreement between the securities intermediary and entitlement holder, the securities intermediary shall perform its duties and the entitlement holder shall exercise its rights in a commercially reasonable manner.

3. (c) The obligation of a securities intermediary to perform the duties imposed by §§ 28:8-504 through 28:8-508 is subject to:

   1. (1) Rights of the securities intermediary arising out of a security interest under a security agreement with the entitlement holder or otherwise; and
   2. (2) Rights of the securities intermediary under other law, regulation, rule, or agreement to withhold performance of its duties as a result of unfulfilled obligations of the entitlement holder to the securities intermediary.
4. (d) Sections 28:8-504 through 28:8-508 do not require a securities intermediary to take any action that is prohibited by other statute, regulation, or rule.

Uniform Commercial Code Comment

“Security interest”. Section 1-201(37).

“Security agreement”. Section 9-105(1)(l).

“Securities intermediary”. Section 8-102(a)(14).

“Entitlement holder”. Section 8-102(a)(7).

Definitional Cross References “Agreement”. Section 1-201(3).

For many intermediaries, regulatory law specifies in great detail the intermediary’s obligations on such matters as safekeeping of customer property, distribution of proxy materials, and the like. To avoid any conflict between the general statement of duties in this Article and the specific statement of intermediaries’ obligations in such regulatory schemes, subsection (a) provides that compliance with applicable regulation constitutes compliance with the duties specified in Sections 8-504 through 8-508.

This Article is not a comprehensive statement of the law governing the relationship between broker-dealers or other securities intermediaries and their customers. Most of the law governing that relationship is the common law of contract and agency, supplemented or supplanted by regulatory law. This Article deals only with the most basic commercial/property law principles governing the relationship. Although Sections 8-504 through 8-508 specify certain duties of securities intermediaries to entitlement holders, the point of these sections is to identify what it means to have a security entitlement, not to specify the details of performance of these duties.

History

Apr. 9, 1997, D.C. Law 11-240, § 2, 44 DCR 1087

Prior Codifications

1981 Ed., § 28:8-509.