SB 2364 — Relating to the property rights of entitlement holders in Uniform Commercial Code transactions.

c.

If neither subdivision a nor b applies and an agreement between the securities intermediary and its entitlement holder governing the securities account Page No.

2 25.0840.02001 Sixty-ninth Legislative Assembly expressly provides that the securities account is maintained at an office in a particular jurisdiction, that jurisdiction is the securities intermediary's jurisdiction.

d.

If none of the preceding subdivisions applies, the securities intermediary's jurisdiction is the jurisdiction in which the office identified in an account statement as the office serving the entitlement holder's account is located.

e.

If none of the preceding subdivisions applies, the securities intermediary's jurisdiction is the jurisdiction in which the chief executive office of the securities intermediary is located.

6.

A securities intermediary's jurisdiction is not determined by the physical location of certificates representing financial assets, or by the jurisdiction in which is organized the issuer of the financial asset with respect to which an entitlement holder has a security entitlement, or by the location of facilities for data processing or other recordkeeping concerning the account.

7.

The local law of the issuer's jurisdiction or the securities intermediary's jurisdiction governs a matter or transaction specified in subsection 1 or 2 even if the matter or transaction does not bear any relation to the jurisdiction.

SECTION 2.

AMENDMENT.

Subsection 1 of section 41-08-43 of the North Dakota Century Code is amended and reenacted as follows:

1.

To the extent necessary for a securities intermediary to satisfy all security entitlements with respect to a particular financial asset, all interests in that financial asset held by the securities intermediary are held by the securities intermediary for the entitlement holders, are not property of the securities intermediary, and are not subject to claims of creditors of the securities intermediary, except as otherwise provided in section 41-08-51.

SECTION 3.

AMENDMENT.

Section 41-08-51 of the North Dakota Century Code is amended and reenacted as follows:

41-08-51.

(8-511) Priority among security interests and entitlement holders.

1.

Except as otherwise provided in subsections 2 and 3, ifIf a securities intermediary does not have sufficient interests in a particular financial asset to satisfy both its obligations to entitlement holders who have security entitlements to that financial asset and its obligation to a Page No.

3 25.0840.02001 Sixty-ninth Legislative Assembly creditor of the securities intermediary who has a security interest in that financial asset, the claims of entitlement holders, other than the creditor, have priority over the claim of the creditor.

2.

A claim of a creditor of a securities intermediary who has a security interest in a financial asset held by a securities intermediary has priority over claims of the securities intermediary's entitlement holders who have security entitlements with respect to that financial asset if the creditor has control over the financial asset.

3.

If a clearing corporation does not have sufficient financial assets to satisfy both its obligations to entitlement holders who have security entitlements with respect to a financial asset and its obligation to a creditor of the clearing corporation who has a security interest in that financial asset, the claim of the creditor has priority over the claims of entitlement holders.

SECTION 4.

AMENDMENT.

Subsection 1 of section 41-09-25 of the North Dakota Century Code is amended and reenacted as follows:

1.

Except as otherwise provided in subsection 3, the following rules apply:

a.

While a security certificate is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in the certificated security represented thereby.

b.

The local law of the issuer's jurisdiction as specified in subsection 4 of section 41-08-10 governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in an uncertificated security.

c.

The local law of the securities intermediary's jurisdiction as specified in subsection 5 of section 41-08-10this state governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a security entitlement or securities account.

d.

The local law of the commodity intermediary's jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a commodity contract or commodity account.

e.

Subdivisions b, c, and d apply even if the transaction does not bear any relation to the jurisdiction.

SECTION 1.

During the 2025-26 interim, the legislative management shall consider Pagestudying No.the property rights of entitlement holders in Uniform Commercial Code transactions, along with the jurisdiction for disputes between entitlement holders and securities intermediaries.

4 25.0840.02001 Sixty-ninth Legislative Assembly studying the property rights of entitlement holders in Uniform Commercial Code transactions, along with the jurisdiction for disputes between entitlement holders and securities intermediaries.

51 25.0840.0200125.0840.03000