(a) "Protected purchaser" means a purchaser of a certificated or uncertificated security, or of an interest therein, who:

(1) gives value;

(2) does not have notice of any adverse claim to the security; and

(3) obtains control of the certificated or uncertificated security.

(b) In addition to acquiring the rights of a purchaser, a protected purchaser also acquires its interest in the security free of any adverse claim.

History: 1978 Comp., § 55-8-303, enacted by Laws 1996, ch. 47, § 33.

OFFICIAL COMMENTS

UCC Official Comments by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved.

1. Subsection (a) lists the requirements that a purchaser must meet to qualify as a "protected purchaser." Subsection (b) provides that a protected purchaser takes its interest free from adverse claims. "Purchaser" is defined broadly in Section 1-201 [55-1-201 NMSA 1978]. A secured party as well as an outright buyer can qualify as a protected purchaser. Also, "purchase" includes taking by issue, so a person to whom a security is originally issued can qualify as a protected purchaser.

2. To qualify as a protected purchaser, a purchaser must give value, take without notice of any adverse claim, and obtain control. Value is used in the broad sense defined in Section 1-201(44) [55-1-201 NMSA 1978]. See also Section 8-116 [55-8-116 NMSA 1978] (securities intermediary as purchaser for value). Adverse claim is defined in Section 8-102(a)(1) [55-8-102 NMSA 1978]. Section 8-105 [55-8-105 NMSA 1978] specifies whether a purchaser has notice of an adverse claim. Control is defined in Section 8-106 [55-8-106 NMSA 1978]. To qualify as a protected purchaser there must be a time at which all of the requirements are satisfied. Thus if a purchaser obtains notice of an adverse claim before giving value or satisfying the requirements for control, the purchaser cannot be a protected purchaser. See also Section 8-304(d) [55-8-304 NMSA 1978].

The requirement that a protected purchaser obtain control expresses the point that to qualify for the adverse claim cut-off rule a purchaser must take through a transaction that is implemented by the appropriate mechanism. By contrast, the rules in Part 2 provide that any purchaser for value of a security without notice of a defense may take free of the issuer's defense based on that defense. See Section 8-202 [55-8-202 NMSA 1978].

3. The requirements for control differ depending on the form of the security. For securities represented by bearer certificates, a purchaser obtains control by delivery. See Sections 8-106(a) [55-8-106 NMSA 1978] and 8-301(a) [55-8-301 NMSA 1978]. For securities represented by certificates in registered form, the requirements for control are: (1) delivery as defined in Section 8-301(b), plus (2) either an effective indorsement or registration of transfer by the issuer. See Section 8-106(b). Thus, a person who takes through a forged indorsement does not qualify as a protected purchaser by virtue of the delivery alone. If, however, the purchaser presents the certificate to the issuer for registration of transfer, and the issuer registers transfer over the forged indorsement, the purchaser can qualify as a protected purchaser of the new certificate. If the issuer registers transfer on a forged indorsement, the true owner will be able to recover from the issuer for wrongful registration, see Section 8-404 [55-8-404 NMSA 1978], unless the owner's delay in notifying the issuer of a loss or theft of the certificate results in preclusion under Section 8-406 [55-8-406 NMSA 1978].

For uncertificated securities, a purchaser can obtain control either by delivery, see Sections 8-106(c)(1) [55-8-106 NMSA 1978] and 8-301(b) [55-8-301 NMSA 1978], or by obtaining an agreement pursuant to which the issuer agrees to act on instructions from the purchaser without further consent from the registered owner, see Section 8-106(c)(2) [55-8-106 NMSA 1978]. The control agreement device of Section 8-106(c)(2) takes the place of the "registered pledge" concept of the 1978 version of Article 8. A secured lender who obtains a control agreement under Section 8-106(c)(2) can qualify as a protected purchaser of an uncertificated security.

4. This section states directly the rules determining whether one takes free from adverse claims without using the phrase "good faith." Whether a person who takes under suspicious circumstances is disqualified is determined by the rules of Section 8-105 [55-8-105 NMSA 1978] on notice of adverse claims. The term "protected purchaser," which replaces the term "bona fide purchaser" used in the prior version of Article 8, is derived from the term "protected holder" used in the Convention on International Bills and Notes prepared by the United Nations Commission on International Trade Law ("UNCITRAL").

"Adverse claim" Section 8-102(a)(1) [55-8-102 NMSA 1978]

"Certificated security" Section 8-102(a)(4)

"Control" Section 8-106 [55-8-106 NMSA 1978]

"Notice of adverse claim" Section 8-105 [55-8-105 NMSA 1978]

"Purchaser" Sections 1-201(33) & 8-116 [55-1-201 & 55-8-116 NMSA 1978]

"Uncertificated security" Section 8-102(a)(18)

"Value" Sections 1-201(44) & 8-116

Repeals and reenactments. — Laws 1996, ch. 47, § 33, repealed former 55-8-33 NMSA 1978, as amended by Laws 1987, ch. 248, § 20, relating to brokers, and enacted a new section, effective May 15, 1996.

Purchaser. — Securities clearing firm which credited shares to a securities firm before it actually received the shares performed more than a purely intermediary function and was a purchaser under former Section 55-8-401 NMSA 1978. Broadcort Capital Corp. v. Summa Med. Corp., 972 F.2d 1183 (10th Cir. 1992).

Collection upon stolen or lost negotiable bond or coupon. — Under former Section 55-8-301 NMSA 1978 and this section, a person may become the lawful holder of a negotiable bond or bond coupon where he is a "bona fide purchaser," as defined under the statute, and be entitled to collection upon a negotiable bond or coupon, even though the bond was stolen or lost. 1962 Op. Att'y Gen. No. 62-139 (rendered under prior law).

Am. Jur. 2d, A.L.R. and C.J.S. references. — Rights of owner and bona fide purchaser of lost or stolen stock certificates, 52 A.L.R. 947.

Priority as between lien of corporation and bona fide purchaser of lost or stolen stock certificates, 81 A.L.R. 989.

Who is "bona fide purchaser" of investment security under UCC § 8-302, 88 A.L.R.3d 949.