(a) Except as otherwise provided in Subsection (c) of this section, the following rules apply:

(1) 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;

(2) the local law of the issuer's jurisdiction as specified in Subsection (d) of Section 55-8-110 NMSA 1978 governs perfection, the effect of perfection or nonperfection and the priority of a security interest in an uncertificated security;

(3) the local law of the securities intermediary's jurisdiction as specified in Subsection (e) of Section 55-8-110 NMSA 1978 governs perfection, the effect of perfection or nonperfection and the priority of a security interest in a security entitlement or securities account; and

(4) 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.

(b) The following rules determine a commodity intermediary's jurisdiction for purposes of Sections 55-9-301 through 55-9-342 NMSA 1978:

(1) if an agreement between the commodity intermediary and commodity customer governing the commodity account expressly provides that a particular jurisdiction is the commodity intermediary's jurisdiction for purposes of the Uniform Commercial Code, that jurisdiction is the commodity intermediary's jurisdiction;

(2) if Paragraph (1) of this subsection does not apply and an agreement between the commodity intermediary and commodity customer governing the commodity account expressly provides that the agreement is governed by the law of a particular jurisdiction, that jurisdiction is the commodity intermediary's jurisdiction;

(3) if neither Paragraph (1) nor Paragraph (2) of this subsection applies and an agreement between the commodity intermediary and commodity customer governing the commodity account expressly provides that the commodity account is maintained at an office in a particular jurisdiction, that jurisdiction is the commodity intermediary's jurisdiction;

(4) if none of the preceding paragraphs applies, the commodity intermediary's jurisdiction is the jurisdiction in which the office identified in an account statement as the office serving the commodity customer's account is located; and

(5) if none of the preceding paragraphs applies, the commodity intermediary's jurisdiction is the jurisdiction in which the chief executive office of the commodity intermediary is located.

(c) The local law of the jurisdiction in which the debtor is located governs:

(1) perfection of a security interest in investment property by filing;

(2) automatic perfection of a security interest in investment property created by a broker or securities intermediary; and

(3) automatic perfection of a security interest in a commodity contract or commodity account created by a commodity intermediary.

History: 1978 Comp., § 55-9-305, enacted by Laws 2001, ch. 139, § 25.

OFFICIAL COMMENTS

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

1. Source. Former section 9-103(6).

2. Investment Property: General Rules. This section specifies choice-of-law rules for perfection and priority of security interests in investment property. Subsection (a)(1) covers security interests in certificated securities. Subsection (a)(2) covers security interests in uncertificated securities. Subsection (a)(3) covers security interests in security entitlements and securities accounts, and where the Hague Securities Convention applies it may in occasional instances modify Subsection (a)(3)'s results as discussed in Comments 3, 5 and 6 to Section 8-110. Subsection (a)(4) covers security interests in commodity contracts and commodity accounts. The approach of each of these paragraphs is essentially the same. They identify the jurisdiction's law that governs questions of perfection and priority by using the same principles that Article 8 uses to determine other questions concerning that form of investment property. Thus, for certificated securities, the law of the jurisdiction in which the certificate is located governs. Cf. Section 8-110(c). For uncertificated securities, the law of the issuer's jurisdiction governs. Cf. Section 8-110(a). For security entitlements and securities accounts, the law designated by the agreement between the securities intermediary and the entitlement holder governing the securities account generally governs. Cf. Section 8-110(b), (e)(1) and (2) and Convention Article 4(1).

For commodity contracts and commodity accounts, the law of the commodity intermediary's jurisdiction governs, though if particular assets of this type qualify as securities held with an intermediary within the meaning of the Convention, the Convention would also apply. Commodity contracts and commodity accounts are not governed by Article 8, and for this reason Subsection (b) contains rules that specify the commodity intermediary's jurisdiction that are analogous to the rules in Section 8-110(e) specifying a securities intermediary's jurisdiction. Subsection (b)(1) affords the parties greater flexibility than did former Section 9-103(6)(3). See also Section 9-304(b) (bank's jurisdiction); Revised Section 8-110(e)(1) and (2) (securities intermediary's jurisdiction).

3. Investment Property: Exceptions. Subsection (c) establishes an exception to the general rules discussed in the preceding Comment. It provides that perfection of a security interest by filing, automatic perfection of a security interest in investment property created by a debtor who is a broker or securities intermediary (see Section 9-309(10)), and automatic perfection of a security interest in a commodity contract or commodity account of a debtor who is a commodity intermediary (see Section 9-309(11)) are governed by the law of the jurisdiction in which the debtor is located, as determined under Section 9-307.

The Hague Securities Convention generally preserves these rules for perfection by filing. However, if the debtor is located in a non-U.S. jurisdiction, or if the account agreement designates the law of a non-U.S. jurisdiction, then filing may be appropriate only in a different jurisdiction or altogether unavailable. See Convention Articles 12(2)(b) and 4(1), respectively, and PEB Commentary No. 19, dated April 11, 2017, particularly footnote 25.

4. Examples: The following examples illustrate the rules in this section:

Example 1: A customer residing in New Jersey maintains a securities account with Able & Co. The agreement between the customer and Able specifies that it is governed by Pennsylvania law but expressly provides that California is Able's jurisdiction for purposes of the Uniform Commercial Code. Through the account the customer holds securities of a Massachusetts corporation, which Able holds through a clearing corporation located in New York. The customer obtains a margin loan from Able. Subsection (a)(3) provides that California law—the law of the securities intermediary's jurisdiction—governs perfection and priority of the security interest, even if California has no other relationship to the parties or the transaction. Even if other facts cause the Hague Securities Convention to apply (see Comment 1 to Section 8-110), the Convention does not change this result, provided that the account agreement either was entered into before the Convention's effectiveness in the United States or expressly specifies that the law of California is applicable to all issues specified in Convention Article 2(1), and also provided that at the time of the agreement Able had an office in the United States engaged in a regular activity of maintaining securities accounts.

Example 2: A customer residing in New Jersey maintains a securities account with Able & Co. The agreement between the customer and Able specifies that it is governed by Pennsylvania law. Through the account the customer holds securities of a Massachusetts corporation, which Able holds through a clearing corporation located in New York. The customer obtains a loan from a lender located in Illinois. The lender takes a security interest and perfects by obtaining an agreement among the debtor, itself, and Able, which satisfies the requirement of section 8-106(d)(2) to give the lender control. Subsection (a)(3) provides that Pennsylvania law - the law of the securities intermediary's jurisdiction - governs perfection and priority of the security interest, even if Pennsylvania has no other relationship to the parties or the transaction. Even if other facts cause the Hague Securities Convention to apply, the Convention does not change this result, provided that at the time of the agreement between the customer and Able, Able had an office in the United States engaged in a regular activity of maintaining securities accounts.

Example 3: A customer residing in New Jersey maintains a securities account with Able & Co. The agreement between the customer and Able specifies that it is governed by Pennsylvania law. Through the account, the customer holds securities of a Massachusetts corporation, which Able holds through a clearing corporation located in New York. The customer borrows from SP-1, and SP-1 files a financing statement in New Jersey. Later, the customer obtains a loan from SP-2. SP-2 takes a security interest and perfects by obtaining an agreement among the debtor, itself, and Able, which satisfies the requirement of Section 8-106(d)(2) to give SP-2 control. Subsection (c)(1) provides that perfection of SP-1's security interest by filing is governed by the location of the debtor, so the filing in New Jersey was appropriate. Even if other facts cause the Hague Securities Convention to apply, Convention article 12(2)(b) preserves this result. Subsection (a)(3), however, provides that Pennsylvania law—the law designated by the agreement between the customer and Able—governs all other questions of perfection and priority, and the Convention preserves this result, provided that at the time of the agreement between the customer and Able, Able had an office in the United States engaged in a regular activity of maintaining securities accounts. Thus, Pennsylvania law governs perfection of SP-2's security interest, and Pennsylvania law also governs the priority of the security interests of SP-1 and SP-2.

Example 4: A customer maintains a securities account with Able & Co. The customer is an Ontario, Canada corporation with its chief executive office in Toronto. The agreement between the customer and Able specifies that it is governed by New York law, and at the time of the agreement Able had an office in the United States engaged in a regular activity of maintaining securities accounts. The customer obtains a loan secured by the securities account, and the lender wishes to perfect by filing. Subsection (c)(1) provides that perfection of the security interest by filing is generally governed by the law of the location of the debtor (in this case Ontario, assuming that it has a filing system described by Section 9-307(c)); however, Convention Article 12(2)(b) recognizes Article 9's place-of-filing rules only when they designate a U.S. jurisdiction for the filing. As a result, Subsection (c)(1) does not govern filing for this transaction, and perfection of the security interest is governed by the substantive law of the jurisdiction designated by the account agreement (in this case New York).

Example 5: A customer maintains a securities account with Able & Co. The customer is a Texas corporation. The agreement between the customer and Able specifies that it is governed by English law, and at the time of the agreement Able had an office in England engaged in a regular activity of maintaining securities accounts. The customer obtains a loan secured by the securities account, and the lender wishes to perfect by filing. Subsection (c)(1), if it applied, would provide that perfection of the security interest by filing is governed by the law of the location of the debtor (in this case Texas); however, under Convention Article 4(1), perfection of the security interest is governed by the law of the jurisdiction designated by the account agreement (in this case England), rather than by the law of any UCC jurisdiction.

5. Change in Law Governing Perfection. When the issuer's jurisdiction, the securities intermediary's jurisdiction, or commodity intermediary's jurisdiction changes, the jurisdiction whose law governs perfection under Subsection (a) changes, as well. Similarly, the law governing perfection of a possessory security interest in a certificated security changes when the collateral is removed to another jurisdiction, see Subsection (a)(1), and the law governing perfection by filing changes when the debtor changes its location. See Subsection (c). Nevertheless, under the UCC these changes will not result in an immediate loss of perfection. See Section 9-316(f), (g) [55-9-316(f), (g) NMSA 1978]. Along generally similar lines in cases to which the Hague Securities Convention applies, Article 7 provides that when the account agreement is amended to designate a new jurisdiction's law under Article 4(1), the new law governs perfection, except that the old law continues to govern the perfection of security or other property interests that arose before the amendment and a limited number of other issues affecting such interests, without limitation as to time.

Repeals and reenactments. — Laws 2001, ch. 139, § 25 repealed former 55-9-305 NMSA 1978, as amended by Laws 1997, ch. 75, § 25, and enacted a new section, effective July 1, 2001.