§ 554.8202 — Issuer’s responsibility and defenses — notice of defect or defense

Iowa § 554.8202

• Jurisdiction: Iowa
• Title XIII: COMMERCE
• Ch. 554: UNIFORM COMMERCIAL CODE

Text

1. Even against a purchaser for value and without notice, the terms of a certificated
security include terms stated on the certificate and terms made part of the security
by reference on the certificate to another instrument, indenture, or document or to a
constitution, statute, ordinance, rule, regulation, order, or the like, to the extent the terms
referred to do not conflict with terms stated on the certificate. A reference under this
subsection does not of itself charge a purchaser for value with notice of a defect going to
the validity of the security, even if the certificate expressly states that a person accepting it
admits notice. The terms of an uncertificated security include those stated in any instrument,
indenture, or document or in a constitution, statute, ordinance, rule, regulation, order, or the
like, pursuant to which the security is issued.
2. The following rules apply if an issuer asserts that a security is not valid:
a. A security other than one issued by a government or governmental subdivision, agency,
or instrumentality, even though issued with a defect going to its validity, is valid in the hands
of a purchaser for value and without notice of the particular defect unless the defect involves
a violation of a constitutional provision. In that case, the security is valid in the hands of a
purchaser for value and without notice of the defect, other than one who takes by original
issue.
b. Paragraph “a” applies to an issuer that is a government or governmental subdivision,
agency, or instrumentality only if there has been substantial compliance with the legal
requirements governing the issue or the issuer has received a substantial consideration for
the issue as a whole or for the particular security and a stated purpose of the issue is one for
which the issuer has power to borrow money or issue the security.
3. Except as otherwise provided in section 554.8205, lack of genuineness of a certificated
security is a complete defense, even against a purchaser for value and without notice.

4. All other defenses of the issuer of a security, including nondelivery and conditional
delivery of a certificated security, are ineffective against a purchaser for value who has taken
the certificated security without notice of the particular defense.
5. Thissectiondoesnotaffecttherightofapartytocancelacontractforasecurity“when,
as and if issued” or “when distributed” in the event of a material change in the character of
the security that is the subject of the contract or in the plan or arrangement pursuant to which
the security is to be issued or distributed.
6. If a security is held by a securities intermediary against whom an entitlement holder
has a security entitlement with respect to the security, the issuer may not assert any defense
that the issuer could not assert if the entitlement holder held the security directly.

Legislative History

[S13, §3060-a16, -a23, -a28, -a56, -a57, -a60, -a61, -a62; C24, 27, 31, 35, 39, §9476, 9483, 9488, 9516, 9517, 9520 – 9522; C46, 50, 54, 58, 62, §541.16, 541.23, 541.28, 541.56, 541.57, 541.60 – 541.62; C66, 71, 73, 75, 77, 79, 81, §554.8202]