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HomeCommercial CodeDiv. 8Ch. 5§ 8503 Securities Intermediary Asset Protection

§ 8503 Securities Intermediary Asset Protection

Commercial Code·California
AI Summary·Official Text·Key Terms·Related Statutes·References
AI SummaryVerified

§ 8503 Securities Intermediary Asset Protection

Key Takeaways

  • •If a company holds stocks or bonds for you, those assets belong to you, not the company, and the company’s creditors can’t take them.
  • •Your share of the assets is based on how much you own compared to others, no matter when you bought in.
  • •You can only get your assets back from the company by following specific rules—you can’t just take them.
  • •If the company goes broke and doesn’t have enough assets for everyone, you might get some back from someone who bought them unfairly.

Example

You invest in stocks through a brokerage firm, and the firm goes bankrupt.

Your stocks are still yours, and the firm’s creditors can’t take them. If the firm doesn’t have enough stocks to cover everyone’s investments, you might get some back from people who bought them unfairly.

AI-generated — May contain errors. Not legal advice. Always verify source.

Official Source
View on CA.gov

§ 8503 Securities Intermediary Asset Protection

(a) 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 8511. (b) An entitlement holder’s property interest with respect to a particular financial asset under subdivision (a) is a pro rata property interest in all interests in that financial asset held by the securities intermediary, without regard to the time the entitlement holder acquired the security entitlement or the time the securities intermediary acquired the interest in that financial asset. (c) An entitlement holder’s property interest with respect to a particular financial asset under subdivision (a) may be enforced against the securities intermediary only by exercise of the entitlement holder’s rights under Sections 8505 to 8508, inclusive. (d) An entitlement holder’s property interest with respect to a particular financial asset under subdivision (a) may be enforced against a purchaser of the financial asset or interest therein only if all of the following conditions are met: (1) Insolvency proceedings have been initiated by or against the securities intermediary. (2) The securities intermediary does not have sufficient interests in the financial asset to satisfy the security entitlements of all of its entitlement holders to that financial asset. (3) The securities intermediary violated its obligations under Section 8504 by transferring the financial asset or interest therein to the purchaser. (4) The purchaser is not protected under subdivision (e). The trustee or other liquidator, acting on behalf of all entitlement holders having security entitlements with respect to a particular financial asset, may recover the financial asset, or interest therein, from the purchaser. If the trustee or other liquidator elects not to pursue that right, an entitlement holder whose security entitlement remains unsatisfied has the right to recover its interest in the financial asset from the purchaser. (e) An action based on the entitlement holder’s property interest with respect to a particular financial asset under subdivision (a), whether framed in conversion, replevin, constructive trust, equitable lien, or other theory, may not be asserted against any purchaser of a financial asset or interest therein who gives value, obtains control, and does not act in collusion with the securities intermediary in violating the securities intermediary’s obligations under Section 8504. (Added by Stats. 1996, Ch. 497, Sec. 9. Effective January 1, 1997.)

Last verified: January 23, 2026

Key Terms

securities intermediaryentitlement holders

Related Statutes

  • § 8504 Securities Intermediary Asset Maintenance
  • § 8511 Priority Of Security Entitlements
  • § 8501 Securities Account Entitlements
  • § 8505 Securities Intermediary Payment Duties
  • § 8506 Securities Intermediary Duties

References

  • Official text at leginfo.legislature.ca.gov
  • California Legislature. Commercial Code. Section 8503.
View Official Source