NMSA 55-8-102. Definitions

55-8-102. Definitions. (a) In this article: (1) "adverse claim" means a claim that a claimant has a property interest in a financial asset and that it is a violation of the rights of the claimant for another person to hold, transfer or deal with the financial asset; (2) "bearer form", as applied to a certificated security, means a form in which the security is payable to the bearer of the security certificate according to its terms but not by reason of an indorsement; (3) "broker" means a person defined as a broker or dealer under the federal securities laws, but without excluding a bank acting in that capacity; (4) "certificated security" means a security that is represented by a certificate; (5) "clearing corporation" means: (i) a person that is registered as a "clearing agency" under the federal securities laws; (ii) a federal reserve bank; or (iii) any other person that provides clearance or settlement services with respect to financial assets that would require it to register as a clearing agency under the federal securities laws but for an exclusion or exemption from the registration requirement, if its activities as a clearing corporation, including promulgation of rules, are subject to regulation by a federal or state governmental authority; (6) "communicate" means to: (i) send a signed record; or (ii) transmit information by any mechanism agreed upon by the persons transmitting and receiving the information; (7) "entitlement holder" means a person identified in the records of a securities intermediary as the person having a security entitlement against the securities intermediary. If a person acquires a security entitlement by virtue of Paragraph (2) or (3) of Subsection (b) of Section 55-8-501 NMSA 1978, that person is the entitlement holder; (8) "entitlement order" means a notification communicated to a securities intermediary directing transfer or redemption of a financial asset to which the entitlement holder has a security entitlement; (9) "financial asset", except as otherwise provided in Section 55-8-103 NMSA 1978, means: (i) a security; (ii) an obligation of a person or a share, participation or other interest in a person or in property or an enterprise of a person, which is, or is of a type, dealt in or traded on financial markets, or which is recognized in any area in which it is issued or dealt in as a medium for investment; or (iii) any property that is held by a securities intermediary for another person in a securities account if the securities intermediary has expressly agreed with the other person that the property is to be treated as a financial asset under this article. As context requires, the term means either the interest itself or the means by which a person's claim to it is evidenced, including a certificated or uncertificated security, a security certificate or a security entitlement; (10) [Reserved]; (11) "indorsement" means a signature that alone or accompanied by other words is made on a security certificate in registered form or on a separate document for the purpose of assigning, transferring or redeeming the security or granting a power to assign, transfer or redeem it; (12) "instruction" means a notification communicated to the issuer of an uncertificated security that directs that the transfer of the security be registered or that the security be redeemed; (13) "registered form", as applied to a certificated security, means a form in which: (i) the security certificate specifies a person entitled to the security; and (ii) a transfer of the security may be registered upon books maintained for that purpose by or on behalf of the issuer or the security certificate so states; (14) "securities intermediary" means: (i) a clearing corporation; or (ii) a person, including a bank or broker, that in the ordinary course of its business maintains securities accounts for others and is acting in that capacity; (15) "security", except as otherwise provided in Section 55-8-103 NMSA 1978, means an obligation of an issuer or a share, participation or other interest in an issuer or in property or an enterprise of an issuer: (i) that is represented by a security certificate in bearer or registered form or the transfer of which may be registered upon books maintained for that purpose by or on behalf of the issuer; (ii) that is one of a class or series or by its terms is divisible into a class or series of shares, participations, interests or obligations; and (iii) that: (A) is, or is of a type, dealt in or traded on securities exchanges or securities markets; or (B) is a medium for investment and by its terms expressly provides that it is a security governed by this article; (16) "security certificate" means a certificate representing a security; (17) "security entitlement" means the rights and property interest of an entitlement holder with respect to a financial asset specified in Part 5 of this article; and (18) "uncertificated security" means a security that is not represented by a certificate. (b) The following definitions in this article and other articles apply to this article: appropriate person Section 55-8-107 NMSA 1978; control Section 55-8-106 NMSA 1978; controllable account Section 55-9-102 NMSA 1978; controllable electronic record Section 55-12-102 NMSA 1978; controllable payment intangible Section 55-9-102 NMSA 1978; delivery Section 55-8-301 NMSA 1978; investment company security Section 55-8-103 NMSA 1978; Issuer Section 55-8-201 NMSA 1978; overissue Section 55-8-210 NMSA 1978; protected purchaser Section 55-8-303 NMSA 1978; and securities account Section 55-8-501 NMSA 1978. (c) In addition, Chapter 55, Article 1 NMSA 1978 contains general definitions and principles of construction and interpretation applicable throughout this article. (d) The characterization of a person, business or transaction for purposes of this article does not determine the characterization of the person, business or transaction for purposes of any other law, regulation or rule. History: 1978 Comp., § 55-8-102, enacted by Laws 1996, ch. 47, § 6; 2005, ch. 144, § 92; 2023, ch. 142, § 38. OFFICIAL COMMENTS UCC Official Comments © by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved. 1. "Adverse claim." The definition of the term "adverse claim" has two components. First, the term refers only to property interests. Second, the term means not merely that a person has a property interest in a financial asset but that it is a violation of the claimant's property interest for the other person to hold or transfer the security or other financial asset. The term adverse claim is not, of course, limited to ownership rights, but extends to other property interests established by other law. A security interest, for example, would be an adverse claim with respect to a transferee from the debtor since any effort by the secured party to enforce the security interest against the property would be an interference with the transferee's interest. The definition of adverse claim in the prior version of Article 8 might have been read to suggest that any wrongful action concerning a security, even a simple breach of contract, gave rise to an adverse claim. Insofar as such cases as Fallon v. Wall Street Clearing Corp., 586 N.Y.S.2d 953, 182 A.D.2d 245, (1992) and Pentech Intl. v. Wall St. Clearing Co., 983 F.2d 441 (2d Cir. 1993), were based on that view, they are rejected by the new definition which explicitly limits the term adverse claim to property interests. Suppose, for example, that A contracts to sell or deliver securities to B, but fails to do so and instead sells or pledges the securities to C. B, the promisee, has an action against A for breach of contract, but absent unusual circumstances the action for breach would not give rise to a property interest in the securities. Accordingly, B does not have an adverse claim. An adverse claim might, however, be based upon principles of equitable remedies that give rise to property claims. It would, for example, cover a right established by other law to rescind a transaction in which securities were transferred. Suppose, for example, that A holds securities and is induced by B's fraud to transfer them to B. Under the law of contract or restitution, A may have a right to rescind the transfer, which gives A a property claim to the securities. If so, A has an adverse claim to the securities in B's hands. By contrast, if B had committed no fraud, but had merely committed a breach of contract in connection with the transfer from A to B, A may have only a right to damages for breach, not a right to rescind. In that case, A would not have an adverse claim to the securities in B's hands. 2. "Bearer form." The definition of "bearer form" has remained substantially unchanged since the early drafts of the original version of Article 8. The requirement that the certificate be payable to bearer by its terms rather than by an indorsement has the effect of preventing instruments governed by other law, such as chattel paper or Article 3 negotiable instruments, from being inadvertently swept into the Article 8 definition of security merely by virtue of blank indorsements. Although the other elements of the definition of security in Section 8-102(a)(14) [55-8-102(a)(14) NMSA 1978] probably suffice for that purpose in any event, the language used in the prior version of Article 8 has been retained. 3. "Broker." Broker is defined by reference to the definitions of broker and dealer in the federal securities laws. The only difference is that banks, which are excluded from the federal securities law definition, are included in the Article 8 definition when they perform functions that would bring them within the federal securities law definition if it did not have the clause excluding banks. The definition covers both those who act as agents ("brokers" in securities parlance) and those who act as principals ("dealers" in securities parlance). Since the definition refers to persons "defined" as brokers or dealers under the federal securities law, rather than to persons required to "register" as brokers or dealers under the federal securities law, it covers not only registered brokers and dealers but also those exempt from the registration requirement, such as purely intrastate brokers. The only substantive rules that turn on the defined term broker are one provision of the section on warranties, Section 8-108(i) [55-8-108(i) NMSA 1978], and the special perfection rule in Article 9 for security interests granted by brokers, Section 9-115(4)(c) [55-9-115(4)(c) NMSA 1978]. 4. "Certificated security." The term "certificated security" means a security that is represented by a security certificate. 5. "Clearing corporation." The definition of clearing corporation limits its application to entities that are subject to a rigorous regulatory framework. Accordingly, the definition includes only federal reserve banks, persons who are registered as "clearing agencies" under the federal securities laws (which impose a comprehensive system of regulation of the activities and rules of clearing agencies), and other entities subject to a comparable system of regulatory oversight. 6. "Communicate." The term "communicate" assures that the Article 8 rules will be sufficiently flexible to adapt to changes in information technology. Sending a signed writing always suffices as a communication, but the parties can agree that a different means of transmitting information is to be used. Agreement is defined in Section 1- 201(b)(3) [55-1-201 NMSA 1978] as "the bargain of the parties in fact as found-in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance." Thus, use of an information transmission method might be found to be authorized by agreement, even though the parties have not explicitly so specified in a formal agreement. The term communicate is used in Sections 8-102(a)(7) [55-8-102 NMSA 1978] (definition of entitlement order), 8- 102(a)(11) (definition of instruction), and 8-403 [55-8-102 NMSA 1978] (demand that issuer not register transfer). Also in furtherance of medium neutrality, pursuant to the Uniform Commercial Code Amendments (2022) (2022 Amendments) the reference in paragraph (6)(i) to a "signed writing" has been changed to refer to a "signed record." 7. "Entitlement holder." This term designates those who hold financial assets through intermediaries in the indirect holding system. Because many of the rules of Part 5 impose duties on securities intermediaries in favor of entitlement holders, the definition of entitlement holder is, in most cases, limited to the person specifically designated as such on the records of the intermediary. The last sentence of the definition covers the relatively unusual cases where a person may acquire a security entitlement under Section 8-501 [55-8-501 NMSA 1978] even though the person may not be specifically designated as an entitlement holder on the records of the securities intermediary. A person may have an interest in a security entitlement, and may even have the right to give entitlement orders to the securities intermediary with respect to it, even though the person is not the entitlement holder. For example, a person who holds securities through a securities account in its own name may have given discretionary trading authority to another person, such as an investment adviser. Similarly, the control provisions in Section 8-106 [55-8-106 NMSA 1978] and the related provisions in Article 9 are designed to facilitate transactions in which a person who holds securities through a securities account uses them as collateral in an arrangement where the securities intermediary has agreed that if the secured party so directs the intermediary will dispose of the positions. In such arrangements, the debtor remains the entitlement holder but has agreed that the secured party can initiate entitlement orders. 8. "Entitlement order." This term is defined as a notification communicated to a securities intermediary directing transfer or redemption of the financial asset to which an entitlement holder has a security entitlement. The term is used in the rules for the indirect holding system in a fashion analogous to the use of the terms "indorsement" and "instruction" in the rules for the direct holding system. If a person directly holds a certificated security in registered form and wishes to transfer it, the means of transfer is an indorsement. If a person directly holds an uncertificated security and wishes to transfer it, the means of transfer is an instruction. If a person holds a security entitlement, the means of disposition is an entitlement order. As noted in Comment 7, an entitlement order need not be initiated by the entitlement holder in order to be effective, so long as the entitlement holder has authorized the other party to initiate entitlement orders. See Section 8-107(b) [55-8-107(b) NMSA 1978]. 9. "Financial asset." The definition of "financial asset," in conjunction with the definition of "securities account" in Section 8-501 [55-8-501 NMSA 1978], sets the scope of the indirect holding system rules of Part 5 of Revised Article 8. The Part 5 rules apply not only to securities held through intermediaries, but also to other financial assets held through intermediaries. The term financial asset is defined to include not only securities but also a broader category of obligations, shares, participations, and interests. Having separate definitions of security and financial asset makes it possible to separate the question of the proper scope of the traditional Article 8 rules from the question of the proper scope of the new indirect holding system rules. Some forms of financial assets should be covered by the indirect holding system rules of Part 5, but not by the rules of Parts 2, 3, and 4. The term financial asset is used to cover such property. Because the term security entitlement is defined in terms of financial assets rather than securities, the rules concerning security entitlements set out in Part 5 of Article 8 and in Revised Article 9 apply to the broader class of financial assets. The fact that something does or could fall within the definition of financial asset does not, without more, trigger Article 8 coverage. The indirect holding system rules of Revised Article 8 apply only if the financial asset is in fact held in a securities account, so that the interest of the person who holds the financial asset through the securities account is a security entitlement. Thus, questions of the scope of the indirect holding system rules cannot be framed as "Is such-and-such a 'financial asset' under Article 8?" Rather, one must analyze whether the relationship between an institution and a person on whose behalf the institution holds an asset falls within the scope of the term securities account as defined in Section 8-501 [55-8-501 NMSA 1978]. That question turns in large measure on whether it makes sense to apply the Part 5 rules to the relationship. The term financial asset is used to refer both to the underlying asset and the particular means by which ownership of that asset is evidenced. Thus, with respect to a certificated security, the term financial asset may, as context requires, refer either to the interest or obligation of the issuer or to the security certificate representing that interest or obligation. Similarly, if a person holds a security or other financial asset through a securities account, the term financial asset may, as context requires, refer either to the underlying asset or to the person's security entitlement. It is not necessary for all of the Part 5 rules to be relevant to a particular financial asset for the relevant property to qualify as a "financial asset" credited to a securities account. Many of the duties set forth in Part 5 will often be relevant to a digital asset such as a "controllable electronic record" (Section 12-102 [55-12-102 NMSA 1978]), or a "controllable account" or "controllable payment intangible" (Section 9-102 [55-9-102 NMSA 1978]) evidenced by a controllable electronic record, treated as a financial asset credited to a securities account. These duties include the duty to exercise rights as directed by the entitlement holder, comply with the entitlement holder’s entitlement orders, and change the position to another form of holding. If the parties agree to treat a digital asset as a financial asset under Article 8 and the digital asset is in fact held in a securities account for an entitlement holder, the rules applicable to controllable electronic records under Article 12 would not apply to the entitlement holder’s security entitlement related to the financial asset. If the financial asset itself is a controllable electronic record, however, then the rules in Article 12 could apply to the securities intermediary’s rights with respect to the controllable electronic record if the intermediary holds the asset directly. 10. "Good faith". Section 1-203 [55-1-203 NMSA 1978] provides that "Every contract or duty within [the Uniform Commercial Code] imposes an obligation of good faith in its performance or enforcement." Section 1-201(b)(20) [55-1-201(b)(20) NMSA 1978] defines "good faith" as "honesty in fact and the observance of reasonable commercial standards of fair dealing." The reference to commercial standards makes clear that assessments of conduct are to be made in light of the commercial setting. The substantive rules of Article 8 have been drafted to take account of the commercial circumstances of the securities holding and processing system. For example, Section 8- 115 [55-8-115 NMSA 1978] provides that a securities intermediary acting on an effective entitlement order, or a broker or other agent acting as a conduit in a securities transaction, is not liable to an adverse claimant, unless the claimant obtained legal process or the intermediary acted in collusion with the wrongdoer. This, and other similar provisions, see Sections 8-404 and 8-503(e) [55-8-404 and 55-8-503(e) NMSA 1978], do not depend on notice of adverse claims, because it would impair rather than advance the interest of investors in having a sound and efficient securities clearance and settlement system to require intermediaries to investigate the propriety of the transactions they are processing. The good faith obligation does not supplant the standards of conduct established in provisions of this kind. In Revised Article 8, the definition of good faith is not germane to the question whether a purchaser takes free from adverse claims. The rules on such questions as whether a purchaser who takes in suspicious circumstances is disqualified from protected purchaser status are treated not as an aspect of good faith but directly in the rules of Section 8-105 [55-8-105 NMSA 1978] on notice of adverse claims. 11. "Indorsement" is defined as a signature made on a security certificate or separate document for purposes of transferring or redeeming the security. The definition is adapted from the language of Section 8-308(1) [55-8-308(1) NMSA 1978] of the prior version and from the definition of indorsement in the Negotiable Instruments Article, see Section 3-204(a) [55-3-204(a) NMSA 1978]. The definition of indorsement does not include the requirement that the signature be made by an appropriate person or be authorized. Those questions are treated in the separate substantive provision on whether the indorsement is effective, rather than in the definition of indorsement. See Section 8-107 [55-8-107 NMSA 1978]. 12. "Instruction" is defined as a notification communicated to the issuer of an uncertificated security directing that transfer be registered or that the security be redeemed. Instructions are the analog for uncertificated securities of indorsements of certificated securities. 13. "Registered form." The definition of "registered form" is substantially the same as in the prior version of Article 8. Like the definition of bearer form, it serves primarily to distinguish Article 8 securities from instruments governed by other law, such as Article 3. Contrary to the holding in Highland Capital Management LP v. Schneider, 8 N.Y.3d 406 (2007), the registrability requirement in the definition of "registered form," and its parallel in the definition of "security," are satisfied only if books are maintained by or on behalf of the issuer for the purpose of registration of transfer, including the determination of rights under Section 8-207(a) [55-8-207(a) NMSA 1978] (or if, in the case of a certificated security, the security certificate so states). It is not sufficient that the issuer records ownership, or records transfers thereof, for other purposes. Nor is it sufficient that the issuer, while not in fact maintaining books for the purpose of registration of transfer, could do so, for such is always the case. 14. "Securities intermediary." A "securities intermediary" is a person that in the ordinary course of its business maintains securities accounts for others and is acting in that capacity. The most common examples of securities intermediaries would be clearing corporations holding securities for their participants, banks acting as securities custodians, and brokers holding securities on behalf of their customers. However, a person need not be such an entity in order to be a securities intermediary. Because a "securities account" is an account to which a financial asset is or may be credited under Section 8-501(a) [55-8-501 NMSA 1978] and the definition of "financial asset" is not limited to securities, a person may be a "securities intermediary" even if that person does not credit "securities" (as defined in Article 8) to the account. Rather, the securities accounts that a securities intermediary maintains may consist exclusively of financial assets described in Section 8-102(a)(9)(ii) and (iii) [55-8-102 NMSA 1978]. For example, a cryptocurrency exchange that holds only cryptocurrencies (and not securities) for customers might be a securities intermediary. Clearing corporations are listed separately as a category of securities intermediary in subparagraph (i) even though in most circumstances they would fall within the general definition in subparagraph (ii). The reason is to simplify the analysis of arrangements such as the NSCC-DTC system in which NSCC performs the comparison, clearance, and netting function, while DTC acts as the depository. Because NSCC is a registered clearing agency under the federal securities laws, it is a clearing corporation and hence a securities intermediary under Article 8, regardless of whether it is at any particular time or in any particular aspect of its operations holding securities on behalf of its participants. The terms securities intermediary and broker have different meanings. Broker means a person engaged in the business of buying and selling securities, as agent for others or as principal. Securities intermediary means a person maintaining securities accounts for others. A stockbroker, in the colloquial sense, may or may not be acting as a securities intermediary. The definition of securities intermediary includes the requirement that the person in question is "acting in the capacity" of maintaining securities accounts for others. This is to take account of the fact that a particular entity, such as a bank, may act in many different capacities in securities transactions. A bank may act as a transfer agent for issuers, as a securities custodian for institutional investors and private investors, as a dealer in government securities, as a lender taking securities as collateral, and as a provider of general payment and collection services that might be used in connection with securities transactions. A bank that maintains securities accounts for its customers would be a securities intermediary with respect to those accounts; but if it takes a pledge of securities from a borrower to secure a loan, it is not thereby acting as a securities intermediary with respect to the pledged securities, since it holds them for its own account rather than for a customer. In other circumstances, those two functions might be combined. For example, if the bank is a government securities dealer it may maintain securities accounts for customers and also provide the customers with margin credit to purchase or carry the securities, in much the same way that brokers provide margin loans to their customers. The definition of securities intermediary includes the requirement that the person in question "in the ordinary course of its business maintain securities accounts for others". This "ordinary course" requirement does not have a fixed quantitative requirement and is determined by the facts of each case. Thus, a person need not necessarily satisfy a specified threshold of activity or necessarily have a minimum number of customers. Law other than the UCC may determine who may legally engage in such a business. 15. "Security." The definition of "security" has three components. First, there is the subparagraph (i) test that the interest or obligation be fully transferable, in the sense that the issuer either maintains transfer books or the obligation or interest is represented by a certificate in bearer or registered form. Second, there is the subparagraph (ii) test that the interest or obligation be divisible, that is, one of a class or series, as distinguished from individual obligations of the sort governed by ordinary contract law or by Article 3. Third, there is the subparagraph (iii) functional test, which generally turns on whether the interest or obligation is, or is of a type, dealt in or traded on securities markets or securities exchanges. There is, however, an "opt-in" provision in subparagraph (iii) which permits the issuer of any interest or obligation that is "a medium of investment" to specify that it is a security governed by Article 8. The divisibility test of subparagraph (ii) applies to the security -- that is, the underlying intangible interest -- not the means by which that interest is evidenced. Thus, securities issued in book-entry only form meet the divisibility test because the underlying intangible interest is divisible via the mechanism of the indirect holding system. This is so even though the clearing corporation is the only eligible direct holder of the security. The third component, the functional test in subparagraph (iii), provides flexibility while ensuring that the Article 8 rules do not apply to interests or obligations in circumstances so unconnected with the securities markets that parties are unlikely to have thought of the possibility that Article 8 might apply. Subparagraph (iii)(A) covers interests or obligations that either are dealt in or traded on securities exchanges or securities markets, or are of a type dealt in or traded on securities exchanges or securities markets. The "is dealt in or traded on" phrase eliminates problems in the characterization of new forms of securities which are to be traded in the markets, even though no similar type has previously been dealt in or traded in the markets. Subparagraph (iii)(B) covers the broader category of media for investment, but it applies only if the terms of the interest or obligation specify that it is an Article 8 security. This opt-in provision allows for deliberate expansion of the scope of Article 8. Section 8-103 [55-8-103 NMSA 1978] contains additional rules on the treatment of particular interests as securities or financial assets. 16. "Security certificate." The term "security" refers to the underlying asset, e.g., 1000 shares of common stock of Acme, Inc. The term "security certificate" refers to the paper certificates that have traditionally been used to embody the underlying intangible interest. 17. "Security entitlement" means the rights and property interest of a person who holds securities or other financial assets through a securities intermediary. A security entitlement is both a package of personal rights against the securities intermediary and an interest in the property held by the securities intermediary. A security entitlement is not, however, a specific property interest in any financial asset held by the securities intermediary or by the clearing corporation through which the securities intermediary holds the financial asset. See Sections 8-104(c) [55-8-104(c) NMSA 1978] and 8-503 [55-8-503 NMSA 1978]. The formal definition of security entitlement set out in subsection (a)(17) of this section is a cross-reference to the rules of Part 5. In a sense, then, the entirety of Part 5 is the definition of security entitlement. The Part 5 rules specify the rights and property interest that comprise a security entitlement. 18. "Uncertificated security." The term "uncertificated security" means a security that is not represented by a security certificate—i.e., a paper certificate. This is so even if, for example, the organic documents relating to the security refer to it as being "certificated" or refer to the electronic record evidencing the security as an "electronic certificate." For uncertificated securities, there is no need to draw any distinction between the underlying asset and the means by which a direct holder’s interest in that asset is evidenced. Compare "certificated security" and "security certificate." As discussed above in Comment 9, a controllable electronic record may be a "financial asset." However, a controllable electronic record is not itself a "security," defined in part in Section 8-102(a)(15) [55-8-102 NMSA 1978] as "an obligation of an issuer or a share, participation, or other interest in an issuer or in property or an enterprise of an issuer." It also is not "a share or similar equity interest," an "investment company security," or "an interest in a partnership or limited liability company." See Section 8-103(a), (b), and (c) [55-8-103 NMSA 1978]. Of course, a controllable electronic record might be involved in the issuance and distribution of something that is a security for other, non-Article 8 purposes, including the federal securities laws. For example, a controllable electronic record (perhaps labeled as a "token" or "coin") might provide a mechanism for facilitating investments in such securities. As Section 8-102(d) makes clear, however, characterization under Article 8 does not determine characterization for other purposes. The converse is also true—characterization for other purposes does not determine characterization under Article 8. Although not itself an Article 8 security, a controllable electronic record might play a role in the facilitating transactions in Article 8 securities. The following examples address situations in which controllable electronic records may have such a role as well as situations in which investment property is not involved. Example 1 (corporate shares: Article 8 uncertificated securities; token as instruction). A Delaware corporation (D Corp) issues shares of stock and maintains books and records evidencing the registered ownership of the shares. Because the shares are not represented by security certificates, they are uncertificated securities. Pursuant to the applicable law and the organic documentation of D Corp, D Corp creates, or causes to be created, controllable electronic records (CERs)—"tokens"—to facilitate transfers of the shares. Also pursuant to that law and documentation, the transfer of control of a token on the platform on which the token is recorded constitutes an instruction to D Corp, as issuer, for the transfer of registration of the share(s) represented by the token to the transferee of control. Following receipt of the instruction upon transfer of control of a token, D Corp transfers registration of the share(s) on its books and records. See Sections 8-102(a)(12) [55-8-102 NMSA 1978] (defining "instruction"); 8-401 (duty of issuer to register transfer). Although Article 12 governs the tokens (as CERs) and the transfer of control thereof, other law, including Delaware corporate law and Delaware Article 8 (and Article 9 of the relevant jurisdiction, if applicable) governs rights in the uncertificated securities and the transfer of registration. See Sections 8-110(a); 12-104(f) [55-8-110, 55-12-104 NMSA 1978]. Example 2 (LLC membership interests: Article 8 uncertificated securities; token as instruction). A Delaware limited liability company (LLC) issues membership interests that are dealt in or traded on securities exchanges or in securities markets and which by their terms are securities governed by Article 8. See Section 8-103(c) [55-8- 103 NMSA 1978]. LLC maintains books and records evidencing the registered ownership of the interests. Because the interests are not represented by security certificates, they are uncertificated securities. Pursuant to the applicable law and the organic documentation of LLC, LLC creates, or causes to be created, controllable electronic records (CERs)—"tokens"—to facilitate transfers of the interests. Also pursuant to that law and documentation, the transfer of control of a token on the platform on which the token is recorded constitutes an instruction to LLC, as issuer, for the transfer of registration of the interest(s) represented by the token to the transferee of control. Following receipt of the instruction upon transfer of control of a token, LLC transfers registration of the interest(s) on its books and records. See Sections 8- 102(a)(12) [55-8-102 NMSA 1978] (defining "instruction"); 8-401 [55-8-401 NMSA 1978] (duty of issuer to register transfer). Although Article 12 governs the tokens (as CERs) and the transfer of control thereof, other law, including Delaware LLC law and Delaware Article 8 (and Article 9 of the relevant jurisdiction, if applicable), governs rights in the uncertificated securities and the transfer of registration. See Sections 8-110(a); 12- 104(f) [55-8-110, 55-12-104 NMSA 1978]. Example 3 (LLC membership interests not covered by Article 8; interests are general intangibles). A Delaware limited liability company issues membership interests that are not securities governed by UCC Article 8 and, consequently, are not investment property. See Section 8-103(c) [55-8-103 NMSA 1978]. Instead, the membership interests are general intangibles. LLC maintains books and records evidencing ownership of the interests. Pursuant to the applicable law and the organic documentation of LLC, LLC creates, or causes to be created, controllable electronic records (CERs)—"tokens"—to facilitate transfers of the interests. Also pursuant to that law and documentation, the transfer of control of a token on the platform on which the token is recorded constitutes a request to LLC, as issuer, for the transfer of the interest(s) related to the token. Following receipt of the request upon transfer of control of a token, LLC transfers the interest(s) on its books and records. Although Article 12 governs the tokens (as CERs) and the transfer of control, other law (including Article 9 or the relevant jurisdiction, if applicable, but not Article 8) governs rights in the interests (general intangibles). See Section 12-104(f) [55-12-104 NMSA 1978]. Examples 1 and 2 posit that controllable electronic records function as instructions to the issuers. For an analogous example in another context, see Section 4A-104 [55-4A- 104 NMSA 1978], Comment 3 ("An instruction to pay might be a component of a computer program or a transaction protocol intended to execute automatically under specified circumstances."). The central point is that the roles of the controllable electronic records must comply with the organic corporate and LLC laws and documentation as well as the Article 8 regime for uncertificated securities. Although controllable electronic records might be structured to functionally "represent" the underlying uncertificated securities, Article 8 makes no provision for such a "representation" for uncertificated securities (unlike the role of security certificates for certificated securities). Whether it would be possible and feasible to expand the structure contemplated in Examples 1 and 2 so that transfer of control of a controllable electronic record would, ipso facto, constitute a transfer of registration on the issuer’s books and records would depend on the terms of and compliance with both the underlying organic laws and documentation for the uncertificated securities, the requirements of Article 8, and, where applicable, other law. If the securities issued by D Corp or LLC in Examples 1 and 2 were payment obligations of the issuers that met the definition of "security" in Section 8-102(a)(15) [55-8-102 NMSA 1978]—i.e., debt securities—the same analysis discussed in those examples as to the applicability and scope of Articles 8 and 12 would apply. However, if the debt obligations were not Article 8 securities (as in Example 3) but were obligations of account debtors on controllable accounts or controllable payment intangibles, then the relevant provisions of Articles 9 and 12, and not those of Article 8, would apply. See, e.g., Sections 9-107A; 9-306B; 9-314; 12-104(a), (b), and (e) [55-9-107, 55-9-314, 55- 12-104 NMSA 1978, respectively]and Comments 6 – 10; Article 12, Prefatory Note 4. "Agreement". Section 1-201(b)(3) [55-1-201(b)(3) NMSA 1978]. "Bank". Section 1-201(b)(4) [55-1-201(b)(4) NMSA 1978]. "Person". Section 1-201(b)(27) [55-1-201(b)(27) NMSA 1978]. "Send". Section 1-201(b)(36) [55-1-201(b)(36) NMSA 1978]. "Signed". Section 1-201(b)(37) [55-1-201(b)(37) NMSA 1978]. "Writing". Section 1-201(b)(43) [55-1-201(b)(43) NMSA 1978].