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Committee advances bill to alter state law on brokerage "entitlement" rules after panel debates investor protection and market fallout
Summary
Senate File 189 would change state Uniform Commercial Code (UCC) rules governing investment securities and intermediaries to strengthen investors' property claims in insolvency. Supporters cited Lehman-era risks and a Fed response; bankers warned the change could disrupt interstate clearing and increase costs. Committee voted 4–1 to advance thebill
The Appropriations Committee voted 4–1 to advance Senate File 189, a bill amending provisions of the Uniform Commercial Code (UCC) that govern investment securities, intermediaries and the claims of "entitlement holders" when an intermediary becomes insolvent.
A sponsor introduced the bill as a targeted update to the UCC to protect investors' property claims if intermediaries fail. Attorney Don Grandy, who testified for the bill, summarized the policy aim: the proposed changes would "restore those property rights" that he said were weakened when states adopted the 1994 revision to Article 8 of the UCC. Grandy described the current status under Article 8 as creating a "security entitlement" rather than direct share ownership and said that, in insolvency, entitlement holders can be vulnerable to secured creditors.
Witness Justin Webb, a former investment banker who testified with technical detail, told the committee the change is intended to…
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