Committee advances bill to alter state law on brokerage "entitlement" rules after panel debates investor protection and market fallout

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 reverse a structural shift in control away from investors and toward secured creditors under the indirect holdings system. Webb cited the Lehman Brothers bankruptcy as an illustration of the risk: client accounts were frozen when Lehman failed and the institutional accounts "had no right to take their property back," he said. Webb also referenced a written response from the New York Federal Reserve to an EU legal certainty group, which he said confirms that investors can be vulnerable to insolvency of intermediaries.

Supporters described the amendment as narrow and surgical: it would change priority rules that, they argued, allow secured creditors to take pooled client collateral in a systemic insolvency. Don Kleiss, a retired witness, told the committee the risk is substantial for many account types and urged the committee to act, saying the state could risk sovereign funds and other assets in a worst-case systemic failure.

Opponents included Scott Meyer, representing the Wyoming Bankers Association and the Uniform Laws Commission as Wyoming's commissioner. Meyer told the committee the UCC exists to provide uniform rules across states and warned that repealing or narrowing the UCC exceptions "could cause companies to cease doing business in Wyoming" or raise legal costs for routine transactions. He said Article 8 already recognizes property interests and narrow exceptions for secured-creditor priority tied to consented margin arrangements and clearinghouse liquidity operations.

State Treasurer's Office staff including Patrick Fleming, the chief investment officer, testified that the treasurer's office manages large public assets in separate, managed accounts and that the state's investment practices avoid the specific collateralization risks described by witnesses: Fleming told the committee the state does not accept equities as collateral in securities lending and holds many state positions in separately managed accounts in the state's name.

Committee members asked how broadly the indirect holding system is used; Grandy and Webb said the system is universal, with most securities held in digital form and custody concentrated at entities such as the Depository Trust Company. Webb and Grandy said similar bills are moving in several states and that the sponsors hope to prompt a wider fix to Article 8 nationally.

At the end of the hearing the clerk called roll on Senate File 189. The committee recorded four ayes and one no; the clerk announced "4 ayes, 1 no, do pass." The transcript records the roll-call reads as: Senator Driscoll — Aye; Senator Giroux — No; Senator Larson — Aye; Senator Smith — Aye; Chairman Salazar — Aye.

The committee record includes written testimony and witnesses on both sides; the transcript shows the chair gave supporters and opponents time to make the legal and practical case before the roll-call vote.