UCC filing for security entitlement - what documentation needed?

Thanks! So I don't need to list the individual stocks or bonds, just reference the account? That makes more sense.

Exactly, and make sure you get the exact legal name of the securities intermediary right on the filing.

Oh wow, so I might need to file in Delaware instead of locally? That changes everything. Do I need to research Delaware's specific filing requirements?

Yes, Delaware has their own portal and fee structure. It's pretty straightforward but definitely different from what you might be used to locally.

I ran into this exact issue last month. Had to refile because I initially filed in the wrong state. Cost us extra time and fees.

These are all held electronically through the broker, so uncertificated I assume? The borrower doesn't have physical stock certificates.

Right, if they're held in a brokerage account then you're dealing with security entitlements, not direct ownership of uncertificated securities. The UCC-1 filing is the right approach.

That sounds useful - I'm always worried about name mismatches between the loan agreement and UCC filing. How does it work exactly?

You just upload PDFs of your documents and it cross-checks everything automatically. For security entitlements it caught that my collateral description was too vague and wouldn't have properly covered the account.

I've heard good things about that tool. Definitely worth checking if you're dealing with complex collateral like investment accounts.

I get the frustration but security entitlements really are different from typical equipment or inventory collateral. The rules exist for good reasons.

I guess but it feels like you need a law degree just to file a UCC-1 correctly these days

Control agreement? Is that required or just recommended? Our loan docs don't mention anything about that.

Not required but highly recommended. It's like getting both a UCC filing and possession of the collateral. Gives you priority over other secured creditors in most cases.

Good point. Control trumps filing in the priority rules under Article 8. Definitely worth pursuing if the intermediary will cooperate.

You can perfect by control OR by filing, but many lenders do both for extra protection. Control gives you priority but filing gives you broader notice to other potential creditors.

Ah that makes sense. Belt and suspenders approach.

How can I tell the difference? The account statements just show it as a regular investment account with various stocks and mutual funds.

Look at the account agreement with the broker. If the securities are held in the broker's name for the benefit of your borrower, then they're security entitlements. If somehow the borrower is the direct registered owner, it's different.

In practice, almost all retail brokerage accounts create security entitlements. Direct registration is pretty rare these days.

Good to know! So being specific is better than being too broad. I'll make sure to include the account numbers.

Which state was that in? Some filing offices are pickier than others about collateral descriptions.

This was in California. They seem to want very detailed descriptions for anything involving securities.

Glad it helped! This forum is great for figuring out these tricky UCC issues.

Always happy to help prevent filing mistakes. Been there myself too many times!

Great to hear it worked out! Those little name details can cause big headaches later if not caught early.

Perfect example of why it's worth taking the time to verify everything before filing. Congrats on getting it sorted out.

Excellent outcome. Security entitlement filings can be tricky but sounds like you nailed it.