Amends existing law to revise a provision regarding applicability and choice of law, to remove provisions regarding applicability and choice of law, to remove provisions regarding priority among security interests and entitlement holders, and to remove a provision regarding security interests.

LEGISLATURE OF THE STATE OF IDAHO Sixty-eighth Legislature Second Regular Session - 2026 IN THE HOUSE OF REPRESENTATIVES HOUSE BILL NO. 702 BY BUSINESS COMMITTEE AN ACT1 RELATING TO COMMERCIAL TRANSACTIONS; AMENDING SECTION 28-8-110, IDAHO2 CODE, TO REVISE A PROVISION REGARDING APPLICABILITY AND CHOICE OF LAW3 AND TO REMOVE PROVISIONS REGARDING APPLICABILITY AND CHOICE OF LAW;4 AMENDING SECTION 28-8-503, IDAHO CODE, TO REMOVE A CODE REFERENCE AND5 TO MAKE TECHNICAL CORRECTIONS; AMENDING SECTION 28-8-511, IDAHO CODE,6 TO REMOVE PROVISIONS REGARDING PRIORITY AMONG SECURITY INTERESTS AND7 ENTITLEMENT HOLDERS; AMENDING SECTION 28-9-305, IDAHO CODE, TO REMOVE A8 PROVISION REGARDING SECURITY INTERESTS AND TO MAKE A TECHNICAL CORREC-9 TION; AND DECLARING AN EMERGENCY AND PROVIDING AN EFFECTIVE DATE.10

Be It Enacted by the Legislature of the State of Idaho:11

SECTION 1. That Section 28-8-110, Idaho Code, be, and the same is hereby12 amended to read as follows:13 28-8-110. APPLICABILITY AND CHOICE OF LAW. (1) The local law of the is-14 suer's jurisdiction, as specified in subsection (4) of this section, gov-15 erns:16 (a) The validity of a security;17 (b) The rights and duties of the issuer with respect to registration of18 transfer;19 (c) The effectiveness of registration of transfer by the issuer;20 (d) Whether the issuer owes any duties to an adverse claimant to a secu-21 rity; and22 (e) Whether an adverse claim can be asserted against a person to whom23 transfer of a certificated or uncertificated security is registered or24 a person who obtains control of an uncertificated security.25 (2) The local law of the securities intermediary's jurisdiction, as26 specified in subsection (5) of this section, Idaho governs:27 (a) Acquisition of a security entitlement from the securities interme-28 diary;29 (b) The rights and duties of the securities intermediary and entitle-30 ment holder arising out of a security entitlement;31 (c) Whether the securities intermediary owes any duties to an adverse32 claimant to a security entitlement; and33 (d) Whether an adverse claim can be asserted against a person who ac-34 quires a security entitlement from the securities intermediary or a35 person who purchases a security entitlement or interest therein from an36 entitlement holder.37 (3) The local law of the jurisdiction in which a security certificate38 is located at the time of delivery governs whether an adverse claim can be39 asserted against a person to whom the security certificate is delivered.40 (4) "Issuer's jurisdiction" means the jurisdiction under which the is-41 suer of the security is organized or, if permitted by the law of that juris-42

2 diction, the law of another jurisdiction specified by the issuer. An is-1 suer organized under the law of this state may specify the law of another ju-2 risdiction as the law governing the matters specified in subsections (1)(b)3 through (1)(e) of this section.4 (5) The following rules determine a "securities intermediary's juris-5 diction" for purposes of this section:6 (a) If an agreement between the securities intermediary and its en-7 titlement holder governing the securities account expressly provides8 that a particular jurisdiction is the securities intermediary's ju-9 risdiction for purposes of this part, this chapter, or this act, that10 jurisdiction is the securities intermediary's jurisdiction.11 (b) If paragraph (a) of this subsection does not apply and an agreement12 between the securities intermediary and its entitlement holder gov-13 erning the securities account expressly provides that the agreement is14 governed by the law of a particular jurisdiction, that jurisdiction is15 the securities intermediary's jurisdiction.16 (c) If neither paragraph (a) nor paragraph (b) of this section applies17 and an agreement between the securities intermediary and its entitle-18 ment holder governing the securities account expressly provides that19 the securities account is maintained at an office in a particular juris-20 diction, that jurisdiction is the securities intermediary's jurisdic-21 tion.22 (d) If none of the preceding paragraphs apply, the securities interme-23 diary's jurisdiction is the jurisdiction in which the office identified24 in an account statement as the office serving the entitlement holder's25 account is located.26 (e) If none of the preceding paragraphs apply, the securities interme-27 diary's jurisdiction is the jurisdiction in which the chief executive28 office of the securities intermediary is located.29 (6) A securities intermediary's jurisdiction is not determined by the30 physical location of certificates representing financial assets, or by the31 jurisdiction in which is organized the issuer of the financial asset with re-32 spect to which an entitlement holder has a security entitlement, or by the33 location of facilities for data processing or other recordkeeping concern-34 ing the account.35

SECTION 2. That Section 28-8-503, Idaho Code, be, and the same is hereby36 amended to read as follows:37 28-8-503. PROPERTY INTEREST OF ENTITLEMENT HOLDER IN FINANCIAL ASSET38 HELD BY SECURITIES INTERMEDIARY. (1) To the extent necessary for a secu-39 rities intermediary to satisfy all security entitlements with respect to40 a particular financial asset, all interests in that financial asset held41 by the securities intermediary are held by the securities intermediary for42 the entitlement holders, are not property of the securities intermediary,43 and are not subject to claims of creditors of the securities intermediary,44 except as otherwise provided in section 28-8-511.45 (2) An entitlement holder's property interest with respect to a partic-46 ular financial asset under subsection (1) of this section is a pro rata prop-47 erty interest in all interests in that financial asset held by the securities48 intermediary, without regard to the time the entitlement holder acquired the49

3 security entitlement or the time the securities intermediary acquired the1 interest in that financial asset.2 (3) An entitlement holder's property interest with respect to a par-3 ticular financial asset under subsection (1) of this section may be enforced4 against the securities intermediary only by exercise of the entitlement5 holder's rights under sections 28-8-505 through 28-8-508, Idaho Code.6 (4) An entitlement holder's property interest with respect to a par-7 ticular financial asset under subsection (1) of this section may be enforced8 against a purchaser of the financial asset or interest therein only if:9 (a) Insolvency proceedings have been initiated by or against the secu-10 rities intermediary;11 (b) The securities intermediary does not have sufficient interests in12 the financial asset to satisfy the security entitlements of all of its13 entitlement holders to that financial asset;14 (c) The securities intermediary violated its obligations under section15 28-8-504, Idaho Code, by transferring the financial asset or interest16 therein to the purchaser; and17 (d) The purchaser is not protected under subsection (5) of this sec-18 tion.19 The trustee or other liquidator, acting on behalf of all entitlement holders20 having security entitlements with respect to a particular financial asset,21 may recover the financial asset, or interest therein, from the purchaser. If22 the trustee or other liquidator elects not to pursue that right, an entitle-23 ment holder whose security entitlement remains unsatisfied has the right to24 recover its interest in the financial asset from the purchaser.25 (5) An action based on the entitlement holder's property interest with26 respect to a particular financial asset under subsection (1) of this sec-27 tion, whether framed in conversion, replevin, constructive trust, equitable28 lien or other theory, may not be asserted against any purchaser of a finan-29 cial asset or interest therein who gives value, obtains control, and does not30 act in collusion with the securities intermediary in violating the securi-31 ties intermediary's obligations under section 28-8-504, Idaho Code.32

SECTION 3. That Section 28-8-511, Idaho Code, be, and the same is hereby33 amended to read as follows:34 28-8-511. PRIORITY AMONG SECURITY INTERESTS AND ENTITLEMENT HOLD-35 ERS. (1) Except as otherwise provided in subsections (2) and (3) of this36 section, if If a securities intermediary does not have sufficient interests37 in a particular financial asset to satisfy both its obligations to entitle-38 ment holders who have security entitlements to that financial asset and its39 obligation to a creditor of the securities intermediary who has a security40 interest in that financial asset, the claims of entitlement holders, other41 than the creditor, have priority over the claim of the creditor.42 (2) A claim of a creditor of a securities intermediary who has a secu-43 rity interest in a financial asset held by a securities intermediary has pri-44 ority over claims of the securities intermediary's entitlement holders who45 have security entitlements with respect to that financial asset if the cred-46 itor has control over the financial asset.47 (3) If a clearing corporation does not have sufficient financial assets48 to satisfy both its obligations to entitlement holders who have security en-49

4 titlements with respect to a financial asset and its obligation to a creditor1 of the clearing corporation who has a security interest in that financial as-2 set, the claim of the creditor has priority over the claims of entitlement3 holders.4

SECTION 4. That Section 28-9-305, Idaho Code, be, and the same is hereby5 amended to read as follows:6 28-9-305. LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY INTERESTS7 IN INVESTMENT PROPERTY. (a) Except as otherwise provided in subsection (c)8 of this section, the following rules apply:9 (1) While a security certificate is located in a jurisdiction, the lo-10 cal law of that jurisdiction governs perfection, the effect of perfec-11 tion or nonperfection, and the priority of a security interest in the12 certificated security represented thereby.13 (2) The local law of the issuer's jurisdiction as specified in section14 28-8-110(4), Idaho Code, governs perfection, the effect of perfection15 or nonperfection, and the priority of a security interest in an uncer-16 tificated security.17 (3) The local law of the securities intermediary's jurisdiction as18 specified in section 28-8-110(5) governs perfection, the effect of per-19 fection or nonperfection, and the priority of a security interest in a20 security entitlement or securities account.21 (4) (3) The local law of the commodity intermediary's jurisdiction22 governs perfection, the effect of perfection or nonperfection, and the23 priority of a security interest in a commodity contract or commodity24 account.25 (b) The following rules determine a commodity intermediary's jurisdic-26 tion for purposes of this part:27 (1) If an agreement between the commodity intermediary and commodity28 customer governing the commodity account expressly provides that a par-29 ticular jurisdiction is the commodity intermediary's jurisdiction for30 purposes of this part, this chapter, or the uniform commercial code,31 that jurisdiction is the commodity intermediary's jurisdiction.32 (2) If paragraph (1) of this subsection does not apply and an agree-33 ment between the commodity intermediary and commodity customer govern-34 ing the commodity account expressly provides that the agreement is gov-35 erned by the law of a particular jurisdiction, that jurisdiction is the36 commodity intermediary's jurisdiction.37 (3) If neither paragraph (1) nor (2) of this subsection applies and an38 agreement between the commodity intermediary and commodity customer39 governing the commodity account expressly provides that the commodity40 account is maintained at an office in a particular jurisdiction, that41 jurisdiction is the commodity intermediary's jurisdiction.42 (4) If none of the preceding paragraphs apply, the commodity interme-43 diary's jurisdiction is the jurisdiction in which the office identified44 in an account statement as the office serving the commodity customer's45 account is located.46 (5) If none of the preceding paragraphs apply, the commodity intermedi-47 ary's jurisdiction is the jurisdiction in which the chief executive of-48 fice of the commodity intermediary is located.49

5 (c) The local law of the jurisdiction in which the debtor is located1 governs:2 (1) Perfection of a security interest in investment property by filing;3 (2) Automatic perfection of a security interest in investment property4 created by a broker or securities intermediary; and5 (3) Automatic perfection of a security interest in a commodity contract6 or commodity account created by a commodity intermediary.7

SECTION 5. An emergency existing therefor, which emergency is hereby8 declared to exist, this act shall be in full force and effect on and after9 July 1, 2026.10