Bill C-5
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Proceedings |
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Rules of
action
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198. The following rules apply in an action
on a security:
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Delivery |
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Delivery of
securities
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199. (1) A person who is required to deliver
securities may deliver any security of the
specified issue
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Limitation
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(2) Subsection (1) is subject to any agree
ment to the contrary, to any applicable Act of
Parliament or the legislature of a province or
to any applicable regulation or stock exchange
rule.
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General |
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Incorporation
by reference
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200. (1) The terms of a security include
those stated on the security and those incorpo
rated by reference to another document, Act of
Parliament or the legislature of a province,
regulation, rule or order to the extent that the
incorporated terms do not conflict with those
stated on the security.
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Purchaser
without notice
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(2) Subsection (1) applies to a good faith
purchaser but the incorporation by reference is
itself not notice of a defect to the purchaser
even if the security expressly states that a
person accepting it admits that notice.
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Validity of
security
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201. A security is valid in the hands of a
good faith purchaser.
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Defence
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202. Subject to section 205, the fact that a
security is not genuine is a complete defence
even against a good faith purchaser.
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Defences
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203. All other defences of an issuer, includ
ing non-delivery and conditional delivery of a
security, are ineffective against a good faith
purchaser.
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Deemed
notice
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204. (1) A purchaser is deemed to have
notice of any defect in the issue of a security
or any defence of the issuer if the security
becomes stale within the meaning of subsec
tion (2).
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Stale security
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(2) A security becomes stale if
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Unauthorized
signature
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205. (1) Subject to subsection (2), an
unauthorized signature on a security is inef
fective.
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Limited
effectiveness
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(2) An unauthorized signature on a security
is effective in favour of a good faith purchaser
if the signature was made by
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Completion of
form
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206. If a security contains the signatures
necessary for its issue or transfer but is
incomplete in another respect, any person may
complete it in accordance with their authority.
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Enforceabi- lity
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207. A security that was completed incor
rectly is enforceable by a good faith purchaser.
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Fraud
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208. A completed security that was improp
erly altered, even if fraudulently altered,
remains enforceable but only according to its
original terms.
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Guarantees
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209. (1) A person signing a security as an
authenticating trustee, transfer agent or other
person entrusted by the issuer with the duty to
sign the security guarantees to a good faith
purchaser that
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Liability
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(2) Unless agreed otherwise, a person
referred to in subsection (1) does not assume
any further liability for the validity of the
security.
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Acquisition of
rights
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210. (1) On delivery of a security, the
purchaser of the security acquires the rights in
it that the transferor had or had authority to
convey.
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Claim free
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(2) A good faith purchaser of a security
acquires it free from any adverse claim.
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No better
position
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(3) A purchaser who was a party to a fraud
or illegality affecting a security or who, as a
prior holder, had notice of an adverse claim
does not have a better position by taking from
a later good faith purchaser.
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Limited
interests
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211. A purchaser of a limited interest
acquires rights only to the extent of the interest
purchased.
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Deemed
notice
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212. (1) A purchaser of a security, or a
broker for a seller or purchaser, is deemed to
have notice of an adverse claim if
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Name
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(2) The mere writing of a name on a security
is not a statement for the purposes of para
graph (1)(b).
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No duty to
inquire
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213. (1) A purchaser of a security, or a
broker for a seller or purchaser, has no duty to
inquire into the rightfulness of the transfer
and, subject to section 214, has no notice of an
adverse claim.
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Third party
holding
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(2) Subsection (1) applies even if the
purchaser or broker has notice that the security
is held by a third person or is registered in the
name of or endorsed by a fiduciary.
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Deemed
notice
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214. A purchaser or broker who knows that
the transaction is for the personal benefit of
the fiduciary or is otherwise in breach of the
fiduciary's duty is deemed to have notice of an
adverse claim.
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Staleness
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215. (1) The following events do not
constitute notice of an adverse claim except if
the security becomes stale within the meaning
of subsection (2):
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Staleness of
security
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(2) A security becomes stale if
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Guarantee
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216. (1) A person who presents a security
for registration of transfer or for payment or
exchange guarantees to the issuer that the
person is entitled to do so.
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Limitation on
guarantee
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(2) A good faith purchaser who receives a
new, re-issued or re-registered security and
who registers a transfer guarantees only that
the purchaser has no knowledge of any
unauthorized signature in a necessary en
dorsement.
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Content of
guarantee
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217. A person who transfers a security to a
purchaser for value guarantees by the transfer
only that
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Guarantee of
intermediary
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218. An intermediary delivering a security
to a purchaser who knows that the intermedi
ary is an intermediary guarantees only good
faith.
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Guarantee of
broker
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219. A broker gives to a customer, to the
issuer and to a purchaser the guarantees
provided in sections 216 to 218 and has the
rights and privileges of a purchaser under
those sections, and those guarantees of and in
favour of the broker acting as an agent or
mandatary are in addition to guarantees given
by the customer and guarantees given in
favour of the customer.
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Right to
compel
endorsement
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220. If a registered security is delivered to
a purchaser without a necessary endorsement,
the purchaser has the right to demand the
endorsement. The purchaser becomes a good
faith purchaser after the endorsement.
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Definition of
``appropriate''
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221. (1) In this section, section 222, subsec
tions 229(1) and 237(1) and section 241,
``appropriate'', with respect to a person,
means that the person is
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Time for
determina- tion
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(2) The authority of a person signing is
determined as of the time of signing.
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Endorsement
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222. (1) An endorsement of a security in
registered form for the purposes of assignment
or transfer is made when an appropriate person
signs either the security or a separate docu
ment, or when the signature of an appropriate
person is written without more on the back of
the security.
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Blank or
special
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(2) An endorsement may be
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Blank
endorsement
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(3) An endorsement in blank includes an
endorsement to bearer.
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Special
endorsement
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(4) A special endorsement specifies the
person to whom the security is to be trans
ferred, or who has power to transfer it.
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Right of
holder
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(5) A holder may convert an endorsement in
blank into a special endorsement.
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Immunity of
endorser
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223. Unless agreed otherwise, the endorser
does not, by the endorsement, assume any
obligation that the security will be honoured
by the issuer.
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Partial
endorsement
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224. An endorsement purporting to be an
endorsement of only part of a security repre
senting units intended by the issuer to be
separately transferable is effective to the
extent of the endorsement.
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Effect of
failure by
fiduciary to
comply
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225. Failure of a fiduciary to comply with
the document that is the source of the fidu
ciary's power or with the law of the jurisdic
tion governing the fiduciary relationship does
not render the fiduciary's endorsement unau
thorized for the purposes of this Part.
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Effect of
endorsement
without
delivery
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226. An endorsement of a security does not
constitute a transfer until delivery of the
security on which it appears or, if the endorse
ment is on a separate document, until delivery
of both the security and the document.
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Endorsement
in bearer form
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227. An endorsement of a security in bearer
form may give notice of an adverse claim
under section 212 but does not otherwise
affect any of the holder's rights.
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Effect of
unauthorized
endorsement
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228. (1) The owner of a security may assert
the ineffectiveness of an endorsement against
the issuer or a purchaser, other than a good
faith purchaser who has in good faith received
a new, re-issued or re-registered security on
registration of transfer, unless the owner
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Liability of
issuer
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(2) An issuer who registers the transfer of a
security on an unauthorized endorsement is
liable for improper registration.
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Warranties of
guarantor of
signature
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229. (1) A person who guarantees the
signature of an endorser of a security warrants
that, at the time of signing, the signer was an
appropriate person to endorse and the signa
ture was genuine.
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Limitation of
liability
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(2) A person who guarantees the signature
of an endorser does not otherwise warrant the
rightfulness of the transfer to which the
signature relates.
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Warranties of
guarantor of
endorsement
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(3) A person who guarantees the endorse
ment of a security warrants both the signature
and the rightfulness, in all respects, of the
transfer to which the signature relates, but an
issuer may not require a guarantee of endorse
ment as a condition to registration of transfer.
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