Bill C-5

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	Proceedings
Rules of action	198. The following rules apply in an action on a security:
	(a) each signature on the security certificate or in a necessary endorsement is admitted unless specifically denied in the pleadings;
	(b) a signature on the security is presumed to be genuine and authorized but, if the effectiveness of the signature is in issue, the burden of establishing that it is genuine and authorized is on the party claiming under the signature;
	(c) if a signature is admitted or established, production of a certificate entitles the holder to recover on it unless the other party establishes a defence or defect going to the validity of the security; and
	(d) if the other party establishes the defence or defect, the plaintiff has the burden of establishing that the defect is ineffective against the plaintiff or some other person under whom the claim is made.
	Delivery
Delivery of securities	199. (1) A person who is required to deliver securities may deliver any security of the specified issue
	(a) in bearer form;
	(b) in registered form in the name of the transferee; or
	(c) endorsed to the person or in blank.
Limitation	(2) Subsection (1) is subject to any agreement to the contrary, to any applicable Act of Parliament or the legislature of a province or to any applicable regulation or stock exchange rule.
	General
Incorporation by reference	200. (1) The terms of a security include those stated on the security and those incorporated 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.
Purchaser without notice	(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.
Validity of security	201. A security is valid in the hands of a good faith purchaser.
Defence	202. Subject to section 205, the fact that a security is not genuine is a complete defence even against a good faith purchaser.
Defences	203. All other defences of an issuer, including non-delivery and conditional delivery of a security, are ineffective against a good faith purchaser.
Deemed notice	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 subsection (2).
Stale security	(2) A security becomes stale if
	(a) the purchaser takes the security more than two years after
	(i) the date on which performance of the principal obligation evidenced by the security was due, or
	(ii) the set date on or after which the security is to be presented or surrendered for redemption or exchange; or
	(b) the payment of money or the delivery of securities is required in order to present or surrender the security, the money or securities are available on the day for the payment or delivery and the purchaser takes the security more than one year after that day.
Unauthorized signature	205. (1) Subject to subsection (2), an unauthorized signature on a security is ineffective.
Limited effectiveness	(2) An unauthorized signature on a security is effective in favour of a good faith purchaser if the signature was made by
	(a) an authenticating trustee, transfer agent or other person entrusted by the issuer with the duty to sign the security, or similar securities, or to prepare them for signing; or
	(b) an employee of the issuer or a person referred to in paragraph (a) who handles the security in the ordinary course of their duties.
Completion of form	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.
Enforceability	207. A security that was completed incorrectly is enforceable by a good faith purchaser.
Fraud	208. A completed security that was improperly altered, even if fraudulently altered, remains enforceable but only according to its original terms.
Guarantees	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
	(a) the security is genuine;
	(b) the person's acts in connection with the security are within the person's authority; and
	(c) the person has reasonable grounds for believing that the security is in the form and within the amount the issuer is authorized to issue.
Liability	(2) Unless agreed otherwise, a person referred to in subsection (1) does not assume any further liability for the validity of the security.
Acquisition of rights	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.
Claim free	(2) A good faith purchaser of a security acquires it free from any adverse claim.
No better position	(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.
Limited interests	211. A purchaser of a limited interest acquires rights only to the extent of the interest purchased.
Deemed notice	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
	(a) the security has been endorsed ``for collection'' or ``for surrender'' or for some other purpose other than transfer; or
	(b) the security is in bearer form and has a statement on it that it belongs to a person other than the transferor.
Name	(2) The mere writing of a name on a security is not a statement for the purposes of paragraph (1)(b).
No duty to inquire	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.
Third party holding	(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.
Deemed notice	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.
Staleness	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):
	(a) an event that creates a right to performance of the principal obligation evidenced by the security; or
	(b) an event that sets the date on or after which the security is to be presented or surrendered for redemption or exchange.
Staleness of security	(2) A security becomes stale if
	(a) the purchaser takes the security more than one year after
	(i) the date on which performance of the principal obligation evidenced by the security was due, or
	(ii) the date on or after which the security was to be presented or surrendered for redemption or exchange; or
	(b) the payment of money or the delivery of securities is required in order to present or surrender the security, the money or securities are available on the day for the payment or delivery and the purchaser takes the security more than six months after that day.
Guarantee	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.
Limitation on guarantee	(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 endorsement.
Content of guarantee	217. A person who transfers a security to a purchaser for value guarantees by the transfer only that
	(a) the transfer is effective and rightful;
	(b) the security is genuine and has not been materially altered; and
	(c) the person knows of nothing that might impair the validity of the security.
Guarantee of intermediary	218. An intermediary delivering a security to a purchaser who knows that the intermediary is an intermediary guarantees only good faith.
Guarantee of broker	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.
Right to compel endorsement	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.
Definition of ``appropriate''	221. (1) In this section, section 222, subsections 229(1) and 237(1) and section 241, ``appropriate'', with respect to a person, means that the person is
	(a) the person who is specified by the security or by a special endorsement to be entitled to the security;
	(b) if a person described in paragraph (a) is described as a fiduciary but is no longer serving as one, either that person or their successor;
	(c) if the security or endorsement mentioned in paragraph (a) specifies more than one person as fiduciaries and one or more of those persons is no longer a fiduciary, the remaining fiduciary or fiduciaries, whether or not a successor has been appointed or qualified;
	(d) if a person described in paragraph (a) is an individual and is without capacity to act by reason of death, incompetence, minority or other incapacity, the person's fiduciary;
	(e) if the security or endorsement mentioned in paragraph (a) specifies more than one person with right of survivorship and by reason of death not all of the persons can sign, the survivor or survivors;
	(f) a person who has the legal power to sign; or
	(g) to the extent that a person described in any of paragraphs (a) to (f) may act through an agent or mandatary, the person's authorized agent or mandatary.
Time for determination	(2) The authority of a person signing is determined as of the time of signing.
Endorsement	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 document, or when the signature of an appropriate person is written without more on the back of the security.
Blank or special	(2) An endorsement may be
	(a) in blank; or
	(b) special.
Blank endorsement	(3) An endorsement in blank includes an endorsement to bearer.
Special endorsement	(4) A special endorsement specifies the person to whom the security is to be transferred, or who has power to transfer it.
Right of holder	(5) A holder may convert an endorsement in blank into a special endorsement.
Immunity of endorser	223. Unless agreed otherwise, the endorser does not, by the endorsement, assume any obligation that the security will be honoured by the issuer.
Partial endorsement	224. An endorsement purporting to be an endorsement of only part of a security representing units intended by the issuer to be separately transferable is effective to the extent of the endorsement.
Effect of failure by fiduciary to comply	225. Failure of a fiduciary to comply with the document that is the source of the fiduciary's power or with the law of the jurisdiction governing the fiduciary relationship does not render the fiduciary's endorsement unauthorized for the purposes of this Part.
Effect of endorsement without delivery	226. An endorsement of a security does not constitute a transfer until delivery of the security on which it appears or, if the endorsement is on a separate document, until delivery of both the security and the document.
Endorsement in bearer form	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.
Effect of unauthorized endorsement	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
	(a) has ratified an unauthorized endorsement of the security; or
	(b) is otherwise precluded from impugning the effectiveness of an unauthorized endorsement.
Liability of issuer	(2) An issuer who registers the transfer of a security on an unauthorized endorsement is liable for improper registration.
Warranties of guarantor of signature	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 signature was genuine.
Limitation of liability	(2) A person who guarantees the signature of an endorser does not otherwise warrant the rightfulness of the transfer to which the signature relates.
Warranties of guarantor of endorsement	(3) A person who guarantees the endorsement 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 endorsement as a condition to registration of transfer.

Bill C-5

Proceedings

Delivery

General