Amend provisions of the Uniform Commercial Code.
HB1122 amends several provisions of South Dakota’s Uniform Commercial Code, focused on the rules that determine which jurisdiction’s law governs securities, security entitlements, commodity accounts, and related priority and perfection issues. The bill updates UCC Article 8 and Article 9 provisions dealing with issuers, securities intermediaries, commodity intermediaries, and entitlement holders, including how to identify the relevant jurisdiction based on account agreements, governing law clauses, office locations, or a firm’s chief executive office.
The bill also clarifies property interests in financial assets held by securities intermediaries, the circumstances under which entitlement holders can enforce those interests, and the priority rules between entitlement holders and creditors when an intermediary lacks sufficient assets. It further addresses when a purchaser of a financial asset is protected from claims and when a creditor with control has priority. In Article 9, it revises choice-of-law rules for perfection, the effect of perfection or nonperfection, and priority for certificated securities, uncertificated securities, security entitlements, securities accounts, commodity contracts, and commodity accounts.
HB1122 would change South Dakota’s commercial law governing investment property and commodity-related accounts by updating choice-of-law, perfection, and priority rules in the UCC. The practical effect is to provide clearer statutory guidance for brokers, securities intermediaries, commodity intermediaries, investors, secured creditors, and insolvency administrators on which state’s law applies and how competing claims are resolved. It primarily affects financial transactions and secured lending involving securities and commodities rather than general consumer or criminal law.
The available voting history suggests the bill was somewhat divisive but not broadly controversial in committee, where it received a narrow 7-6 do-pass-amended recommendation. It then failed on the House floor on a 26-41 vote, indicating limited support overall. With no committee transcript available, the record suggests the measure drew enough concern or disagreement to prevent passage, but the specific arguments are not documented in the provided materials.
The likely points of contention are the bill’s technical changes to UCC jurisdiction rules and the allocation of priority between entitlement holders, purchasers, and secured creditors. Parties most affected would include financial institutions, securities intermediaries, commodity intermediaries, investors, and creditors, especially where the bill determines which jurisdiction’s law controls and who has priority when assets are insufficient. The narrow committee vote and later floor defeat indicate disagreement over these financial-law revisions, though the exact objections are not stated in the record.