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.

(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.

201. A security is valid in the hands of a good faith purchaser.

202. Subject to section 205, the fact that a security is not genuine is a complete defence even against a good faith purchaser.

203. All other defences of an issuer, including non-delivery and conditional delivery of a security, are ineffective against a good faith purchaser.

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).

(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.

205. (1) Subject to subsection (2), an unauthorized signature on a security is ineffective.

(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.

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.

207. A security that was completed incorrectly is enforceable by a good faith purchaser.

208. A completed security that was improperly altered, even if fraudulently altered, remains enforceable but only according to its original terms.

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.

(2) Unless agreed otherwise, a person referred to in subsection (1) does not assume any further liability for the validity of the security.

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.

(2) A good faith purchaser of a security acquires it free from any adverse claim.

(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.

211. A purchaser of a limited interest acquires rights only to the extent of the interest purchased.

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.

(2) The mere writing of a name on a security is not a statement for the purposes of paragraph (1)(b).

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.

(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.

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.

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.

(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.

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.

(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.

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.

218. An intermediary delivering a security to a purchaser who knows that the intermediary is an intermediary guarantees only good faith.

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.

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.

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.

(2) The authority of a person signing is determined as of the time of signing.

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.

(2) An endorsement may be

(a) in blank; or

(b) special.

(3) An endorsement in blank includes an endorsement to bearer.

(4) A special endorsement specifies the person to whom the security is to be transferred, or who has power to transfer it.

(5) A holder may convert an endorsement in blank into a special endorsement.

223. Unless agreed otherwise, the endorser does not, by the endorsement, assume any obligation that the security will be honoured by the issuer.

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.

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.

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.

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.

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.

(2) An issuer who registers the transfer of a security on an unauthorized endorsement is liable for improper registration.

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.

(2) A person who guarantees the signature of an endorser does not otherwise warrant the rightfulness of the transfer to which the signature relates.

(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.

(4) The guarantees referred to in subsections (1) to (3) are made to any person who, relying on the guarantee, takes or deals with the security, and the guarantor is liable to the person for any loss resulting from breach of warranty.

230. Delivery of a security to a purchaser occurs when

(a) the purchaser or a person designated by the purchaser acquires possession of it;

(b) the purchaser’s securities broker acquires possession of a security specially endorsed to or issued in the name of the purchaser;

(c) the purchaser’s securities broker sends the purchaser confirmation of the purchase and the broker in the broker’s records identifies a specific security as belonging to the purchaser; or

(d) in respect of an identified security to be delivered while still in the possession of a third person, that person acknowledges that it is held for the purchaser.

231. (1) A purchaser is the owner of a security held for the purchaser by a securities broker, but a purchaser is not a holder except in the cases described in paragraphs 230(b) and (c).

(2) If a security is part of a fungible bulk, a purchaser of the security is the owner of the proportionate interest in the fungible bulk.

(3) Notice of an adverse claim received by a securities broker or by a purchaser after the broker takes delivery as a holder for value is not effective against the broker or the purchaser, except that, as between the broker and the purchaser, the purchaser may demand delivery of an equivalent security in respect of which no notice of an adverse claim has been received.

232. (1) Unless agreed otherwise, if a sale of a security is made on a stock exchange or otherwise through securities brokers,

(a) the selling customer fulfils their duty to deliver when the customer delivers the security to the selling securities broker or to a person designated by the selling securities broker or when they cause an acknowledgement to be made to the selling securities broker; and

(b) the selling securities broker, including a correspondence broker, acting for a selling customer fulfils their duty to deliver by delivering the security or a like security to the buying securities broker or to a person designated by the buying securities broker or by affecting clearance of the sale in accordance with the rules of the exchange on which the transaction took place.

(2) Except as provided otherwise in this section and unless agreed otherwise, a transferor’s duty to deliver a security under a contract of purchase is not fulfilled until the transferor delivers the security in negotiable form to the purchaser or to a person designated by the purchaser, or causes an acknowledgement to be made to the purchaser that the security is held for the purchaser.

(3) A sale to a securities broker purchasing for the securities broker’s own account is subject to subsection (2) and not subsection (1), unless the sale is made on a stock exchange.

233. (1) A person against whom the transfer of a security is wrongful may, against anyone except a good faith purchaser,

(a) reclaim possession of the security or obtain possession of a new security evidencing all or part of the same rights; or

(b) claim damages.

(2) If the transfer of a security is wrongful by reason of an unauthorized endorsement, the owner may reclaim possession of the security or a new security even from a good faith purchaser if the ineffectiveness of the purported endorsement is asserted against the purchaser under section 228.

234. (1) Unless agreed otherwise, a transferor must, on demand, supply a purchaser with proof of the transferor’s authority to transfer a security or with any other requisite that is necessary to obtain registration of the transfer of a security, but if the transfer is not for value, it is not necessary for the transferor to provide authority to transfer unless the purchaser pays the reasonable and necessary costs of the proof and transfer.

(2) If a transferor fails to comply with a demand under subsection (1) within a reasonable time, the purchaser may reject or rescind the transfer.

235. No seizure of a security or other interest evidenced by the security is effective until the person making the seizure obtains possession of the security.

236. An agent or mandatary, or a bailee or depositary, who in good faith has received securities and sold, pledged or delivered them according to the instructions of the mandator, pledgor, depositor or principal is not in breach of a fiduciary duty or otherwise liable even though they have no right to dispose of the securities.

237. (1) If a security in registered form is presented for transfer, the issuer must register the transfer if

(a) the security is endorsed by an appropriate person;

(b) reasonable assurance is given that the endorsement is genuine and effective;

(c) the issuer has no duty to inquire into adverse claims or has discharged that duty;

(d) all applicable laws relating to the collection of taxes have been complied with;

(e) the transfer is rightful or is to a good faith purchaser; and

(f) any transfer fee referred to in section 180 has been paid.

(2) An issuer who has a duty to register a transfer of a security is liable to the person presenting it for registration for any loss resulting from an unreasonable delay in registration or from the failure or refusal to register the transfer.

238. (1) An issuer may require an assurance that each necessary endorsement on a security is genuine and effective by requiring a guarantee of the signature of the person endorsing the security and by requiring

(a) if the endorsement is by an agent or mandatary, reasonable assurance of authority to sign;

(b) if the endorsement is by a fiduciary, evidence of appointment or incumbency;

(c) if there is more than one fiduciary, reasonable assurance that all who are required to sign have done so; and

(d) in any other case, assurance that corresponds as closely as is feasible to the cases set out in paragraphs (a) to (c).

(2) For the purpose of subsection (1), a guarantee of the signature of a person is sufficient if it is signed by or on behalf of a person whom the issuer believes, on reasonable grounds, to be a responsible person.

(3) An issuer may adopt reasonable standards to determine responsible persons for the purpose of subsection (2).

(4) For the purpose of paragraph (1)(b), the following constitute sufficient evidence of appointment or incumbency of a fiduciary:

(a) in the case of a fiduciary of a deceased security holder’s estate or succession, a certified copy of the document referred to in paragraph 195(1)(c) and dated not earlier than sixty days before the day a security is presented for transfer; or

(b) in the case of any other fiduciary, a copy of a document showing the appointment or other evidence believed by the issuer to be appropriate.

(5) An issuer may adopt reasonable standards with respect to evidence referred to in paragraph (4)(b).

(6) An issuer is deemed not to have notice of the content of a document referred to in subsection (4) that is obtained by the issuer except to the extent that the contents relate directly to appointment or incumbency.

239. If an issuer, in relation to a transfer, demands assurance other than an assurance specified in subsection 238(1) and obtains a copy of a will, trust or partnership agreement or a by-law or similar document, the issuer is deemed to have notice of all matters contained in the document that affect the transfer.

240. (1) An issuer to whom a security is presented for registration has a duty to inquire into adverse claims if the issuer

(a) receives written notice of an adverse claim at a time and in a manner that provide the issuer with a reasonable opportunity to act on it before the issue of a new, re-issued or re-registered security and the notice discloses the name and address of the claimant, the registered owner and the issue of which the security is a part; or

(b) is deemed to have notice of an adverse claim from a document that it obtained under section 239.

(2) An issuer may discharge a duty of inquiry by any reasonable means, including notifying an adverse claimant by registered mail sent to the address provided by the adverse claimant or, if no such address has been provided, to the adverse claimant’s residence or regular place of business, that a security has been presented for registration of transfer by a named person and that the transfer will be registered unless, no later than thirty days after the date of sending the notice, the issuer

(a) is served with a restraining order or other order of a court; or

(b) is provided with an indemnity bond sufficient in the issuer’s judgement to protect the issuer and any transfer agent or other agent or mandatary of the issuer from any loss that may be incurred by any of them as a result of complying with the adverse claim.

241. (1) Unless an issuer is deemed to have notice of an adverse claim from a document that is obtained under section 239 or has received notice of an adverse claim under subsection 240(1), if a security presented for registration is endorsed by the appropriate person, the issuer has no duty to inquire into adverse claims and, in particular,

(a) an issuer registering a security in the name of a person who is a fiduciary or who is described as a fiduciary is not bound to inquire into the existence, extent or correct description of the fiduciary relationship and the issuer may then assume without inquiry that the newly registered owner continues to be the fiduciary until the issuer receives written notice that the fiduciary is no longer acting as such with respect to the particular security;

(b) an issuer registering a transfer on an endorsement by a fiduciary has no duty to inquire into whether the transfer is made in compliance with the document or with the law of the jurisdiction governing the fiduciary relationship; and

(c) an issuer is deemed not to have notice of the contents of a court record or a registered document even if the record or document is in the issuer’s possession and the transfer is made on the endorsement of a fiduciary to the fiduciary specifically or to the fiduciary’s nominee.

242. A written notice of adverse claim received by an issuer is effective for twelve months after the day it was received unless the notice is renewed in writing.

243. (1) Except as provided otherwise in any applicable law relating to the collection of taxes, an issuer is not liable to the owner or any other person who incurs a loss as a result of the registration of a transfer of a security if

(a) the necessary endorsements were on or with the security; and

(b) the issuer had no duty to inquire into adverse claims or had discharged that duty.

(2) If an issuer has registered a transfer of a security to a person not entitled to it, the issuer must on demand deliver a like security to the owner unless

(a) the issuer is not liable by virtue of subsection (1);

(b) the owner is precluded by subsection 244(1) from asserting a claim; or

(c) the delivery would result in an overissue to which section 196 applies.

244. (1) The owner of a security who fails to notify the issuer of an adverse claim, in writing, within a reasonable time after the owner knows of a loss, apparent destruction or wrongful taking of the security is precluded from asserting against the issuer a claim to a new security if the issuer has registered a transfer of the security.

(2) If the owner of a security claims that the security has been lost, destroyed or wrongfully taken, the issuer shall issue a new security in place of the original security if the owner

(a) so requests before the issuer has notice that the security has been acquired by a good faith purchaser;

(b) provides the issuer with a sufficient indemnity bond; and

(c) satisfies any other reasonable requirements imposed by the issuer.

(3) If, after the issue of a new security under subsection (2), a good faith purchaser of the original security presents the original security for registration of transfer, the issuer shall register the transfer unless registration would result in an overissue to which section 196 applies.

(4) In addition to the rights that an issuer has by reason of an indemnity bond, the issuer may recover the new security issued under subsection (2) from the person to whom it was issued or any person taking under that person other than a good faith purchaser.

245. An authenticating trustee, transfer agent or other agent or mandatary of an issuer has, in respect of the issue, registration of transfer and cancellation of a security of the issuer,

(a) a duty to the issuer to exercise good faith and reasonable diligence; and

(b) the same obligations to the holder or owner of a security and the same rights, privileges and immunities as the issuer.

246. Notice to an authenticating trustee, transfer agent or other agent or mandatary of an issuer is notice to the issuer in respect of the functions performed by the agent or mandatary.