This is just another conspiracy theory right?
We heard this and similar objections when we met with legislators in South Dakota and Tennessee. It is simply false and it illustrates the lack of understanding of this state law. One would hope that the property rights of constituents deserve a little more effort than this flippant statement. But far too often one hopes in vain.
This law has been on the books for 25 or more years, but to say nothing has happened in false.
Between 1995 and 2001 the UCC Article 8 Amendment was passed by the legislature and signed into in all 50 states. One state, Connecticut, actually amended the Model Bill to protect investors when it first passed the bill in 1997. But quickly succumbed to pressure from special interests and passed an amended bill in 1998 to give certain banks priority over investors to the investor’s assets.1 Connecticut got the call and got in line.
- Nothing has Happened?
Nothing has happened? Investors will see this differently. Since the date this law went into effect in your state every time an investor directed their broker or investment advisor to purchase a stock, bond, mutual fund, or Exchange-traded fund (ETF) to be held on the books of the broker the investor did not receive what they paid for they received something else – a securities entitlement.
- Notice and Consent Not Required
Investors were not aware of this; they did not consent to this – it is state-authorized ‘bait and switch’. That used to be called fraud and theft; but now it’s legal.
Nothing has happened? I beg to differ.
- More to the Story
But there is more to this story. The priority given to the ‘too big to fail’ banks over investor assets upon the insolvency of a broker or custodian was not intended to be enforced until needed. The lead drafter of the 1994 UCC Article 8 Amendment stated that these provisions were ‘Armageddon planning for the financial system’.2 It’s an insurance policy lurking in state law to make sure the big banks are saved (at our expense) in the event of financial collapse.
Supporters of this law say that there is no difference between a security entitlement and holding a physical stock certificate. Again, this is a lie. Simple proof is that UCC Article 8 added several sections dealing solely with securities entitlements; the law itself treats holding a physical stock certificate differently than holding a security entitlement.
The Drafting Committee for the 1994 UCC Article 8 Amendment defines ‘security entitlement’ as a ‘package of personal rights you hold against an intermediary’.3 When you hold rights against another that is a contract – it is clearly not the same as holding property in your own hands. You paid good money for the stock; you thought you owned the stock you paid for but your state law says you do not.
- Investors can Hold Physical Stock Certificates
This is another argument the lobbyists for the banks and financial institutions use to fight our efforts to protect investors. Sure, there is a ring of truth to this argument, but it is another misdirection. Most stocks and some bonds are available in physical certificate form if requested, and there is a fee to deliver physical certificates. But most individual investors do not invest directly into stocks and bonds, they use mutual funds and ETFs. Some mutual fund families offer physical certificates but almost every ETF is available in digital form only. US Treasuries are also digital only. So, talking point again falls far short of solving the problem.
But it gets worse. Most people hold their investments in IRAs or 401(k)s and federal law does not allow you to physically hold the securities in your retirement plans. This argument, like most of what we heard in testimony is a red herring, meant to deflect attention from the black & white words in the state statute.
Action Step
When people learn about this issue, they want to do something, but they do not know what to do. The good news here is that an important piece of The Great Taking scheme is in state law. These provisions protecting the biggest banks are in state law so it can be fixed at the state level. We know Washington DC is broken and we do not expect any help from Congress; state legislatures are where the action is.
I wrote an earlier post saying The Great Taking is not a Red vs. Blue issue, it is an issue that can draw support from a broad range of legislators. If you know who your State Representative or State Senator reach out to them and share your concerns over UCC Article 8. If you do not know who your legislators are you can find out on the Legislative website for your state. Make contact, request a meeting and politely share your concerns. If there is interest in more information, we are available to work directly with your legislator. Let them know that resources are available.
With the recent stock market selloff there are growing signs that the bubble may be getting ready to burst. We do not know if the next financial crisis will be the ‘financial Armageddon’ we were warned about. But we do know everything is in place for The Great Taking globally. If we can get enough states to step up to protect investors we can stop – or at least minimize the pain.
August 9, 2024
Footnotes
- See Connecticut House Bill No. 5080 1997 PUBLIC ACT NO. 97-182 and compare House Bill No. 5469 1998 PUBLIC ACT NO. 98-93 ↩︎
- 43 UCLA Law Review (1996) pg. 1436 ↩︎
- UCC 1994 Article 8 Amendment Drafting Committee Official Comments, Pg. 75 ↩︎
