2023 New York Laws › UCC - Uniform Commercial Code › Article 8 - Investment Securities › Part 2 - Issue and Issuer › 8-202 - Issuer's Responsibility and Defenses; Notice of Defect or Defense.

Section 8--202. Issuer's  Responsibility  and Defenses; Notice of Defect
or Defense.
(a) Even against a purchaser for value and without notice,  the  terms
of  a  certificated security include terms stated on the certificate and
terms made part of the security  by  reference  on  the  certificate  to
another  instrument,  indenture,  or  document  or  to  a  constitution,
statute, ordinance, rule, regulation, order, or the like, to the  extent
the  terms  referred  to  do  not  conflict  with  terms  stated  on the
certificate. A reference under this subsection does not of itself charge
a purchaser for value with notice of a defect going to the  validity  of
the  security,  even  if  the certificate expressly states that a person
accepting it admits notice. The  terms  of  an  uncertificated  security
include  those  stated in any instrument, indenture, or document or in a
constitution, statute, ordinance, rule, regulation, order, or the  like,
pursuant to which the security is issued.
(b) The  following rules apply if an issuer asserts that a security is
not valid:
(1) A  security  other  than  one  issued  by  a  government   or
governmental  subdivision,  agency,  or instrumentality, even
though issued with a defect going to its validity,  is  valid
in  the  hands of a purchaser for value and without notice of
the particular defect unless the defect involves a  violation
of  a constitutional provision. In that case, the security is
valid in the hands of  a  purchaser  for  value  and  without
notice  of  the  defect, other than one who takes by original
issue.
(2) Paragraph (1) applies to an issuer that is  a  government  or
governmental  subdivision, agency, or instrumentality only if
there  has  been  substantial  compliance  with   the   legal
requirements governing the issue or the issuer has received a
substantial consideration for the issue as a whole or for the
particular  security and a stated purpose of the issue is one
for which the issuer has power to borrow money or  issue  the
security.
(c) Except   as   otherwise   provided  in  Section  8--205,  lack  of
genuineness of a certificated  security  is  a  complete  defense,  even
against a purchaser for value and without notice.
(d) All  other  defenses  of  the  issuer  of  a  security,  including
nondelivery and conditional delivery  of  a  security,  are  ineffective
against  a purchaser for value who has taken the security without notice
of the particular defense.
(e) This section does not affect the right of  a  party  to  cancel  a
contract  for  a security "when, as and if issued" or "when distributed"
in the event of a material change in the character of the security  that
is the subject of the contract or in the plan or arrangement pursuant to
which the security is to be issued or distributed.
(f) If a security is held by a securities intermediary against whom an
entitlement  holder  has  a  security  entitlement  with  respect to the
security, the issuer may not assert any defense that  the  issuer  could
not assert if the entitlement holder held the security directly.