Lesson 20: Investment Property and Deposit Accounts
Welcome to Lesson 20, part of our series on Types of Collateral, as found in secured transactions law. This lesson focuses on investment property and deposit accounts as forms of collateral. For further reading, consider Secured Transactions in Personal Property by Steven D. Walt and William D. Warren.
Investment Property
Investment property includes securities, security entitlements, securities accounts, commodity contracts, and commodity accounts. This type of collateral is often governed by UCC Article 9 and involves various methods of perfection and priority rules.
Perfection by Control
Perfection by control occurs when the secured party has the ability to make decisions regarding the investment property.
Deposit Accounts
Deposit accounts refer to savings, passbook, time, or demand accounts maintained with a bank. The control method is the primary way to perfect a security interest in a deposit account.
Control of Deposit Accounts
The secured party gains control of a deposit account by becoming the bank’s customer with respect to the deposit account, or by entering into a control agreement with the bank and the debtor.
Priority Rules
The priority of security interests in investment property and deposit accounts is determined by the method of perfection. Generally, control provides a higher priority compared to filing or other methods.
Priority Rules Overview
When multiple security interests exist, the order of priority usually follows: Control, Filing, Possession.
Understanding the Concepts
To better understand the relationship between the various elements, consider the following diagram:
Practical Application
Secured parties must carefully select the method of perfection to ensure the strongest claim. For more detailed analysis, you can refer to our lesson on Methods of Perfection. For more comprehensive coverage, check out Secured Transactions: Examples & Explanations by James Brook.
Conclusion
Understanding the specifics of investment property and deposit accounts as collateral is crucial for navigating secured transactions effectively. For deeper insights, consider reading Secured Transactions: Teaching Materials by James J. White. Be sure to review Rights upon Default to understand the implications if the debtor fails to meet their obligations.