                                 CODE OF VIRGINIA

NOTICE OF ADVERSE CLAIM (§ 8.8A-105)

a. A person has notice of an adverse claim if:

   1. the person knows of the adverse claim;

   2. the person is aware of facts sufficient to indicate that there is a
   significant probability that the adverse claim exists and deliberately avoids
   information that would establish the existence of the adverse claim; or

   3. the person has a duty, imposed by statute or regulation, to investigate
   whether an adverse claim exists, and the investigation so required would
   establish the existence of the adverse claim.

b. Having knowledge that a financial asset or interest therein is or has been
transferred by a representative imposes no duty of inquiry into the rightfulness
of a transaction and is not notice of an adverse claim. However, a person who
knows that a representative has transferred a financial asset or interest
therein in a transaction that is, or whose proceeds are being used, for the
individual benefit of the representative or otherwise in breach of duty has
notice of an adverse claim.

c. An act or event that creates a right to immediate performance of the
principal obligation represented by a security certificate or sets a date on or
after which the certificate is to be presented or surrendered for redemption or
exchange does not itself constitute notice of an adverse claim except in the
case of a transfer more than:

   1. one year after a date set for presentment or surrender for redemption or
   exchange; or

   2. six months after a date set for payment of money against presentation or
   surrender of the certificate, if money was available for payment on that date.

d. A purchaser of a certificated security has notice of an adverse claim if the
security certificate:

   1. whether in bearer or registered form, has been endorsed &#8220;for
   collection&#8221; or &#8220;for surrender&#8221; or for some other purpose not
   involving transfer; or

   2. is in bearer form and has on it an unambiguous statement that it is the
   property of a person other than the transferor, but the mere writing of a name
   on the certificate is not such a statement.

e. Filing of a financing statement under Title 8.9A is not notice of an adverse
claim to a financial asset.

HISTORY: 1996, c. 216.