2718

LAWS OF MARYLAND

Ch. 720

TRANSACTION STATEMENT SENT TO THE REGISTERED OWNER OR REGISTERED
PLEDGEE; AND

(C) [those] THOSE made part of the security by
reference, ON THE CERTIFICATED SECURITY OR IN THE INITIAL
TRANSACTION STATEMENT, to another instrument, indenture or
document or to a constitution, statute, ordinance, rule,
regulation, order or the like, to the extent that the terms [so]
referred to do not conflict with the [stated] terms STATED ON THE
CERTIFICATED SECURITY OR CONTAINED IN THE STATEMENT. [Such a] A
reference UNDER THIS PARAGRAPH does not of itself charge a
purchaser for value with notice of a defect going to the validity
of the security even though the CERTIFICATED security OR
STATEMENT expressly states that a person accepting it admits
[such] notice.

(2)  [(a)] A CERTIFICATED security IN THE HANDS OF A
PURCHASER FOR VALUE OR AN UNCERTIFICATED SECURITY AS TO WHICH AN
INITIAL TRANSACTION STATEMENT HAS BEEN SENT TO A PURCHASER FOR
VALUE, other than [one] A SECURITY issued by a government or
governmental agency or unit even though issued with a defect
going to its validity is valid [in the hands of a] WITH RESPECT
TO THE purchaser [for value and] IF HE IS without notice of the
particular defect unless the defect involves a violation of
constitutional provisions in which case the security is valid [in
the hands of] WITH RESPECT TO a subsequent purchaser for value
and without notice of the defect.

[(b) The rule of subparagraph (a)] THIS SUBSECTION
applies to an issuer [which] THAT is a government or governmental
agency or unit only if either 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.

(3)  Except as [otherwise] provided in the case of certain
unauthorized signatures [on issue] (§ 8-205), lack of genuineness
of a CERTIFICATED security OR AN INITIAL TRANSACTION STATEMENT is
a complete defense even against a purchaser for value and without
notice.

(4)  All other defenses of the issuer OF A CERTIFICATED OR
UNCERTIFICATED SECURITY, including nondelivery and conditional
delivery of [the] A CERTIFICATED security, are ineffective
against a purchaser for value who has taken without notice of the
particular defense.

(5)  Nothing in this section shall be construed to affect
the right of a party to a "when, as and if issued" or a "when
distributed" contract to cancel the contract in the event of a
material change in the character of the security [which] THAT is
the subject of the contract or in the plan or arrangement