For Perfection Purposes, “Securities Accounts” Differ Sharply From “Deposit Accounts”

LexisNexis (January 23, 2019, 1:59 PM EST) -- In handling a secured transaction under Article 9 of the UCC, the secured lender must make sure that it uses the correct categories of collateral. Different categories often require different methods of perfection. For example, a security interest in a “deposit account” may only be perfected by “control,” while a “securities account” may be perfected by either control or filing a financing statement. In a leading bankruptcy decision from Pennsylvania, the court carefully distinguished between the two categories and concluded that the collateral at issue (a brokerage account and subaccounts the debtor maintained at Charles Schwab) was a “securities account” rather than a “deposit account,” so that filing was a permissible method of perfection. Since the secured lender had filed in the right office, with an adequate description of the collateral, the debtor’s trustee in bankruptcy could not avoid the lender’s security interest under the strongarm clause....