Your bank likely will want to perfect its security interest in the stock by obtaining control over the stock, as defined in the Uniform Commercial Code (UCC). Your bank also may perfect its security interest in the stock by filing a financing statement, but perfecting by control likely is preferable, as it would result in a higher lien priority for your bank.

In this case, the stock likely is held in registered form because it is held in a brokerage account. The UCC provides that a lender may obtain control over stock held in registered form with an effective endorsement of the stock certificates. This typically is accomplished using a “stock power” form.

For resources related to our guidance, please see:

• Illinois UCC, 810 ILCS 5/8-303 (“‘Protected purchaser’ means a purchaser of a certificated or uncertificated security, or of an interest therein, who . . . (3) obtains control of the certificated or uncertificated security. (b) In addition to acquiring the rights of a purchaser, a protected purchaser also acquires its interest in the security free of any adverse claim.”)

• Illinois UCC, 810 ILCS 5/8-106(b) (“A purchaser has ‘control’ of a certificated security in registered form if the certificated security is delivered to the purchaser, and: (1) the certificate is indorsed to the purchaser or in blank by an effective indorsement  
• Illinois UCC, 810 ILCS 5/9-312(a) (“Perfection by filing permitted. A security interest in chattel paper, negotiable documents, instruments, beneficial interests in Illinois land trusts, or investment property may be perfected by filing.”)