Georgia UCC Data Added to FCS Online System

Georgia UCC dataWe are pleased to announce the release of Georgia data to our online UCC system. Beginning November 3, 2014, FCS online clients may search the state’s database of more than 3 million filings within our online UCC system.

The FCS online UCC system was designed with the high volume searcher in mind. For example, on the FCS system you can see full, detailed results with just one click, instead of having to open multiple screens. You will be able to combine your results all into just one clean search report. This saves a huge amount of time when doing regular UCC searches in Georgia.

Additionally, you may order all copies for your search at once—you no longer have to select each UCC-1, and then every amendment, to obtain your document images.

Georgia’s SOS website does not allow you to run wildcard searches, instead using a system called “stem searches” or “RA9 searches.” We have covered the importance of name variations in UCC searching extensively in previous blog posts.

The Georgia state portal does not contain filings prior to 1/1/1995. We have supplemented the state-direct data from Georgia with proprietary data, allowing users to search for UCC’s beyond that date. This means there are recent amendments belonging to older filings that will not have a parent on the state’s site, but will on the FCS online UCC system.

The Georgia SOS website also has a base monthly fee of $11.95 per month. The FCS system only charges you for the transactions you perform.

A constant benefit of using a third party online UCC system is the consistency of search logic and user interface, two areas that FCS takes great pride in providing for our customers.

If you have any questions, please contact your account manager or give us a call at 800.406.1577.

Not an online user? Set up a time to demo the FCS online UCC system today!

UCC system demo

 

First Corporate Solutions to Sponsor Bulk Sale Class, Exhibit at California Escrow Association’s 59th Annual Education Conference

California Escrow Association 59th Annual Educational Conference

FCS will host an exhibit at this year’s disco themed “Don’t Stop Believing” CEA conference, as well as sponsoring and presenting company news and information at the bulk sale session. The conference runs October 23-25 at the Hilton in Costa Mesa, with the bulk sale presentation taking place Saturday at 8:30AM.

FCS will host booth #15 and will offer information on the available products and services, conference swag and a prize drawing.

The conference will feature a golf tournament on Thursday, followed by two days full of speakers, industry sessions, legislative updates and prize drawings.

FCS has been a long time sponsor of the CEA and brings many services to the industry including UCC search packages, UCC filing, title search, and UCC recording and publishing.

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First Corporate Solutions Will Exhibit CADENCE Integrated Lien Monitoring at the CADENCE User Conference

It’s that time of year again: The CADENCE User Conference is just a few days away! The conference kicks off Tuesday, October 21 and runs through 10/23  at the Sheraton Birmingham, Alabama. Here is the conference flyer.

The conference, which has grown from a handful of CADENCE users into a substantial group of partners and vendors, will give Bayside Business Solutions partners a chance to discuss their various integrations with CADENCE, as well as give operators the opportunity to offer feedback on the user experience.

This marks the fifth year that we have exhibited at the CADENCE User Conference, which brings together Information Technology leaders and operators in the factoring industry.

First Corporate Solutions is the original partner to develop an integrated product with CADENCE. Together, we deliver a lien monitoring solution that can be managed within CADENCE that alerts users of post-filing lien events that could affect their perfected security interest.

The conference, which is only open to CADENCE users and partners, will feature eight breakout sessions, networking opportunities and tips to utilize the CADENCE platform better.

As a special gift to our readers, we’re giving away free copies of our eBook, The Ultimate Guide to Post Funding Due Diligence. Click below to get your copy today!

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Does the control agreement govern if it conflicts with any of the customer agreements between Pledgor and Broker?

Attorney Bennett Cohen returns this week to continue his examination on control agreements for pledged securities accounts. This is part six in our eight part series on the topic of control agreements. To start from the beginning, please see the first post, Examining Issues with Control Agreements for Pledged Securities Accounts.


Does the control agreement govern if it conflicts with any of the customer agreements between Pledgor and Broker?

Control Agreements photoSome control agreements fail to provide that if there is a conflict between the control agreement and the other customer agreements between Pledgor and Broker, that the control agreement will govern.  It is important for the Lender that the control agreement govern any such conflict, since the customer agreements will most likely conflict with, and be adverse to, the Lender’s rights. It should further be noted that a Charles Schwab’s control agreement form we recently reviewed provided exactly the opposite (i.e., that any conflict with the control agreement will be governed by Charles Schwab’s other customer agreements), and for this reason such provision was objectionable.

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Are the termination provisions in the control agreement acceptable to the Lender?

We’re talking control agreements this week with attorney Bennett Cohen. We’re midway through an eight part series on this topic, so if you need a refresher please check out our previous posts:

And now here’s Bennett Cohen with the latest piece on control agreements for pledged securities accounts.


Control Agreements photoA number of control agreements we reviewed have either vague, incomplete or unacceptable termination provisions. First, the Pledgor should have no ability to terminate the control agreement. Second, some control agreements provide that the Broker can terminate the agreement upon prior written notice to Lender and Pledgor, but fail to provide that upon termination, the pledged assets will be transferred either to the Lender or to another broker acceptable to Lender and who, along with Pledgor, have executed a new control agreement in favor of Lender, in form acceptable to Lender.  A poorly drafted termination provision can pose a significant risk to the Lender.

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We hoped you enjoyed this chapter of Bennett Cohen’s series on control agreements. By the way, have you checked out the list of UCC services we provide at First Corporate Solutions? With more than 25 years of experience in UCC and corporate due diligence, we have the right package for you. Click here to get started.

Get started today!

 

California Governor signs Assembly Bill 1858: Individual Debtor Name Safe Harbor

Debtor Name Safe HarborFor those managing personal property transactions in California, it is important to understand and be prepared for recent legislation that has been passed to provide a safe harbor for proper entry of individual debtor names when filing and searching for UCC Financing Statements.

Effective January 1, 2015, California will join the majority of states in adopting legislation which governs the proper name identification of individuals. This is commonly referred to as the ‘Alternative A’ or the ‘Only If’ approach.

Unlike business entities, where the name must be the same as what is reflected in the organic document (typically the Articles and Amendments), Assembly Bill 1858 provides rules for the valid individual debtor name, which states that the debtor’s name on the UCC will be sufficient ONLY IF the name provided is the exact name on the driver’s license or a California Identification Card.

New Individual Debtor Name Guidelines – Driver’s License

When qualifying a debtor, be sure to follow these tips to ensure proper entry of individual debtor names on your UCC Financing Statement and/or search requests.

  1. Insert the exact name on the Driver’s License or California ID card of your debtor onto the UCC.
  2. Ask the party(ies) if this is the most current ID provided.
  3. Ask if the name may have changed since the ID was issued.
  4. Have the party(ies) sign a declaration that there have been no changes.
  5. If there have been changes, include both the name on the ID and the current name used on your UCC filings and search request.

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Does the control agreement go too far in limiting the potential liability of the Broker?

We’re back this week with more in our series from attorney Bennett Cohen on control agreements for pledged securities accounts. This is the fourth post in our series, so if you need a refresher please visit his introductory post, Examining Issues with Control Agreements for Pledged Securities Accounts.


We’ve reviewed quite a number of control agreements which provide that the Broker shall have no liability to the Lender except for the Broker’s gross negligence or willful misconduct. This limit of liability is too narrowly drawn. Three (3) additional exceptions that should be carved-out of this standard non-recourse language are as follows:

(a) if the Broker permits any withdrawals of any assets from the Securities Account at any time without the prior written consent of Lender (except to the extent, if any, that the control agreement permits the Pledgor to receive cash interest or regular cash dividends prior to Lender’s issuance of a “notice of exclusive control” and such withdrawals occur prior to such notice),

(b) if trading by Pledgor is allowed in the Securities Account, then if Pledgor is allowed to trade in the account after the Broker has received from Lender a “notice of exclusive control”, or

(c) if the Broker permits the Pledgor to trade in the Securities Account and the control agreement provides that the Pledgor has no authority to trade in the Securities Account at any time.

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About the Author

Bennett L. Cohen is a partner in the law firm of Cohen, Salk & Huvard, P.C.  Bennett concentrates his practice in commercial finance. He regularly represents banks, commercial finance companies and other institutional lenders in the structuring, documentation and closing of commercial financing transactions, including asset-based loans, commercial & industrial loans, commercial real estate mortgage and construction loans, equipment lease loans and factoring transactions. He served for fifteen years as general counsel to the Midwest Association of Secured Lenders, a trade association of over eighty banks and finance companies located in Chicago and outlying areas. Bennett is a member of the American Bar Association and serves on the ABA Committee on Commercial Financial Services and the ABA Subcommittees on Secured Lending, Loan Documentation and the Uniform Commercial Code. He was a member of the ABA Joint Task Force on Deposit Account Control Agreements, the ABA Model Intercreditor Task Force, and the ABA Joint Task Force on Filing Operations and Search Logic.

 

Has the Broker subordinated its statutory first priority security interest in the Securities Account to the Lender’s security interest in the Securities Account?

We’re continuing our examination of control agreements for pledged securities accounts with guest blogger Bennett Cohen of the law firm Cohen, Salk & Huvard, P.C. See the introductory post here and the follow-up post, Is there adequate “control” language in the control agreement?


Has the Broker subordinated its statutory first priority security interest in the Securities Account to the Lender’s security interest in the Securities Account?

Some control agreements fail to provide that the Broker subordinates its security interest in the Securities Account to the Lender’s security interest in the Securities Account. This subordination is absolutely essential for a Lender because a Broker’s security interest in the Securities Account automatically primes the Lender’s security interest in the Securities Account under Code Section 9-328(3).[1]  Most subordination provisions will necessarily carve-out for the Broker the right to charge the Securities Account for (a) payment for assets purchased in the Securities Account, and (b) normal commissions and service fees due the Broker for the Securities Account.

It should be noted that a recent TD Ameritrade control agreement form we reviewed did not contain a subordination provision.  If the Securities Account is not a margin account and the Broker does not otherwise extend credit to the Pledgor (or provide Pledgor with credit card or check-writing privileges), the absence of a subordination provision may not be fatal.  However, the best practice is to require this standard subordination provision in the control agreement.

[1] All customer agreements we’ve reviewed between the Pledgor and the Broker contain the Pledgor’s grant of a security interest in the Securities Account to the Broker which automatically gives the Broker a first priority security interest in the Securities Account.


Next week we’ll continue our guest blog series with attorney Bennett Cohen on control agreements for pledged securities accounts. Looking for more educational resources? Just tell us what information you’re looking for by emailing communications@ficoso.com and we’ll send it out.

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Do You Need Plain or Certified Copies of Corporate Documents?

When the time comes to order corporate documents (such as articles of organization, amendments/mergers, annual filings) from the state or county filing office, being prepared can save you money and effort. Once you know the reason you need the documents, you can choose either plain or certified copies. Knowing which will satisfy your business needs can help your ordering process.

In this guide you’ll learn about how a filing offices creates these documents, and also some common business needs for both plain and certified copies of corporate documents. Download this free guide now!

 

Corporate Documents

 

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Free eBook on Lien-Related Post Funding Due Diligence

As a lender, you need to know immediately if your customer is experiencing financial distress that could result in bankruptcy or debtor default. In this FREE guide you will find:

  • Top 5 Mistakes to Avoid on UCC Financing Statements
  • What a Search to Reflect can do for you
  • When to File Continuation Statements
  • Lien Monitoring Programs
  • Importance of Monitoring to Reveal Name Variations

Download this free guide today!

AM ebook

 

The Basics of Collateral Descriptions on UCC Financing Statements

Figuring out how to describe the collateral on a UCC Financing Statement to best protect your interests can be confusing. In fact, one of the most common questions FCS hears from customers and prospects is “What collateral language should I use on my UCC filing to make sure we’re protected?”

Bradley B. Clark answers that question and more in this webinar presentation.

Webinar

 

Why Search for Tax Liens and Judgment Liens?

Judgment Lien and Tax LienThe short answer is that searching Tax Liens and Judgment Liens while conducting your due diligence might save you money and hassle, but let’s back up and explain the reasoning.

The first thing to understand is that both Tax Liens and Judgment Liens have priority relative to other types of liens, such as a UCC, based on the date of its filing, and this affects your ability to collect. For example, if your debtor has an outstanding Tax or Judgment Lien filed against him, those liens will most likely prime a subsequent perfected UCC in the event of a default.

In addition to affecting priority, it’s important to note that both Judgment and Tax Liens are involuntary liens, which means the debtor has not entered into the deal willingly. Neither of these liens requires a signature from the debtor, and there is no underlying agreement to which both parties agree. A debtor should not be relied upon to disclose these liens, and it’s even possible that they are not aware the lien exists. This is why a thorough due diligence search will reveal all types of liens.

Depending on the jurisdiction, Judgment Liens or Tax Liens can be filed in either the state or the county filing office. When conducting due diligence searches, make sure that you use a service provider that’s capable of finding name variations using broad-based searching techniques.

If you’re interested in learning more about this topic, download our reference guide What Liens to Search For today.

Download

 *Disclaimer

California Assembly Bill 2416

Assembly Bill 2416, a bill currently moving through the California Legislature, could have negative effects on California business owners. The bill will allow an employee to place a lien on the personal property of their employer. Many organizations are opposed to this bill and have been vocal about their opposition, including the California Escrow Association. Below is the CEA’s stance on the bill:

AB 2416 (Stone) would allow an employee, employee representative, or even a creditor of the employee to record a lien against an employer’s real and personal property for alleged unpaid wages, without any review by a court or the Labor Commissioner to determine validity.

AB 2416 provides no protections to innocent property owners against erroneously recorded liens, and grossly insufficient remedies for the property owner harmed by the actions of an employee or former employee.

As an escrow holder or title insurer, if AB 2416 were to pass, you would be faced with recorded “wage liens” filed by persons likely unknown to you and who are not parties to your transaction. You would then need to engage in further fact-finding to ascertain if the liens were valid, and possibly to assist with obtaining information to pay the lien(s), a surety bond to assure payment, or otherwise to obtain lien releases and instructions, or await action of a court or the Labor Commissioner, prior to closing a transaction.

We seek your help in defeating AB 2416, and ask that you fax, call, and email your California Senator and Assembly Member today to request his or her “NO” vote on AB 2416 when it next comes before them. We have provided talking points below.  The most effective letter includes a few of these points together with specifics of how this would affect both you as well as consumers in your transactions.  If you are unable to write a letter, please at least call and express your concerns and your request for a “NO” vote.  For your convenience, please click HERE to find your California Senator and Assembly Member and CALL or FAX (or both) today.

CEA, CLTA, and a substantial coalition (see our letter, attached) are opposed to AB 2416, which would:

– Allow employees, employees’ representatives, and third-party creditors, to file pre-judgment wage liens against the real property of innocent third party homeowners and the real and personal property of an employer.

– Interfere with financing opportunities and real estate transactions for third party homeowners and employers.

– Harm businesses, from small to large, by potentially flooding them with unsubstantiated wage lien claims.

– Violate due process as there is no realistic opportunity for an employer or third party to prevent the taking of their property through the recording of a pre-judgmentwage lien.

– Force innocent third parties and the employer to incur costs and attorney’s fees to remove liens from real and personal property.

AB 2416:

– Is not limited to minimum wage violations – but includes all wage violations and all penalties under the Labor Code, as determined by the employee without having to prove the lien validity to an independent court or state agency that would normally require proof of validity BEFORE the lien is recorded.

– Is a threat to property owners – any remedies in the bill do not begin until afterthe lien is recorded.

– Provides opportunities for misuse with grave consequences and insufficient remedies.  Though the bill prohibits the use of the lien unreasonably or in bad faith, a disgruntled employee could effectively delay an employer’s sale, purchase, or refinance of real or personal property, to the great detriment of the employer. The maximum recovery by an employer against whom a lien is wrongfully recorded is a fine of up to $1,000 and possible recovery of attorney fees and costs, at the discretion of the court.

Under AB 2416, if an employer was selling, buying, or refinancing real property (or personal property subject to a security interest), the filing of a lien by an employee, agent of the employee, or third party creditor of the employee (“lien claimant”) would effectively stop that transaction from proceeding, resulting in delays and potentially terminating otherwise successful transactions.  California’s real estate market, recovering in some places and still tenuous in others, can ill afford this uncertainty.

Beware that proponents of AB 2416 will falsely assert:

– That there are not adequate remedies for recovery of unpaid wages without costly proceedings.  Just last year, the business community supported AB 1386, which provided the Labor Commissioner with an earlier opportunity to review and lien property, to protect the interests of employees. The Labor Commissioner launched the corresponding campaign against wage theft on April 30, 2014 (www.wagetheftisacrime.com).

Insufficient time has elapsed since the passage of AB 1386 to suggest a problem remains, and the legislature should allow adequate time to determine the effectiveness of those remedies rather than acting hastily with further changes

– That the bill will not result in erroneous recordings of wage liens on the wrong property, or against the wrong party.  Though the bill provides that a lien may not be filed on the employer’s primary residence, filers of wage liens will likely not search the county records adequately to determine the correct property on which to file the lien.

– That the bill provides for adequate safeguards against the filing of invalid liens.  Though the bill currently provides that an employer may “bond around” a lien or that liens are not valid where there a collective bargaining agreement is in place, AB 2416 would place an undue burden on property owners, escrow holders, title insurers, and others, to ascertain non-public information to determine the validity of the lien.

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Model Administrative Rules (MARS) and Search Logic

Following up on our post from earlier this week, What are “Standard Search Logic” and the Model Administrative Rules?, here’s a behind-the-scenes look at how we created an online UCC search system that follows MARS guidelines. 

An FCS online search report is intended to satisfy the requirements under the UCC Revised Article 9 Model Administrative Rules (MARS), which provide state filing offices with a set of guidelines for producing a legally compliant UCC lien search report. The FCS Online Search System was designed to satisfy the requirements under MARS while providing the searcher with increased flexibility.

Flexible search logic generates a more inclusive search report and addresses the inconsistencies in searches performed within states that did not effectively adopt the MARS guidelines. Further, these specially designed broad-based searching features aid in locating involuntary liens such as Federal and State Tax Liens, Judgment Liens and liens that may not be located in state databases limited to the MARS guidelines for the reporting of UCCs.

We recommend that users structure their search strings so possible variations of the name including abbreviations, alternate spellings and initials may be located. A successful search begins before the name is ever keyed into the system by considering what possible variations may exist and then using the proper search string to locate those name variations.

From the International Association of Commercial Administrators

T503 Search methodology – Search results are produced by the application of search logic to the name presented to the filing officer. Human judgment does not play a role in determining the results of the search.

503.1 Standard search logic – The following rules describe the filing office’s standard search logic and apply to all searches except for those where the search request specifies that a non-standard search logic be used:

  • 503.1.1 There is no limit to the number of matches that may be returned in response to the search criteria.
  • 503.1.2 No distinction is made between upper and lower case letters.
  • 503.1.3 The character “&” (the ampersand) is deleted and replaced with the characters “and” each place it appears in the name.
  • 503.1.4 Punctuation marks and accents are disregarded. For the purposes of this rule, punctuation and accents include all characters other than the numerals 0 through 9 and the letters A through Z (in any case) of the English alphabet.
  • 503.1.5 The following words and abbreviations at the end of an organization name that indicate the existence or nature of the organization are “disregarded” to the extent practicable as determined by the filing office’s programming of its UCC information management system: [Insert the filing office’s own “Ending Noise Words” list here.]
  • 503.1.6 The word “the” at the beginning of an organization debtor name is disregarded.
  • 503.1.7 All spaces are disregarded.
  • 503.1.8 For first and middle names of individual debtor names, initials are treated as the logical equivalent of all names that begin with such initials, and first name and no middle name or initial is equated with all middle names and initials. For example, a search request for “John A. Smith” would cause the search to retrieve all filings against all individual debtors with “John” or the initial “J” as the first name, “Smith” as the last name, and with the initial “A” or any name beginning with “A” in the middle name field. If the search request were for “John Smith” (first and last names with no designation in the middle name field), the search would retrieve all filings against individual debtors with “John” or the initial J as the first name, “Smith” as the last name and with any name or initial or no name or initial in the middle name field.
  • 503.1.9 If the name being searched is the last name of an individual debtor name without any first or middle name provided, the search will retrieve from the UCC information management system all financing statements with individual debtor names that consist of only the last name.
  • 503.1.10 After using the preceding rules to modify the name being searched, the search will retrieve from the UCC information management system all Unlapsed Records, or, if requested by the searcher, all Active Records, that pertain to financing statements with debtor names that, after being as provided in this rule 503, exactly match the modified name being searched.

Want to see our online UCC system in action? Sign up here for a free demo. If you have any questions, please feel free to contact us here or by calling 800.406.1577. As always, if you are unsure of any definitions or procedures, consult your legal counsel immediately.

 *Disclaimer

What are “Standard Search Logic” and the Model Administrative Rules?

The amount of liens filed in a given state’s filing office can number in the millions making accuracy, and the ability to uncover name variations,  paramount when analyzing search results. Each individual Secretary of State filing office has a set of rules called “standard search logic” that determines what search results will show for a given search. Here’s the official definition:

Standard Search Logic: The search logic used by a filing office to determine which filings will appear on an official UCC search of that jurisdiction.

iacaThe Model Administrative Rules (MARS) were developed by the International Association of Commercial Administrators (IACA) to standardize search logic for all state filing offices, which was one of the goals of Revised Article 9. Adoption of these rules is, unfortunately, not mandatory, but MARS are still important because they set the framework for standard search logic. Standard search logic sets rules for how words, abbreviations and symbols will be interpreted and delivered as search results by a search engine.

Here are a few examples of MARS search logic:

  • Spaces and punctuation are disregarded
  • “&”equates to “and”
  • No distinction between upper and lower case letters
  • Words and abbreviations at the end of an organization name that indicate the existence or nature of the organization (“noise words”) such as inc, llc, association, incorporated etc. are disregarded (but note that MARS leaves it to the states to determine what constitutes these “noise words”). Most if not all states recognize the following as “noise words”: Corp., Corporation, Incorporated, Inc., Limited Liability Company, L.L.C., Limited Partnership, L.P .

Keeping track of each state’s standard search logic can be a chore, and many people choose to use a UCC service provider to ensure they’re getting the most out of their search results. The FCS online UCC search system has the broad-based search tools (like wild cards and truncated search) you need to uncover name variations and assure you’re getting the results you need.

[Image Source: Official IACA Logo]

 *Disclaimer

Why Would a Lender Establish a Security Interest for a Loan?

Secured TransactionsIf you’re new to the Uniform Commercial Code (UCC), you’ll need a few basic definitions before we answer that. We’ll start you off with a few terms that are the building blocks of UCC search and filing procedures.

Secured Transaction: This is a loan in which the lender acquires a security interest in collateral that belongs to the debtor.

Security Interest: This is a lender’s claim to collateral that a debtor has provided for a loan. A security interest in granted once a security agreement is reached between the debtor and lender (secured party) via a financing statement.

Financing Statement: This is a form (UCC-1 / Fixture Filing) that a creditor files to post public notice of a security interest for the purpose of perfecting the interest. This also includes any subsequent records relating to the initial filing.

Collateral: This is an asset (or assets) that guarantees the loan will be repaid. If the debtor forfeits the loan, the creditor will claim the collateral to cover the debt.

The main reason that a lender would establish a security interest for his loan is to achieve priority over additional creditors. A secured transaction generally has priority over an unsecured transaction, and priority between multiple secured lenders is determined by who filed his financing statement first.

If this topic interests you, check out our free, on-demand webinar The Basics of Lien Priority, presented by Attorney Bradley B. Clark.

As always, consult your legal counsel if you are unsure of any definitions or procedures.

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