North Carolina Law Review

University of North Carolina School of Law

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Chapel Hill, NC 27514

Cybercrime in the Securities Market: Is U.C.C. Article 8 Prepared?

90 N.C. L. Rev. Addendum 122 (2012)


Today, over ninety percent of stock trades are done electronically through financial institutions, exchanges, and brokerage houses. Paper transactions-effectuated by the transfer of a physical stock certificate- are rare and, for that matter, outdated. And as a result of industry efforts to phase out the stock certificate, many investors today can no longer reify their stock ownership with a paper certificate. Yet despite attempts to modernize the commercial law governing investment securities to account for these changes through revisions to Article 8 of the Uniform Commercial Code ("U.C.C."), it is questionable whether those rules of law remain relevant and effective today, particularly in light of the newest challenges to the U.S. securities markets. Specifically, the recent rise in cybercrime, and hacking in particular, poses risks to the securities trading system that were likely unanticipated by the drafters (and revisers) of Article 8. With strong indications that a cyber attack on the U.S. securities markets is imminent, it may be time for the legal and financial communities to consider revising Article 8 once more.


This Article offers a start in that direction by exploring the cybercrime risk, the property ownership questions that might arise from a hack, and the consequences of judicial misapplication or misunderstanding of Article 8. 



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