First Western: First for Dennis Smiley Cash?

by George Waldon  on Monday, Apr. 21, 2014 12:00 am  

Chris Wewers, CEO of First Federal Bank of Harrison, declined to talk about the specifics of his bank’s involvement with Smiley. But he agreed to talk about some of the legal-banking issues surrounding the controversy.

“A UCC is supposed to put the world on notice,” Wewers said. “But if you’re looking at uncertificated shares, does a UCC protect you at all? That why it’s in a court of equity for everyone to argue their position before the judge and let him determine who gets some money.”

These phantom shares of Arvest Bank Group awarded to Smiley and other top executives were atypical securities. First Federal is among the lenders who obtained what they thought were legitimate control agreements to perfect a security claim on the shares.

The secured party must make sure it has the issuer’s consent, which will require a thorough review of the issuer’s governing documents to determine what constitutes approval to the issuer.

Some lenders thought they had obtained Arvest’s consent. It’s unclear how many, if any, were provided or reviewed the governing documents.

“We all need to go back to the processes and see what other efforts there are to prevent this from happening again,” said Joe Edwards of Benefit Bank.



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