New Jersey § 12a:8-202

§ 12a:8-202.

a. Even against a purchaser for value and without notice, the terms of a certificated

security include terms stated on the certificate and terms made part of the security

by reference on the certificate to another instrument, indenture, or document or to

a constitution, statute, ordinance, rule, regulation, order, or the like, to the extent

the terms referred to do not conflict with terms stated on the certificate. A reference under this subsection does not of itself charge a purchaser for value

with notice of a defect going to the validity of the security, even if the certificate

expressly states that a person accepting it admits notice. The terms of an uncertificated security include those stated in any instrument,

indenture, or document or in a constitution, statute, ordinance, rule, regulation,

order, or the like, pursuant to which the security is issued. b. The following rules apply if an issuer asserts that a security is not valid: (1) A security other than one issued by a government or governmental subdivision,

agency, or instrumentality, even though issued with a defect going to its validity,

is valid in the hands of a purchaser for value and without notice of the particular

defect unless the defect involves a violation of a constitutional provision. In that case, the security is valid in the hands of a purchaser for value and without

notice of the defect, other than one who takes by original issue. (2) Paragraph (1) of this subsection b. applies to an issuer that is a government

or governmental subdivision, agency, or instrumentality only if there has been substantial

compliance with the legal requirements governing the issue or the issuer has received

a substantial consideration for the issue as a whole or for the particular security

and a stated purpose of the issue is one for which the issuer has power to borrow

money or issue the security. c. Except as otherwise provided in 12A:8-205, lack of genuineness of a certificated

security is a complete defense, even against a purchaser for value and without notice. d. All other defenses of the issuer of a security, including nondelivery and conditional

delivery of a certificated security, are ineffective against a purchaser for value

who has taken the certificated security without notice of the particular defense. e. This section does not affect the right of a party to cancel a contract for a security

“when, as and if issued” or “when distributed” in the event of a material change in

the character of the security that is the subject of the contract or in the plan or

arrangement pursuant to which the security is to be issued or distributed. f. If a security is held by a securities intermediary against whom an entitlement

holder has a security entitlement with respect to the security, the issuer may not

assert any defense that the issuer could not assert if the entitlement holder held

the security directly.