Article 4A of the Illinois Uniform Commercial Code (UCC) provides rights of a customer and obligations of a bank regarding fund transfers.[1] In the 2020 case, Whitaker v. Wedbush Securities, Inc., the Illinois Supreme Court addressed what type of institution constitutes a “bank” under article 4A.[2]
There, plaintiff James Whitaker’s estate brought suit against defendant Wedbush Securities, Inc. demanding refund of wire transfers from his commodity futures trading accounts which were transferred by the defendant at the request of someone who had hacked plaintiff’s e-mail account and requested multiple wire transfers of funds.[3] Plaintiff argued that the defendant fell within the scope of article 4A because “it is a financial institution action on behalf of its customers in funds transfers” and “is a bank within the meaning of the statute.”[4] The statute defines “bank” as “a person engaged in the business of banking and includes a savings bank, savings and loan association, credit union, and trust company.”[5]
The Court in Whitaker recognized that, although the statute is vague on what constitutes a bank, the article does not apply to every person or entity that processes fund transfers.[6] Instead, the statute limits the scope to organizations that can be “considered financial institutions”. However, the court noted that courts have consistently held that mutual fund companies, brokerage firms, and insurance companies may fall within the definition of a bank under Articles 3, 4, and 4A. Moreover, the defendant sent a letter to the plaintiff stating it was a “leading financial services company,” and it regularly processed funds transfers.[7] Construing the term “bank” liberally, the court concluded that the defendant was a “financial institution” and therefore meets the definition of “bank” under article 4A.[8]
This holding by the court provides a more precise definition of what types of organizations, specifically Securities companies, can constitute a bank for purposes of article 4A of the UCC.
[1] Whitaker v. Wedbush Securities, Inc., 2020 IL 124792, ¶17.
[2] Id. at ¶16.
[3] Id. at ¶¶3-8.
[4] Id. at ¶14.
[5] 810 ILCS 5/4A-105(a)(2) (West 2014).
[6] Whitaker supra. at ¶¶34-35.
[7] Id. at ¶¶ 34-35.
[8] Id. at ¶¶ 36-37.
