What types of collateral typically require perfection by control rather than filing?

• A. Deposit accounts, investment property, and funds in a securities intermediary.
• B. Negotiable instruments, records of inventory, and vehicles.
• C. Intangible assets, goodwill, and brand names.
• D. Cash in a locked safe.

Answer: (A)

Perfection by control is used for collateral where the secured party must have the power to direct disposition to establish priority. This is why deposit accounts, investment property, and funds in a securities intermediary are perfected by control rather than by filing.

For deposit accounts, a control agreement with the bank gives the secured party the authority to direct transactions in the account, and the bank must follow those instructions rather than the debtor’s. For investment property, such as securities, control is established by keeping the property under arrangements that allow the secured party to control dispositions, often by having the securities intermediary act only on the secured party’s instructions. Funds held in a securities intermediary are similarly perfected by control because the intermediary must follow the secured party’s instructions and not the debtor’s.

Other types of collateral are typically perfected by filing or by possession rather than control, such as intangible assets or tangible cash held by the debtor.