Limit Holder in Due Course Status - FTC Rule

The video tutorial discusses whether a commercial instrument's maker can limit a transferee's ability to become a holder in due course. It explains that holder in due course status provides certain defenses against payors. The Federal Trade Commission (FTC) rule allows a note maker to include a legend that subjects the holder to any defenses, thus limiting holder in due course status. This limitation can affect the instrument's value and liquidity, as it reduces the negotiability and increases the risk of non-payment.

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