On March 17, 2026, Justice Masley of the New York County Commercial Division issued a decision in Oasis Invs. II Master Fund Ltd. v. Chang Ye Inv. Co. Ltd., 2026 NY Slip Op. 31050(U), analyzing the issue of an investor’s standing to sue when the governing agreement provides that the registered owner, not the beneficial owner, can sue.
The parties agree that Oasis, as a mere beneficial owner of the Notes, does not have standing to enforce the Notes. Instead, the Indentures provide that only the registered holders and trustees have the right to collect. The Indentures define a Holder as the Person whose name a Note is registered in the Note register. The parties agree that the 11.25%, 8.65%, and 8.50% Notes are registered in the name of Citivic Nominees Limited (‘Citivic’), as the nominee of Citibank Europe plc (‘Citibank’), the Common Depository of those Notes, for the account of Euroclear and Clearstream. The point of disagreement between the parties is whether obtaining authorization pursuant to Euroclear’s operating rules is, alone, sufficient to give Oasis standing to bring this action absent authorization from Citivic and/or Citibank.
On a pre-answer motion to dismiss for lack of standing, the burden lies with the defendant to establish prima facie that plaintiff has no standing to sue. Here, defendants argue that Oasis’ allegation in its complaint that it sent a request to Citibank to have Citivic sign an authorization confirming that Oasis had authority to sue which Citibank acknowledged receipt of but did not otherwise respond to, is enough to determine that Oasis lacks standing to bring this action. While it is well settled that a beneficial holder of a note lacks standing to sue for payments due upon the note where, as here, the indenture reserves the right to sue to the registered holder of the note, the law is also clear that such lack of standing may be cured if the beneficial holder obtains authorization to sue from a registered holder.
Section 2.06(d) of the Indentures provide that the registered holder may grant proxies and otherwise authorize any Person to take any action which a Holder is entitled to take under this Indenture or the Notes. Oasis pleads that after receiving no answer to its authorization request from Citibank, Oasis, through its prime broker, attempted to have Euroclear request authorization from Citibank on Oasis’ behalf. In its response, Euroclear explained that common depositories, such as Citibank, are reluctant to issue authorization letters, but that Euroclear’s operating procedures allow Euroclear to issue a statement of holding, which would give Oasis the authorization needed for Oasis to bring claims against defendants.
Specifically, Oasis (and Euroclear) asserts that Citibank, as the Common Depository of the Notes, are bound by Euroclear’s terms and conditions, including its operating procedures. Section 5.3.1.3.(a) of such procedures provides that “[Euroclear] authorise you and/or the underlying beneficial owners of such securities to maintain proceedings against issuers, guarantors and any other parties. This is to the extent that [Euroclear], our nominee, a Depository or their nominee acts as registered owner of any security held in the Euroclear System, or in any other relevant situation.”
Section 5.3.1.3(c) further provides that “[u]pon your request, we will issue a statement of account for the purpose of the filing of a claim.” Pursuant to § 5.3.1.3 of Euroclear’s operating procedures, Oasis requested statements of account letters (STAC Letters) from Euroclear. In August 2023, Euroclear issued three STAC Letters that certified that Oasis was the beneficial owner of the Notes and that in accordance with § 5.3.1.3(a) of the operating procedures of the Euroclear system, we authorize our clients and/or the underlying Beneficial Owners of securities held in the Euroclear system, to maintain proceedings against issuers and guarantors of these securities, this is to the extent that, as is the case for above captioned securities, a nominee of a depository, [Citivic], acts as registered owner of the security held in the Euroclear system.
Assuming that Citibank is bound by Euroclear’s operating procedures, Oasis maintains that Citibank is similarly bound by Euroclear’s authorization permitting Oasis, as the beneficial owner of the Notes, to initiate legal action against the defendants. Similar fact patterns have led courts to find that plaintiff has standing to initiate litigation.
Defendants seek to differentiate the facts in this case from those in BFAM and Cortland II. First, defendants argue that this case differs from the prior cases in that the indentures at issue here do not incorporate Euroclear’s operating procedures. While the Indentures do not explicitly incorporate Euroclear’s operating procedures, they refer generally to these rules and procedures throughout. Indeed, the references to Euroclear’s rules and procedures in the indentures here far outnumber the sole reference to such rules and procedures in BFAM. Thus, the court finds this distinction to be without a difference.
Moreover, the Offering Memoranda for the Notes clearly set forth that so long as the Notes are held in global form participants must rely on the procedures of Euroclear and Clearstream and indirect participants must rely on the procedures of the participants through which they own book-entry interests in order to transfer their interests in the Notes or to exercise any rights of Holders under the Indenture.
The repeated references to Euroclear’s procedures in the Indentures and Offering Memoranda support plaintiff’s contention that the parties intended to be bound by Euroclear’s rules and procedures.
Defendants further argue that Euroclear, and by extension Oasis, concede that Citibank is not required to abide by Euroclear’s instructions. Defendants base this argument on Euroclear’s response to Oasis’ request that Euroclear submit an authorization request to Citibank on Oasis’ behalf, in which Euroclear wrote that recent experience taught us that the common depository community is very reluctant in delivering the requested statement of account/authorization letter. There is also no contractual obligation for the common depository to issue such letters. Whether or not Citibank is required under Euroclear’s operating procedures to issue authorization letters is a separate question from Oasis’ argument that Citibank is bound by Euroclear’s authorization letter pursuant to Euroclear’s operating procedures. Thus, defendants’ argument does nothing to disturb Oasis’ allegation that it has standing to bring its claims pursuant to Euroclear’s STAC Letters. Rather, it raises an issue of fact as to the relationship between Euroclear and the Common Depository and whether it is one of principal and agent or nominee.
Finally, defendants reiterate their point that the Indentures unequivocally grants only the registered holder the power to grant any authorizations. This is not an accurate recitation of the contract language. Section 2.06(d) provides that the registered holder of a Global Note may grant proxies and otherwise authorize any Person to take any action which a Holder is entitled to take under this Indenture or the Notes. Contrary to defendants’ contention that only the registered holder can grant an authorization, the contract language is not preclusive. Because § 2.06(d) does not give the registered holder exclusive power to grant authorization, the court finds that defendants do not establish prima facie that Oasis has no standing to sue.
(Internal quotations and citations omitted).