What does perfection by control apply to?

Perfection by control specifically applies to certain types of collateral, particularly investment property and electronic chattel paper. In the context of secured transactions, the concept of perfection is crucial because it establishes a secured party's rights in the collateral against other creditors and third parties.

When dealing with investment property, which includes stocks, bonds, and other financial assets, a secured party can achieve perfection by taking control of the investment property. This means that the secured party has the ability to direct the transfer of the investment property, significantly enhancing their security interest and priority against competing claims.

Similarly, electronic chattel paper—a type of record that evidences a monetary obligation and is stored in electronic form—can also be perfected by control. The reason control is effective here is that it allows the secured party to assert rights over the electronic chattel paper in a manner that is recognized and enforceable.

Other collateral types do not allow for perfection solely through the mechanism of control; for example, real property typically requires different methods for perfection such as recording a security interest, while intellectual property rights usually achieve perfection through registration with the appropriate governmental authorities. Therefore, the focus on investment property and electronic chattel paper makes perfection by control a specialized mechanism applicable primarily in these areas.