What is considered a serious misleading defect in a financing statement?

A serious misleading defect in a financing statement can have significant consequences on the enforceability and effectiveness of the security interest. In this context, an incorrect spelling of the debtor's name is particularly consequential because financing statements are intended to provide proper notice to third parties regarding the secured party's interest in the collateral. If the debtor's name is not spelled correctly, it may create confusion or mislead potential creditors or purchasers about who the debtor is. This can ultimately lead to issues regarding the priority of claims, as a correctly spelled name allows for proper identification and priority ranking in the case of multiple claims against the same collateral.

While failure to describe the collateral, using an acronym for the debtor's name, or missing a signature from the secured party can also present issues or require correction, these are not categorized as serious misleading defects in the same manner as the incorrect spelling of a debtor's name. The primary focus here is on the name's accuracy because it serves as a key identifier in the public record system utilized in secured transactions.