If a financing statement describes collateral more broadly than the security agreement, what happens?

When a financing statement describes collateral more broadly than the security agreement, the correct interpretation is that it remains effective but is considered unauthorized to the extent of any collateral not specified in the security agreement. This means that the security interest is only enforceable to the extent that it aligns with the specific collateral described in the security agreement.

In secured transactions, the financing statement serves to put third parties on notice regarding the secured party's interest in the collateral. However, the security agreement governs the rights and obligations between the debtor and the secured party. If the financing statement includes collateral that does not appear in the security agreement, that collateral will not be covered by the security interest.

This principle ensures that there is a clear linkage between the financing statement and the security agreement to maintain the validity of the security interests. A financing statement’s purpose is to provide public notice, but it does not itself create or expand the secured party's rights beyond what is contractually agreed upon in the security agreement.

The other options presented do not accurately reflect the effects of this situation. For instance, declaring the entire statement void would be overly broad since the valid portions can still serve as notice. A determination that the filing is considered valid would overlook the limitations imposed by the security agreement. Similarly