|
Securities are tradeable interests representing financial value. They are often represented by a certificate.
They include shares of corporate stock or mutual funds, bonds issued by corporations or
governmental agencies, stock options or other options, other derivative securities, limited partnership units, and various other formal "investment
instruments." Banknotes, checks, and some
bills of exchange do not fall into this category.
New issues of securities, including what is commonly known as an IPO, or Initial Public Offering, for new stock issues, are offered on the primary market. Securities that have already been issued may also be traded; this trading is called
the aftermarket or secondary market. Secondary markets often consist of what
is called an exchange to facilitate the meeting of buyers and sellers. They are often referred to as a stock exchanges, even though there are exchanges such as the Chicago Board of
Options Exchange where no stocks are traded.
In the United States, securities are registered with the Securities and Exchange Commission (SEC), though some may never trade on an exchange and
some are exempt from registration. Dealing in securities is heavily regulated by both the federal authorities (chiefly SEC) and
state authorities. In addition the industry is heavily self policed by Self Regulatory Organizations (SRO's), such as the NASD or
the MSRB.
Due to the difficulty of creating a general definition that covers all securities, the SEC attempts to define "securities"
exhaustively (and not very precisely) as: "any note, stock, treasury stock, security future, bond, debenture, certificate of
interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease, any
collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust
certificate, certificate of deposit for a security, any put, call, straddle, option, or privilege on any security, certificate of
deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call,
straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or in general, any
instrument commonly known as a "security"; or any certificate of interest or participation in, temporary or interim certificate
for, receipt for, or warrant or right to subscribe to or purchase, any of the foregoing; but shall not include currency or any
note, draft, bill of exchange, or banker's acceptance which has a maturity at the time of issuance of not exceeding nine months,
exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited." --Section 3a item 10 of the 1934
Act.
See also
|