Security – any interest or instrument relating to finances

n. (15c)

l. Collateral given or pledged to guarantee the fulfillment of an obligation; especially, the assurance that a creditor will be repaid (usually with interest) any money or credit extended to a debtor.  See SATISDATION (1).

2. Someone who is bound by some type of guaranty; SURETY.

3. The quality, state, or condition of being secure, especially from danger or attack.

4. An instrument that evidences the holder’s ownership rights in a firm (e. g., a stock), the holder’s creditor relationship with a firm or government (e. g. a bond), or the holder’s other rights (e. g, an option).  *  A security indicates an interest based on an investment in a common enterprise rather than direct participation in the enterprise.  Under an important statutory definition, a security is any interest or instrument relating to finances, including a note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in a profit-sharing agreement, collateral trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, or certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase any of these things.  A security also includes any put, call, straddle, option, or privilege on any security, certificate of deposit, group or index of securities, or any such device entered into on a national securities exchange, relating to foreign currency. 15 USCA § 77b(1). — aka (in sense 4) evidence of indebtedness; evidence of debt.  Cf. SHARE, n. (2); STOCK (4). [1]

1. A stock certificate, bond, or evidence of secures indebtedness.  Anno: 47 ALR2d 229.

A share of stock.  Anno: 52 ALR 1098 (term as used in a will).  A stock, bond, or other contract wherein an investment is made for the purpose of securing income or profit. 47 Am Jlst Secur A § 16.

Any instrument issued or offered to the public by any company, evidencing or representing any right to participate or share in the profits or earnings or the distribution of assets of any business carried on for profit. People v McCalla, 63 Cal App 783, 220 P 436.

An instrument issued in bearer or registered form of a type commonly dealt in upon securities exchanges or markets or is commonly recognized in any area in which it is issued or dealt in as a medium for investment; an instrument evidencing a share, participation, or other interest in property or in an enterprise or evidences an obligation of the issuer. UCC § 8-102(1)(a).

Protection of citizen, resident, or transient against attack directed against his person or property.  Protection of the nation against attacks from abroad and subversion from within.  A mortgage, lien, encumbrance, deposit, or pledge for the payment of a debt or the performance of an obligation.  In the broad sense, inclusive of “surety.” 50 Am J1st Suret § 3.

Security is that which makes the enforcement or promise more certain than the mere personal obligation of the debtor or promisor, whatever may be his possessions or financial standing.  It may be a pledge of property, or an additional personal obligation; but it means more than the mere promise of the debtor with property liable to general execution. It is true that the greater the possessions of the promisor, the more certain the enforcement of his promise, and in a sense, the creditor is more secure; but such is not the security known and expressed in the law. First Nat. Bank v Hollingsworth, 78 Iowa 575, 43 NW 536.
See realizing on security. [2]

1. Singular of securities.
     See securities.

2. Collateral; a pledge given to a creditor by a debtor for he payment of a debt or for the performance of an obligation.  EXAMPLES: a mortgage; a lien; a deposit.
     See personal security.  See also surety.

3. Protection; safety; assurance.
     See client security fund; internal security. [3]

     Excerpt from Thomas Lee Hazen’s Treatise on the Law of Securities Regulation (3d ed. 1995):

     “What do the following have in common: scotch whisky, self-improvement courses, cosmetics, earthworms, beavers, muskrats, rabbits, chinchillas, fishing boats, vacuum cleaners, cemetery lots, cattle embryos, master recording contracts, animal feeding programs, pooled litigation funds, and fruit trees?  The answer is that they have all been held to be securities within the meaning of federal or state securities statutes.  The vast range of such unconventional investments that have fallen within the ambit of the securities laws’ coverage is due to the broad statutory definition of a ‘security.’ [4]

Specific Types of Securities:

bond – a written promise acknowledging the obligation to pay a debt; either as money or to perform some act if certain circumstances occur or a certain time elapses.

mortgage – a conveyance of title to property that is given as security for the payment of a debt or the performance of a duty and that will become void upon payment or performance according to the stipulated terms.

stock – a proportional part of a corporation’s capital represented by the number of equal units (or shares) owned, granting the holder the right to participate in the company’s general management and to share in its net profits or earnings.

adjustment security: (2004) A stock or bond that. is issued during a corporate reorganization.  *  The security holders’ relative interests are readjusted during this process.

assessable security: (1974) A security on which a charge or assessment covering the obligations of the issuing company is made.  *  Bank and insurance-company stock may be assessable.

asset-backed security: (1982) A debt security (such as a bond) that is secured by assets that have been pooled and secured by the assets from the pool. — Abbr. ABS.

bearer security: (1910) An unregistered security payable to the holder.  Cf. bearer bond under BOND (3).

callable security: See redeemable security.

certificated security: (1975) A security that is a recognized investment vehicle, belongs to or is divisible into a class or series of shares, and is represented on an instrument payable to the bearer or a named person.  See UCC § 8-102(a)(4).

collateral security: (17C) 1. A security, subordinate to and given in addition to a primary security, that is intended to guarantee the validity or convertibility of the primary security.  2. COLLATERAL (2).

     “‘Collateral security’ is a separate obligation, as the negotiable bill of exchange or promissory note of a third person, or document of title, or other representative of value, indorsed where necessary, and delivered by a debtor to his creditor, to secure the payment of his own obligation, represented by an independent instrument. Such collateral security stands by the side of the principal promise as an additional or cumulative means for securing the payment of the debt.  The transfer, however, of the debtor’s own negotiable promissory notes as collateral security for the payment of other notes made by him, does not come within any definition of collateral security; nor where the proposed collateral security is a negotiable promissory note of a person already liable on a bill of exchange, the payment of which is to be secured.” William Colebrooke, A Treatise on the Law of Collateral Securities 2-3 (1883).

     “The term ‘collateral security’ or ‘collateral’ means a , pledge of incorporeal property assigned or transferred and delivered by a debtor or some one for him to a creditor as security for the payment of a debt or the fulfillment of an obligation. It stands by the side of the principal obligation as an additional means to secure the payment of the debt or fulfillment of the obligation.” Leonard A. Jones, A Treatise on the Law of Collateral Securities and Pledges 2 (Edward M. White ed., 3d ed. 1912).

     “The term ‘collateral security’ has come into quite frequent use of late to designate pledges of incorporeal personalty, and, when so used, it distinguishes in general the business of the banker from that of the pawnbroker. As thus used, the term is convenient and unobjectionable. Unfortunately, however, it is loosely applied to mortgages either of realty or personalty, and is often improperly used in still other senses.” Armistead M. Dobie, Handbook on the Law of Bailments and Carriers 179 (1914).

consolidated security: (usu. pl.) (1934) A security issued in large enough numbers to provide the funds to retire two or more outstanding issues of debt securities.

conversion security: (I950) The security into which a convertible security may be converted, usually common stock.

convertible security: (1818) A security (usually a bond or preferred stock) that may be exchanged by the owner for another security, especially common stock from the same company, and usually at a fixed price on a specified date. — aka (specif.) convertible debt; convertible stock.

coupon security: (1972) A security with detachable interest coupons that the holder must present for payment as they mature.  *  Coupon securities are usually in denominations of $1,000, and they are negotiable.

covered security: (1968) A security that under federal law is exempt from state restrictions and regulation.  *  Because state laws set different requirements for individual companies to register, file, and comply with state regulations, the National Securities Market Improvement Act of 1996 created a uniform set of rules to standardize security regulations and filings nationwide, most stocks traded in the US are covered securities. — aka federal covered security.

debt security: (1846) A security. representing funds borrowed by the corporation from the holder of the debt obligation; especially, a bond, note, or debenture.  *  Generally, a debt security is any security that is not an equity security.  See BOND (3).

dematerialized security: See uncertificated security.

derivative security: See DERIVATIVE (2).

divisional security: (1880) A special type of security issued to finance a particular project.

equity security: (1883) A security representing an ownership interest in a corporation (such as a share of stock) rather than a debt interest (such as a bond); any stock or similar security, or any security that is convertible into stock or similar security or carrying a warrant or right to subscribe to or purchase stock or a similar security, and any such warrant or right.

exempt security: (1934) A security that need not be registered under the provisions of the Securities Act of 1933 and is exempt from the margin requirements of the Securities Exchange Act of 1934.

federal covered security: See covered security.

first security: See first lien under LIEN.

fixed-income security: (1939) A security that pays 8 fixed rate of return, such as a bond with a fixed interest rate or a preferred stock with a fixed dividend.

fixed security: A security representing a lien on a specified item or items.

government security: (18c) A security issued by a government, a government agency, or a government corporation; especially, a security (such as a Treasury bill) issued by at us. government agency, with the implied backing of Congress. — aka government-agency security; agency security; government bond.

heritable security: (1820) Scots law. A debt instrument secured by a charge on heritable property. — aka inheritable security. See heritable bond under BOND (2).

high-grade security: (1930) A security issued by a company of sound financial condition and having the ability to maintain good earnings (e.g., a utility company security).

high-yield security: See high-yield bond under BOND (3).

hybrid security: (1936) A security with features of both a debt instrument (such as a bond) and an equity interest (such as a share of stock).  *  An example of a hybrid security is a. convertible bond, which can be exchanged for shares in the issuing corporation and is subject to stock-price fluctuations.

investment security: (1894) An instrument issued in PM bearer or registered form as a type commonly recognized as a medium for investment and evidencing a share or other interest in the property or enterprise of it: the issuer.

junior security: (1885) A security that is subordinate ii to a senior security.  *  Junior securities have a lower priority in claims on assets and income.

landed security: (18c) A mortgage or other encumbrance affecting land.
letter security: See restricted security.
listed security: (1910) A security accepted for trading It on a securities exchange.  *  The issuing company must have met the SEC’s registration requirements and . complied with the rules of the particular exchange. — aka listed stock. See DELISTING.
long-term security: (1912) 1. A new securities issue with an initial maturity of ten years or more. 2. On a balance ll sheet, a security with a remaining maturity of one year  or more.
low-grade security: (1949) A security with low investment quality.  *  Low-grade securities usually offer higher yields to attract capital.  See high-yield bond under BOND (3).

marginable security: (1974) A security that can be bought on margin. — aka margin stock. SeeMARGIN.

margined security: (1973) A security that is bought on margin and that serves as collateral in a margin account.  See MARGIN. ,

marketable security: (1835) A security that the holder can readily sell on a stock exchange or an over-tires counter market.

mortgage-backed security: (1968) A security (especially a pass-through security) backed by mortgages.  *  The cash flow from these securities depends on principal and interest payments from the pool of mortgages See stripped mortgage-backed security.

municipal security: See municipal bond under BOND (3).

noncallable security: (1979) A security that cannot be redeemed, or bought back, at the issuer’s option. — aka (specif.) noncallable bond.

nonmarketable security: (1934) 1. A security that cannot be sold on the market and can be redeemed only by the holder. 2. A security that is not of investment quality.

outstanding security: (1831) A security that is held by an investor and has not been redeemed by the issuing corporation.

pass-through security: (1970) A security that passes through payments from debtors to investors.  *  Pass-through securities are usually assembled and sold in packages to investors by private lenders who deduct a service fee before passing the principal and interest payments through to the investors.

personal security: (18c) 1. An obligation for the repayment of a debt, evidenced by a pledge or note binding a natural person, as distinguished from property. 2. A person’s legal right to enjoy life, health, and reputation.

public security: A negotiable or transferable security that is evidence of government debt.

real security: The security of mortgages or other liens or encumbrances on land. See COLLATERAL (2).

redeemable security: (1830) Any security, other than a short-term note, that, when presented to the issuer, entitles the holder to receive a share of the issuer’s assets or the cash equivalent. — aka callable security.

registered security: (1834) l. A security whose owner is recorded in the issuer’s books.  *  The issuer keeps a record of the current owners for purposes of sending dividends, interest payments, proxies, and the like. 2. A security that is to be offered for sale and for which a registration statement has been submitted. — aka (specif.) registered stock.

restricted security: (1939) A security that is not registered with the SEC and therefore may not be sold publicly unless specified conditions are met.  *  A restricted security is usually acquired in a nonpublic transaction in which the buyer gives the seller a letter stating the buyer’s intent to hold the stock as an investment rather than resell it. — aka restricted stock; letter security; letter stock; unregistered security.

senior security: (1893) A security of a class having priority over another class as to the distribution of assets or the payment of dividends. 15 USCA § 7 7r(d)(4).

shelf security: (1963) A security that is set aside for shelf registration.

short-term security: (1926) A bond or note that matures and is payable within a brief period (often one year).

speculative security: (1832) A security that. as an investment, involves a risk of loss greater than would usu. be involved; especially, a security whose value depends on proposed or promised future promotion or development, rather than on present tangible assets or conditions.

stripped mortgage-backed security: (1986) A derivative security providing distributions to classes that receive different proportions of either the principal or interest payments from a pool of mortgage-backed securities. — Abbr. SMBS. See mortgage-backed security.

structured security: (usu. pl.) (1987) 1. A security whose cash-flow characteristics depend on one or more indexes, or that has an embedded forward or option. 2. A security for which an investor’s investment return and the issuer’s payment obligations are contingent on, or highly sensitive to, changes in the value of the underlying assets, indexes, interest rates, or cash flows. SEC Rule 434(h) (17 CFR § 230.434(h)).

treasury security: See treasury stock under STOCK.

uncertificated security: (1976) A share or other interest in property or an enterprise, or an obligation of the issuer that is not represented by an instrument but is registered on the issuer’s books. UCC § 8-102(a)(18).  *  This term was called uncertified security in earlier versions of the UCC. — aka (BrE) dematerialized security.

unlisted security: (1932) An over-the-counter security that is not registered with a stock exchange. — aka unlisted stock.

voting security: See voting stock under STOCK.

when-issued security: (1945) A security that can be traded even though it has not yet been issued.  *  Any transaction that takes place does not become final until the security is issued.

worthless security: (1852) A security that has lost its value, for which a loss (usually capital) is allowed for tax purposes. IRC (26 USCA) § 165.1

zero-coupon security: (1981) A security (especially a bond) that is issued at a large discount but pays no interest.  *  The face value of the bond is payable at maturity.

security agreement: (1909) An agreement that creates or provides for an interest in specified real or personal property to guarantee the performance of an obligation.  *  It must provide for a security interest, describe the collateral, and be signed by the debtor.  The agreement may include other important covenants and warranties.

security clearance: (1963) Official permission for someone to enter a place or building, or to view secret documents and the like, typically after a rigorous background check.

Security Council: A principal organ of the United Nations, consisting of live permanent members (China, France, Russia, the United Kingdom, and the United States) and ten additional members elected at stated intervals, charged with the responsibility of maintaining international peace and security, and esp. of preventing or halting wars by diplomatic, economic, or military action.  *  The nonpermanent members are elected from each of the world’s major regions, based on a distribution formula.

security deposit: See DEPOSIT (3).

security for costs: (17c) Money, property, or a bond given to a court by a plaintiff or an appellant to secure the payment of court costs if that party loses.

security police: (1915) 1. Police whose mission is counter espionage. 2. The military police of an air force. — aka (in sense 2) air police.

security rating: (1938) 1. The system for grading or classifying a security by financial strength, stability, or risk  *  Firms such as Standard and Poors and Moodys grade securities. 2. The classification that a given security 18 assigned to under this system. — aka security grade; security grading; security rate.

security risk: (1948) 1. A situation that could endanger people. 2. Someone within an organization, especially government, who cannot be trusted with important secrets because he or she might divulge them to an enemy.

security service: (1918) A government organization whose mission is to protect a country s secrets and assets from enemy countries and to protect the government against any attempt to diminish its power.


Disclaimer: All material throughout this website is compiled in accordance with Fair Use.

[1]: Black’s Law Dictionary Deluxe Tenth Edition by Henry Campbell Black & Editor in Chief Bryan A. Garner. ISBN: 978-0-314-62130-6

[2]: Ballantine’s Law Dictionary with Pronunciations
Third Edition
 by James A. Ballantine (James Arthur 1871-1949).  Edited by William S. Anderson.  © 1969 by THE LAWYER’S CO-OPERATIVE PUBLISHING COMPANY.  Library of Congress Catalog Card No. 68-30931

[3]: Ballantine’s Law Dictionary Legal Assistant Edition
by Jack Ballantine 
(James Arthur 1871-1949).  Doctored by Jack G. Handler, J.D. © 1994 Delmar by Thomson Learning.  ISBN 0-8273-4874-6.

[4]: 1 Thomas Lee Hazen, Treatise on the Law of Securities Regulation § 1.5, at 2829 (3d ed. 1995).


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