security

Protection; assurance; indemnification. The term is usually applied to an obligation, pledge, mortgage, deposit, lien, etc., given by a debtor in order to assure the payment or performance of his debt, by furnishing the creditor with a resource to be used in case of failure in the principal obligation.

Collateral given by debtor to secure loan. Document that indicates evidence of indebtedness.

The name is also sometimes given to one who becomes surety or guarantor for another. Test for a "security" under securities laws is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others so that whenever an investor relinquishes control over his funds and submits their control to another for the purpose and hopeful expectation of deriving profits therefrom he is in fact investing his funds in a security. Investment Co. Institute v. Camp, D.C.D.C., 274 F.Supp. 624, 642.

"Security" under Securities Act of 1933, means investment in common enterprise in which investors are purchasing interest and where growth of that investment is to result from efforts of promoter, Neuwirth Inv. Fund, Ltd., v. Swanton, D.C.N.Y., 422 F.Supp. 1187,1194;

and the label attached to the transaction is not determinative. McGovern Plaza Joint Venture v. First of Denver Mortg. Investors, 562 F.2d 645, 646.

"Security" includes any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in an oil, gas or mining title or lease or in payments out of production under such a title or lease, collateral trust certificate, transferable share, voting trust certificate or, in general, any interest or instrument commonly known as a security, or any certificate of interest or participation, any temporary or interim certificate, receipt or certificate of deposit for, or any warrant or right to subscribe to or purchase, any of the foregoing. Uniform Probate Code, No. 1-201.

For purposes of the Securities Act of 1933 and the Securities Exchange Act of 1934, the term "security" embraces all investment contracts, and the test is whether the investment is made in a common enterprise which is premised upon the reasonable expectation of profits solely from the managerial or entrepreneurial efforts of others; such test contains three elements: the investment of money; a common enterprise; and profits or returns derived solely from efforts of others. Felts v. National Account Systems Ass'n., Inc., D.C.Miss., 469 F.Supp. 54, 63.

See 15 U.S.C.A. No.No. 77b(l), 78c(10).

A note may be a security, and subject to federal securities laws, even if it has no fixed term and is payable on demand, depending on the economic realities of the transaction. Reves v. Ernst & Young, 110 S.Ct. 945, 108 L.Ed.2d 47.

The term "security" means any bond, debenture, note or certificate or other evidence of indebtedness, issued by a corporation or a government or political subdivision thereof, with interest coupons or in registered form, share of stock, voting trust certificate, or any certificate of interest or participation in, certificate of deposit or receipt for, temporary or interim certificate for, or warrant or right to subscribe to or purchase, any of the foregoing; negotiable instrument; or money. I.R.C. No. 6323(hX4).

As defined in the Bankruptcy Code No. 101, "security" includes: note, stock, treasury stock, bond, debenture, collateral trust certificate, preorganization certificate or subscription, transferable share, voting-trust certificate, certificate of deposit, investment contract or certificate of interest, etc.

Under the U.C.C. (No. 8-102), a security is either a "certificated" or "uncertificated" security.

See "certificated security" or "uncertificated security".

See also collateral

- equity security

- hybrid securities

- internal security acts

- investment security

- junior security issue

- lien

- listed security

- pledge

- risk capital test

- securities

- stock.

@ assessable security

A security on which a charge or assessment for the obligations of the issuing company may be made. In many instances, bank and insurance company stocks are assessable

@ certificated security

A "certificated security" is a share, participation, or other interest in property of or an enterprise of the issuer or an obligation of the issuer which is

(i) represented by an instrument issued in bearer or registered form;

(ii) of a type commonly dealt in on securities exchanges or markets or commonly recognized in any area in which it is issued or dealt in as a medium for investment; and

(iii) either one of a class or series or by its terms divisible into a class or series of shares, participations, interests, or obligations. U.C.C. No. 8-102(lXa).

@

- collateral security

@ convertible security

See convertible securities.

@ equity security

The term "equity security" means any stock or similar security; or any security convertible, with or without consideration, into such a security; or carrying any warrant or right to subscribe to or purchase such a security; or any such warrant or right; or any other security which the Securities and Exchange Commission shall deem to be of similar nature and consider necessary or appropriate, by such rules and regulations as it may prescribe in the public interest or for the protection of investors, to treat as an equity security. Securities Exchange Act, No. 3; 15 U.S.C.A. No. 78c(ll).

(a) share in a corporation, whether or not transferable or denominated "stock", or similar security;

(b) interest of a limited partner in a limited partnership; or

(c) warrant or right, other than a right to convert, to purchase, sell, or subscribe to a share, security, or interest of a kind specified in subparagraph (a) or (b) of this paragraph. Bankruptcy Code No. 101.

+ equity security

A security that represents an equity ownership interest in a corporation, rather than debt. Equity securities are usually considered to be common and preferred shares.

See stock

Compare bond.

As defined in Bankruptcy Code No. 101, term includes:

(a) share in a corporation, whether or not transferable or denominated "stock", or similar security;

(b) interest of a limited partner in a limited partnership; or

(c) warrant or right, other than a right to convert, to purchase, sell, or subscribe to a share, security, or interest of a kind specified in subparagraph (a) or (b) of this paragraph. Bankruptcy Code No. 101.

@ exempted security

A security which is not required to be registered under the provisions of the Securities Exchange Act. 15 U.S.C.A. No.No. 77c, 78c(12).

@ government security

Any security issued or guaranteed as to principal or interest by the United States, or by a person controlled or supervised by and acting as an instrumentality of the Government of the United States pursuant to authority granted by the Congress of the United States; or any certificate of deposit for any of the foregoing. Investment Company Act, No. 2; 15 U.S. C.A. No. 80a-2(aX16).

@ hybrid security

A security which combines features of both debt and equity; i.e. of both bond and stock.

See also hybrid securities.

@ junior security

Security with priority claim on assets and income subordinate to senior security.

@

- listed security

@ marketable security

A security which is of reasonable investment caliber and which can be easily sold on the market.

@ non-marketable security

A security which cannot be sold on the market such as certain government bonds and notes. It can only be redeemed by the holder. Also, a security which is not of investment quality.

@ outstanding security

A security which is held by an investor and which has not been redeemed or purchased back by the issuing corporation.

@ personal security

An obligation to repay a debt evidenced by a pledge, note or bond in contrast to collateral security. Evidences of debt which bind the person of the debtor, not real property. Merrill v. National Bank, 173 U.S. 131, 19 S.Ct. 360, 43 L.Ed. 640.

A person's legal and uninterrupted enjoyment of his life, his limbs, his body, his health, and his reputation. 1 Bl.Comm. 129.

@ public security

Bonds, notes, certificates of indebtedness, and other negotiable or transferable instruments /evidencing the public debt of a state or government. Real security. The security of mortgages or other liens or encumbrances upon land.

See Merrill v. National Bank, 173 U.S. 131, 19 S.Ct. 360, 43 L.Ed. 640.

See also collateral

@ redeemable security

Any security, other than shortterm paper, under the terms of which the holder upon its presentation to the issuer or to a person designated by the issuer, is entitled (whether absolutely or only out of surplus) to receive approximately his proportionate share of the issuer's current net assets, or the cash equivalent thereof. Investment Company Act, No. 2; 15 U.S.C.A. No. 80a-2(a)(32)

@

- security for costs

@ security for good behavior

A bond or recognizance which the magistrate exacts from a defendant brought before him on a charge of disorderly conduct or threatening violence, conditioned upon his being of good behavior, or keeping the peace, for a prescribed period, towards all people in general and the complainant in particular. A peace bond

@ senior security

A security with rights that take precedence over those of other securities in a given capital structure

@ short term security

@ short-term security

A bond or note which matures in and is payable within a short span of time. Such securities are purchased by institutional investors for income rather than for growth potential.

@

\

treasury securities/treasury stock

@ uncertificated security

An "uncertificated security" is a share, participation, or other interest in property or an enterprise of the issuer or an obligation of the issuer which is

(i) not represented by an instrument and the transfer of which is registered upon books maintained for that purpose by or on behalf of the issuer;

(ii) of a type commonly dealt in on securities exchanges or markets; and

(iii) either one of a class or series or by its terms divisible into a class or series of shares, participations, interests, or obligations. U.C.C. No. 8-102(lXb).

@ unlisted security

An over the counter security which is not listed on a stock exchange.

+ unlisted security

Security that is not listed on an organized exchange (e.g., New York Stock Exchange) and, as such, is traded on over-the-counter markets

+ "Unlisted" securities are traded on the over-the-counter markets.

@ voting security

Any security presently entitling the owner or holder thereof to vote for the election of directors of a company. Investment Company Act, No. 2; 15 U.S.C.A. No. 80a-2(aX42)

@ security agreement

An agreement which creates or provides for a security interest between the debtor and a secured party. U.C.C. No. 9-105(h); Bankruptcy Code No. 101.

An agreement granting a creditor a security interest in personal property, which security interest is normally perfected either by the creditor taking possession of the collateral or by filing financing statements in the proper public records.

See perfection of security interest

- purchase money security interest

- secured transaction

- security interest

@