What does not apply to securities? List with description

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

We have no doubt that everyone has heard the definition of "security". Such a document in our country is under the control of the state and is regulated by legislative acts. True, it is quite difficult for an ordinary person to understand what is the difference between a security and a simple document. The information in this article will help you determine which documents do not qualify as securities.

Definition of concept

In simple language, a security is nothing more than a document that provides the owner with property rights that are allowed to be used or transferred to third parties. This can only be done if the relevant document is available. Each of these documents has its own characteristics. At the level of legislation, a number of requirements are imposed on such securities.

The securities market refers to a market that is strictly regulated by Federal Law No. 39. He argues that the issuers of such valuable documents can be legal entities, banking organizations, as well asgovernment structures. As for individuals, they cannot issue securities, but they can buy them from third parties or directly from issuers.

What is a security?

Securities do not include documents with certain characteristics:

1. This document differs from the contract in that the owner of the security is not burdened with obligations. At the same time, upon the fact of its possession, rights appear, thanks to which the right to claim can be declared.
2. The distinguishing characteristic of securities is already mentioned in their name. That is, in order to become their owner, you need to pay a certain price to the issuer or a third party.
3. Securities are very seriously controlled by the state, and there are a number of strict requirements for them. It is obligatory to draw them up in a certain form, indicating the number and all the necessary details.
4. Protection against counterfeiting with watermarks is required.
5. Based on international conventions, therefore, the requirements for such documents are the same in all countries. This makes securities very convenient. After all, they can rotate not only in one state, but also far beyond its borders.

What is not a security?

The following documents do not qualify as securities:

1. The list of securities includes a check, but in no case should it be confused with the usual cashier's check, which is usually issued atmaking purchases in the store. A check gives the right to withdraw a certain amount to one person from the account of another. But a cash receipt simply confirms the transaction and does not provide its owner with any property rights.
2. It is not uncommon to see futures as a number of securities. There is logic here, because it has really similar characteristics. The fact is that a futures is a document that is signed by two parties who actually own it. But it is still more like a contract, since each party has not only rights, but also obligations.
3. There was a time in history when a currency was tied to a gold reserve. It was at this time that money was also classified as securities, since it provided its owner with the opportunity to receive services and goods, and also had a certain denomination. Today, money has been strictly regulated by other legislative acts and has no attachment to anything.
4. A notarized power of attorney is a legally regulated document that has a certain form. The document owner has certain rights. However, it does not carry any material benefit, which is why it does not apply to securities.

What is the difference between a promissory note and an IOU?

Many people confuse a promissory note and an IOU. This can be explained by the fact that both the first and second documents confirm the right to claim a debt from the person who issued it.

Promissory note refers to securities,since it provides the right to demand a debt, but at the same time it does not bind the creditor and the borrower with a loan agreement. But an IOU is tied to an agreement that is drawn up between the parties to the transaction. The advantage of a bill is that its holders can collect the debt much faster and much easier.

What are options?

In today's world, we increasingly hear the concept of "options". However, few now understand what exactly lies under this word.

At its essence, an option is indeed classified as a security. Moreover, along with it, the owner receives exclusive rights to some resource. While the issuer is vested with obligations. Also, the option at a bargain price can be exercised to another owner.

The only disadvantage of such paper is that it is not yet used in our country. If foreign laws prescribe the conditions for its possession, then in Russian legislation there is not even a mention of it.

Federal Securities Market Law

To get a clear idea of what is meant by the concept of "securities", you should carefully read the Federal Law, called "On the Securities Market".

According to Article 143 of the Civil Code of the Russian Federation, the types of securities include:

• bonds;
• government bonds;
• check;
• bill;
• bank savings book to bearer;
• certificate of deposit;
• promotion;
• bill of lading;
• privatization securities;
• shares.

What is a dividend?

There is an opinion that dividends and interest belong to securities. However, this is not entirely correct, but the concept itself is present in the securities market.

In terms of their economic content, securities are long-term obligations that the issuer undertakes to pay the owner of the document income in the form of dividends or fixed interest.

Most often, dividends are paid on shares. At the same time, they are paid only from the profit of the joint-stock company, and the decision of the meeting of shareholders and the results of financial and economic activities also affect the payment.

Security classification

In simple words, a security is an asset, thanks to which its owner receives the right to receive profit, any benefits, goods, services or money.

Such documents are classified according to the following parameters:

1. Permanent and urgent, that is, those that have a limited duration or do not have it at all. In the first case, property rights become invalid immediately after the expiration of the security. But in the second, they can be removed from circulation only if the issuer buys them back from the owner.
2. Form of registration. Documents can be issued both on paper and without it.
3. The form of possession. They can be nominal or bearer. Whereinregistered ones are issued only to a specific person who cannot transfer them to third parties.
4. Emission - issued by the issuer periodically in a certain amount, and non-issue.
5. Account Form. There may be registered or unregistered securities. At the same time, the former must be registered in the register of an enterprise or state.
6. Ethnicity. Depending on who the issuer is, there may be foreign or domestic securities.
7. Release form. According to this parameter, there can be government or non-government securities. It is easy to guess that government agencies are the issuers of government agencies.
8. Form of functioning. According to this principle, they are divided into primary and secondary. The first type includes securities that are purchased from the issuer. At the same time, buying secondary ones is also possible from a third party.
9. The purpose of the issue. This type can be divided into investment (they are needed in order to attract financial flow) or non-investment (necessary to maintain the status of the company).
10. Degree of risk. This determines the risk that the owner bears (can be low, medium and high). This characteristic has a strong impact on the cost. After all, the risk increases with the increase in the value of the security.
11. A way to attract. There may be equity (shares are securities of this type, they assume a return on attracted investments) and debt (in this case, a loan is attracted, which is payable).
12. Shapeprofitability. In this case, there may be profitable and non-profitable securities. In the first case, it is assumed that the owner will make a profit. While the incomeless only confirm that money or any other tangible assets have been invested.
13. Denomination type. This makes it possible to say that some securities have a price, while others do not.

Conclusions

The securities market is a very complex mechanism, understanding of which depends on competent investment. If you know what the company's securities are, you can properly dispose of them and receive income.

You need to understand that a security is a modified money that should not just be stored, but work, guaranteeing the owner additional income. Therefore, something that has nothing to do with such a concept cannot be called a security.