What is Security?

Legal Definition
A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some jurisdictions the term specifically excludes financial instruments other than equities and fixed income instruments. In some jurisdictions it includes some instruments that are close to equities and fixed income, e.g. equity warrants. In some countries and/or languages the term "security" is commonly used in day-to-day parlance to mean any form of financial instrument, even though the underlying legal and regulatory regime may not have such a broad definition.

In the United Kingdom, the national competent authority for financial markets regulation is the Financial Conduct Authority; the definition in its Handbook of the term "security" applies only to equities, debentures, alternative debentures, government and public securities, warrants, certificates representing certain securities, units, stakeholder pension schemes, personal pension schemes, rights to or interests in investments, and anything that may be admitted to the Official List.

In the United States, a security is a tradable financial asset of any kind. Securities are broadly categorized into:

  • debt securities (e.g., banknotes, bonds and debentures)
  • equity securities (e.g., common stocks)
  • derivatives (e.g., forwards, futures, options and swaps).

The company or other entity issuing the security is called the issuer. A country's regulatory structure determines what qualifies as a security. For example, private investment pools may have some features of securities, but they may not be registered or regulated as such if they meet various restrictions.

Securities may be represented by a certificate or, more typically, "non-certificated", that is in electronic (dematerialized) or "book entry" only form. Certificates may be bearer, meaning they entitle the holder to rights under the security merely by holding the security, or registered, meaning they entitle the holder to rights only if he or she appears on a security register maintained by the issuer or an intermediary. They include shares of corporate stock or mutual funds, bonds issued by corporations or governmental agencies, stock options or other options, limited partnership units, and various other formal investment instruments that are negotiable and fungible.
-- Wikipedia
Legal Definition
1. Property that is given or pledged to guarantee the performance of an obligation. See, e.g., Bail.

2. An instrument that functions as proof of a security interest in a public or private body. Share and bond certificates are examples of securities. See Securities law.
Legal Definition
That which renders a matter sure; an instrument which renders certain the performance of a contract. The term is also sometimes applied to designate a person who becomes the surety for another, or who engages himself for the performance of another's contract. See 3 Blackf. R. 431.
-- Bouviers Law Dictionary
Legal Definition
Protection; assurance; indemnification. The term is usually applied to an obligation, pledge, mortgage, deposit, lien, etc., given by a debtor in order to make sure 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. The name is also sometimes given to one who becomes surety or guarantor for another. See First Nat. Bank v. Hollinsworth, 78 Iowa, 575, 43 N. W. 536, 6 L. R. A. 92; Storm v. Waddell, 2 Sandf. Ch. (N. Y.) 507; Goggins v. Jones, 115 Ga. 596, 41 S. Bl 995; Jennings v. Davis, 31 Conn. 139; Mace v. Buchanan (Tenn. Ch.) 52 S. W. 507.
See also
-- Black's Law Dictionary
Legal Definition
A right over property by virtue of which the enforcement of a liability or promise is facilitated. See 78 Iowa, 575, 6 L. R. A. 92, 43 N. W. 536. As applied to persons, means the obligation to stand for the sum absolutely unless discharged by the obligor’s negligence after notice. See 16 Pa. St. 9, 55 Am. Dec. 479.
-- Ballentine's Law Dictionary