In the financial terms related to insurance and investment, ‘security’ refers to a documented financial instrument exemplified by ownership, as with stocks; creditor relationship, as various types of bonds; or rights to ownership such as derivatives. This term embodies a range of financial assets including:
Stocks: Represent shares in the ownership of a company.
Bonds: A fixed income instrument that represents a loan made by an investor to a borrower.
Derivatives: A financial instrument whose value is derived from the performance of underlying entities such as an asset, index, or interest rate.
Investors purchase securities with the aim to gain financial return in the form of dividends, income, or appreciation of capital. Securities are typically traded on markets but can be purchased privately or issued directly by companies.
Government Regulations on Securities
The trading of securities is also governed by federal and state regulations to protect investors against misrepresentations and fraud. Key regulatory frameworks and guides include:
U.S. Securities Act of 1933: Framework handling initial offerings of securities to the public.
U.S. Securities Exchange Act of 1934: Establishes regulations for the secondary securities market.
To enhance understanding, more information about securities regulations and procedures can be found by visiting the Securities and Exchange Communication (SEC) at SEC.gov. Securities are vital financial tools for individuals and institutions looking to achieve investment objectives.
