Securities

Equity Term

The term securities refers to a broad array of documents that represent the financial obligation of an entity (typically a company but sometimes a partnership or trust) to the securities document owner. That obligation is generally 1) an ownership interest, 2) a debt to be repaid, or 3) a right to future ownership.

Equity securities include common stock, preferred stock, and membership interests in the case of Limited Liability Corporations (LLCs).

Debt securities include certain loans, bonds, certificates of deposit from banks, and more exotic debt securities traded by professional investors.

Rights to future ownership securities include options and warrants.

Securities Regulation

In the US, securities are regulated both by the federal Securities and Exchange Commission (SEC) and state securities regulators. This is part of what makes securities law a complicated specialty.

An important rule to remember is that all securities must be registered with the SEC unless there is an available registration exemption. There are many different exemptions at both the federal and state level, but they are complicated. This is another reason why securities law is something you hire a specialist to manage!

Why are securities so tightly regulated? In part, there is a long history of scam artists selling worthless securities to people such as senior citizens who shouldn’t be buying such things. Consumer protection is a very high priority for the SEC and for state securities regulators.

Don Gooding

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