We have no doubt that everyone has heard the definition of “security”. Such a document in our country is under state control 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 determine which documents are not related to securities.
Definition of a concept
In simple language, a security is nothing more than a document providing the owner with property rights that are allowed to be used or transferred to third parties. This can be done only with the appropriate document. 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 the market, which is strictly regulated by 39 Federal Law. He argues that issuers of such valuable documents can be legal entities, banking organizations, as well as government agencies. As for individuals, they cannot issue securities, but they have the right to buy them from third parties or directly from issuers.
What is a security?
Securities do not include documents with certain characteristic features:
- Such a document differs from the contract in that the holder of the security is not burdened with obligations. At the same time, upon the fact of its ownership, rights appear due to which the right of claim can be declared.
- 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.
- Securities are very seriously controlled by the state, and there are a number of strict requirements for them. Mandatory is their compilation in a certain form, indicating the number and all necessary details.
- Mandatory anti-counterfeiting with watermarks.
- Based on international conventions, therefore, such documents have the same requirements 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?
Securities do not include the following documents:
- The list of securities includes a check, but in no case should it be confused with the usual cash check, which is usually issued when making purchases in a store. A check gives the right to withdraw a certain amount to one person from the account of the second. But the cash receipt simply confirms the operation and does not provide its owner with any property rights.
- It is often found that futures are ranked among a number of securities. There is logic here because it has really similar characteristics. The fact is that futures are a document that is signed by two parties that are actually their owners. But it is still more like a contract, since each side has not only rights, but also obligations.
- In history, there was a time of currency attachment to the gold reserve. It was at this time that money was also classified as a security, as it provided its owner with the opportunity to receive services and goods, and also had a certain face value. Today, money has received strict regulation by other legislative acts and is not attached to anything.
- A notarized power of attorney is a document regulated by law, which has a certain form. The owner of the document has certain rights. However, it does not bear any material benefit, which is why it does not apply to securities.
What is the difference between a bill and a promissory note?
Many confuse a bill and a promissory note. This can be explained by the fact that both the first and second documents are a confirmation of the right to claim debt from the person who issued it.
The bill relates to securities, as it provides the right to demand debt, but it does not bind the lender and the borrower with a loan agreement. But the debt receipt is tied to the contract, which is drawn up between the parties to the transaction. The advantage of a bill is that its owners can recover debt much faster and much easier.
What are options?
In today's world, we increasingly hear the concept of “options”. However, few people now understand what exactly lies under this word.
At its core, an option is truly classified as a security. Moreover, with it, the owner receives exclusive rights to some resource. While the issuer is vested with responsibilities. Also, the option at a bargain price can be implemented by another owner.
The only minus of such a paper is that in our country it is not yet used. If foreign laws prescribe the conditions of his ownership, then in Russian legislation there is not even a mention of him.
Federal Law on the Securities Market
In order to get a clear idea of what is meant by the term “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;
- receipt;
- bill of exchange;
- bearer bank savings book;
- certificate of deposit;
- stock;
- bill of lading;
- privatization securities;
- stocks.
What is a dividend?
There is an opinion that the dividend and interest are related 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 makes to pay the owner of the document income in the form of dividends or fixed interest.
Most often, dividends are paid on shares. Moreover, their payment occurs 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.
Classification of Securities
In simple words, a security is an asset, thanks to which its owner receives the right to profit, any goods, goods, services or money.
Such documents are classified by the following parameters:
- Unlimited and urgent, that is, those that have a limited validity period or do not have it at all. In the first case, property rights become null and void immediately after the expiration of the security. But in the second one, they can be removed from circulation only if the issuer redeems them from the owner again.
- Registration form. Documents can be executed both on paper and without it.
- Form of ownership. May be registered or bearer. In this case, registered persons are issued only to a specific person who cannot transfer them to third parties.
- Emission - are issued by the issuer periodically in a certain amount, and non-issue.
- Accounting form. There may be registered or unregistered securities. Moreover, the former must be registered in the register of an enterprise or state.
- National affiliation. Depending on who the issuer may be, foreign or domestic securities.
- Release form. According to this parameter, there may be government or non-government securities. It is easy to guess that government agencies are government issuers.
- 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. In this case, the purchase of secondary is possible from a third party.
- The purpose of the issue. By this type, investment (they are needed in order to attract financial flow) or non-investment (necessary to maintain the status of the company) can be distinguished.
- Degree of risk. Thanks to this, the risk that the owner bears is determined (it can be low, medium and high). This characteristic has a strong impact on cost. After all, the risk increases with the value of the security.
- The way to attract. They can be equity (shares belong to securities of this type, they imply profitability from attracted investments) and debt (in this case, a loan is paid that is payable).
- Profitability form. 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 non-profit only confirm that money or any other tangible assets were invested.
- Type of face value. Thanks to this, we can say that some securities have a price, while others do not.
conclusions
The securities market is a very complex mechanism, on the understanding of which competent investment depends. If you know what the securities of the company belong to, you can correctly 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, that which is not related to such a concept cannot be called a security.