A Registered Security is a type of financial instrument whose ownership is recorded in the books of the issuer or the issuer’s authorized agent, known as the Registrar. This entry covers both types of registered securities: those issued by companies and transactions regulated by the Securities and Exchange Commission (SEC).
Types of Registered Securities
Registered Bonds
A registered bond is a bond whose owner’s name is recorded in the books of the issuer or the issuer’s agent. Interest and principal payments are issued directly to the registered owner.
Registered Stock
Registered stocks are shares whose owners’ names and addresses are recorded in the issuer’s registry books, and all transfers are tracked.
Securities Issues Registered with the SEC
New Issues
New issues refer to securities that are offered to the public for the first time. These securities must be registered with the SEC to ensure they comply with all legal disclosure requirements.
Secondary Offerings
A secondary offering refers to the sale of additional securities from a company that has already gone public, also subject to SEC registration.
Special Considerations
Ownership Tracking
One of the primary advantages of registered securities is the ability to track ownership accurately. This is particularly useful for:
- Corporate governance.
- Dividend distributions.
- Ensuring compliance with securities regulations.
Reduced Risk of Loss or Theft
Since ownership details are maintained in a registry, the risk of loss or theft of securities is minimized compared to bearer bonds or stocks, which do not record the owner’s name.
SEC Compliance
Compliance with SEC regulations ensures that the securities are monitored, providing a layer of protection to investors. Companies are required to provide full disclosure of their financial status and operations, aiding in informed investment decisions.
Examples
Example of Registered Bond
Company X issues a $10,000 bond to Investor Y. The name and address of Investor Y are recorded in the company’s registry books. All interest and principal payments are made directly to Investor Y.
Example of Registered Stock
Investor A purchases 100 shares of Company B. Investor A’s details are recorded in Company B’s registry books, ensuring they receive dividends and can vote in annual meetings.
Historical Context
Evolution from Bearer Bonds
Originally, many securities were issued as bearer forms, meaning whoever held the physical document owned the security. The shift to registered securities came about as a way to mitigate risks and ensure strict regulatory compliance.
SEC’s Role
The establishment of the SEC in 1934 marked a significant turn in securities regulation, requiring companies to register their securities and disclose accurate information, thus protecting investors and maintaining market integrity.
Comparisons
Registered Securities vs. Bearer Securities
Registered Securities
- Ownership: Recorded
- Payment Distribution: Direct to owner
- Security: Higher due to tracking
- Regulation: Subject to SEC
Bearer Securities
- Ownership: Holder
- Payment Distribution: To bearer
- Security: Higher risk of loss/theft
- Regulation: Less stringent
Related Terms
- Registrar: The entity responsible for maintaining the register of securities owners.
- Letter Stock: Stock that is issued with restriction on its transferability, often not registered with SEC right away.
FAQs
What is the primary advantage of registered securities?
Are registered securities safer than bearer securities?
Do all securities need to be registered with the SEC?
References
- U.S. Securities and Exchange Commission (SEC). “Investor.gov.”
- “Fundamentals of Corporate Finance” by Ross, Westerfield, and Jordan.
- Financial Industry Regulatory Authority (FINRA).
Summary
Registered securities are fundamental to modern financial systems, offering traceability, compliance, and security benefits over bearer forms. With strict regulations and accurate ownership tracking, they provide a reliable investment option for individuals and organizations alike.
